Key points of investment

A leader in domestic email, continuing to expand business boundaries: At the beginning of its establishment, the company was mainly engaged in basic Internet business. In 2005, the mobile email service was officially launched, and in 2009, the mobile email product was fully upgraded to China Mobile's “139 Email”. With the development of the Internet industry, the company gradually focused its business focus on “industrial Internet technology and service providers”, focusing on helping enterprises create new products and channels for consumers. The company currently has three product lines: collaborative work, smart channels, cloud and big data.

Xinchuang is becoming normalized, and Xinchuang email products are strong: Xinchuang Email: With the deepening of innovation in the industry and the maturity of application software, email is one of the important collaborative office software for enterprises, and domestic email is expected to replace foreign email systems. Richmail, the email product independently developed by the company, is the main product of domestic Xinchuang email, and is in a leading position in the industry in terms of adaptability and data security. The MMS email system has been selected as a central email collection project, and has won the favor of many government and enterprise customers.

At the singularity of the big model, AI email assistants are expected to start a new growth curve: the big model in 2023 ushered in a period of accelerated development. Big model technology will bring major model innovation and industrial transformation opportunities to many industries. At the same time, it is also expected to evolve into everyone's artificial intelligence assistant, profoundly changing human production and lifestyle. Email is one of the highest quality scenarios where AIGC can be implemented. The company was previously empowered by AI technology. In May 2023, it released the next generation smart email demo product with three core capabilities: active secretary-like service capabilities, integrated processing capabilities based on large models, and cross-domain information acquisition and storage capabilities. Currently, AI email assistant products can improve the efficiency of daily email office by more than 20%.

The operator's state-owned cloud has benefited deeply, and the cloud business is growing strongly: As an important pillar of the national economy, the data security of state-owned enterprises concerns the foundation and people's livelihood. Promoting state-owned enterprises to the cloud has become the next step in the digital transformation of state-owned enterprises, and the “state-owned capital cloud” has emerged. According to the financial reports of the three major operators, cloud computing has become the main driving force for growth, and the growth rate of cloud business in 2022 was over 100%. In the field of operator business, the company is deeply involved in mobile cloud, while successfully expanding horizontally to cover China Unicom and China Telecom. With continued breakthroughs in operator business, the company's market share is expected to increase further.

Profit forecast and investment rating: Leading domestic email companies, credit innovation, AI, and state-owned clouds are expected to bring new growth opportunities. The estimated revenue for 2023-2025 is 1,506/18.94/2,368 billion yuan. We expect net profit from the mother in 2023-2025 to be 3.53, 4.08, and 518 million yuan, corresponding to PE of 31/27/21 times, respectively, for the first time, and a “buy” rating.

Risk warning: policy progress falls short of expectations; AI mailboxes fall short of expectations; operators' investment in informatization falls short of expectations; market competition intensifies risk.