China's leading integrated service provider for government and enterprise informatization, with steady growth in performance

The company was founded in 1998 and is a leading comprehensive informatization service provider in the field of digital government and smart enterprises in China. It is mainly dedicated to providing comprehensive informatization solutions for government and enterprise customers. The company focuses on the two tracks of digital government and intelligent manufacturing. Relying on the core competitiveness of “platform+ (business) application+AI”, the company implements the three major initiatives of “commercialization”, “going global” and “innovation-driven”, guided by market demand, and deeply integrates artificial intelligence technology with business scenarios. At present, the company has 29 national patents, more than 700 software copyrights, and nine basic platforms, including self-developed proprietary cloud platforms, big data platforms, and artificial intelligence platforms. The business has covered more than 20 provinces across the country, providing high-quality services to thousands of customers at all levels, including national ministries, departments, provinces, cities, and counties, etc., covering various industries such as public security, finance, civil affairs, medical care, and machine vision. The company's revenue increased from 333 million yuan in 2018 to 538 million yuan in 2022. The CAGR is 12.75%, and the corresponding net profit has remained above 30 million yuan in recent years (excluding 2022).

Self-developed large-scale government models to consolidate the influence of digital government, increase expansion outside the province and enhance performance

Smart city sector: The company has full-process smart city service capabilities from consulting, design, implementation to operation, and forms a “baseline+customized” smart city construction plan around the two main lines of service and governance to accelerate the modernization of city and county governance; in the field of digital government: it has independently developed a “government brain platform for digital government” product. The platform combines natural language processing, knowledge maps and other technologies to build a knowledge center and competency center, and is aimed at “one thing at a time”, “one network management”, and “one network collaboration” for typical government operation scenarios such as “one network access”, “one network integration”, and “one network collaboration”, Using artificial intelligence to achieve intelligent upgrading of government applications, applications have now been launched in various package-style “one thing at a time” in Hunan Province, such as the birth of a newborn, one matter of enrolling in primary and secondary schools, and one thing serving special groups. At the same time, the company is speeding up research on large-scale government models and continuously consolidating its influence in the field of digital government. Furthermore, the company has stepped up its efforts to develop markets outside the province, such as Hebei, Henan, Yunnan, and Jiangxi, to enhance the company's performance.

Smart enterprise business is expanding at an accelerated pace, and performance growth is impressive

Smart enterprise business is mainly concentrated in the following industries: 1) Advanced manufacturing: With its core advantages in machine vision inspection, glass integrity data collection and management systems have been developed, and products such as online glass defect detection systems have been iteratively upgraded, and products such as glass defects online detection systems have been highly recognized by customers in Nanbo, China Building Materials, and Kibing; 2) Enterprise digital transformation: going deep into enterprise management, office, marketing, operation and maintenance scenarios, and using AI, big data and other technologies to help enterprises move towards digital intelligence; 3) Fintech: Strengthening cooperation with major shareholders, finance, risk control and other scenarios, Licai The digital and intelligent transformation and upgrading of the various businesses of the Credit Financial Holdings Group. The business revenue of smart enterprises increased from 9514 million yuan in 2018 to 195 million yuan in 2022, and achieved revenue of 84.65 million yuan in the first half of 2023 (a sharp increase of 465.39% over the previous year). The impressive growth of smart enterprise business in recent years is an important contribution to the company's revenue growth.

Relying on the participation of major shareholders in the construction of digital Hunan, data elements are expected to become new performance growth points

Digital Hunan Co., Ltd. was officially inaugurated on June 9, 2023. It was jointly funded by China Electronics (51%) and Hunan Caixin Financial Holdings (49%). Digital Hunan Co., Ltd. will focus on digital government construction, operation and data element operation as its core business, focus on the full life cycle of data “aggregation and integration”, lead the construction of a big data industry ecosystem with a full industry chain, full value chain, and full service chain, and strive to build the main force in digital Hunan construction, a pioneer in the data element market, a vanguard in data asset operations, and a goalkeeper in data security governance. The specific business is to use the super service side of the “Xiangyi Office” app as the main platform, accelerate data integration and smart applications, actively expand and deepen cross-provincial government app alliance cooperation, continue to promote “easy to do, and quick” government services, so that “data runs more, the masses run less errands”, and continuously polish the “one thing at a time” service brand. Digital Hunan Co., Ltd. will become one of the main players in the construction and operation of the data element market in Hunan Province.

In terms of data elements, Science Innovation has a first-mover advantage: 1) Enterprise qualification: The largest shareholder of the company is Hunan Caixin Mathematics (holding 13.34%), the latter is a group enterprise of Hunan Caixin Financial Holdings, and the company is expected to become one of the partners in the construction of digital Hunan; 2) Project experience: As a leading state-owned enterprise in government and enterprise informatization in Hunan Province, the company's self-developed “Government Brain” digital government intelligence platform helps Hunan Xiangyi to implement package services such as the theme “One Thing”. The company's 2022 annual report also mentioned that it will start with industries with strong data requirements, such as public security, finance, medical care, etc., to create a number of industry-leading, high-performance, safe and controllable data tools and application products; 3) Technical aspects: the company participated in the preparation of the “White Paper on Data Element Circulation Standardization (2022 Edition)” of the National Beacon Commission's Big Data Standards Working Group; as a state-owned enterprise listing platform in the field of data elements in Hunan Province, it is expected to benefit from the development of the data element industry.

Profit forecasting

We are optimistic about the development prospects of the company's government and enterprise informatization business and the first-mover advantage of the data element industry in Hunan Province. It is predicted that the company's net profit for 2023-2025 will be 0.13, 0.30, and 0.4 billion yuan, EPS is 0.05, 0.12, and 0.17 yuan respectively, and the current stock price corresponding to PE is 268, 115, and 84 times, respectively. Although the short-term valuation is high, as a state-owned enterprise listing platform, it is expected to fully benefit from the rapid development of the data factor industry in Hunan Province, covering it for the first time, giving the company a “buy” investment rating.

Risk warning

Risks such as downstream demand falling short of expectations, data element development falling short of expectations, uncertainty about the development of data element platforms in Hunan Province, macroeconomic downturn, and increased market competition.