Key points of investment
Backed by the Guangzhou Municipal Government, the field of computing power and data elements is emerging. Radio and Television Express was founded in 1999. The largest shareholder of the company is Guangzhou Radio Group Co., Ltd., which holds 50.01% of the company's shares. The latter is actually controlled by the Guangzhou Municipal People's Government. The company started with domestic financial self-service devices, focused on the two main lines of fintech and urban intelligence, and developed two major businesses, data elements and computing power.
In the first three quarters of 2023, the company achieved revenue of 5.744 billion yuan, an increase of 20% over the previous year; net profit of 753 million yuan, an increase of 13% over the previous year. The main business grew steadily over the years, and the growth rate gradually recovered after the pandemic.
The layout of the three aspects of data elements is extremely scarce: on December 2, 2023, Guangzhou released Guangzhou's “Twenty Rules of Data”, and the speed of implementation of the data element industry has accelerated. Radio and Television Express lays out the three major links of data transactions, data services, and data operations. In terms of data trading, the company is the third largest shareholder of the Guangzhou Stock Exchange, holding 10.5% of the shares. In terms of data services, on November 24, 2023, the company acquired 42.16% of the shares in China Digital Intelligence Exchange. The latter is a credit reporting company of the top five big data enterprises in the industry. It has a scarce credit reporting license. The company is expected to use this to enter the field of credit reporting data element processing. In terms of data operations, the company and Guangzhou Data Group are the same controlling shareholders (Guangzhou Radio Group). The company builds and operates Guangzhou's “urban brain” and has rich experience in public data processing and operation. The company builds and operates Guangzhou State-owned Assets Cloud and builds Guangzhou data factor infrastructure.
Actively deploy computing power and build a foundation for the digital economy: In terms of domestic computing power, Radio and Television Express has deployed domestic computing power by investing in Radio and Television Wuzhou, holding 16% of the latter's shares. Radio and Television Express has a variety of domestic computing power devices such as all-in-one computing power machines, Xinchuang servers, and PCs. In H1 in 2023, Radio and Television Wuzhou achieved revenue of 493 million yuan, an increase of 165% over the previous year. In terms of public computing power, the company built and operated the Guangzhou Artificial Intelligence Public Computing Center, and planned two phases of computing power totaling 500P.
The leading position in the main business is stable, and the fundamentals are solid: in terms of fintech, as of June 2023, the company has ranked first in sales volume in the domestic smart financial equipment market for 15 consecutive years. The company is one of the few domestic enterprises with the ability to build a full chain of digital yuan scenarios, and can provide integrated digital renminbi solutions including terminal products and system platforms. The company continues to expand its fintech presence through mergers and acquisitions of companies such as CICC Payment. In terms of urban intelligence, the company's market competitiveness is in the first tier of the industry in terms of intelligent transportation, smart government, etc.
Profit forecast and investment rating: The main business of radio and television transportation is deeply involved in the two major tracks of fintech and urban intelligence. The leading position in the industry is stable, and performance is growing steadily. We expect the company's net profit forecast for 2024 to be 1,097 billion yuan, corresponding to only 28 times PE. At the same time, the company actively lays out data elements and computing power to bring more performance flexibility in the future. In terms of data elements, Radio and Television Communications is actually controlled by the Guangzhou State Assets Administration Commission, and at the same time arranges the three major links of data transactions, data governance, and data operations. The data element business is expected to usher in rapid development. In terms of computing power, Radio and Television Express is actively deploying domestic computing power and public computing power to build a foundation for the digital economy. Based on this, we gave the company a net profit forecast of 9.59/1,097/1,244 billion yuan for 2023-2025. First coverage, giving a “buy” rating.
Risk warning: policy progress falls short of expectations; technology research and development falls short of expectations; industry competition intensifies.