The company is a leading service provider in the field of digital government and collaborative management in China, and a pioneer and leader in the field of credit and innovation government segmentation in China. After 30 years of development and accumulation, the company has deeply served party and government organs, public prosecution law and public institutions. Currently, it has undertaken thousands of digital government application projects, has rich construction and development experience and a good customer base, and has thousands of high-quality customer resources, covering various departments of the central government, as well as party and government agencies, public prosecution and public institutions in Beijing, Shanghai, Fujian, Zhejiang, Henan, Hubei, Jiangxi and Ningxia.
The innovation industry is an important driver for the construction of a digital China, and the market potential is huge; innovation and iteration of artificial intelligence technology has driven the further implementation of application scenarios. Thanks to the rapid development of China's digital economy, according to Ai Media Consulting's “2023 White Paper on the Development of China's Credit and Innovation Industry”, it is expected to reach 3,701.1 billion yuan in 2027, and China's credit and innovation market has unleashed unprecedented vitality. Against the backdrop of increasingly fierce global technology competition, with the rapid development of China's emerging technology industry, China is gradually establishing an autonomous and controllable IT infrastructure and standards. The wave of localized software and hardware alternatives has brought development opportunities to the innovation industry. Thanks to rapid advances in artificial intelligence technology, model accuracy has improved markedly. Artificial intelligence technology is more efficient in processing massive, high-dimensional, and complex data, and can significantly improve productivity, optimize the supply chain, and improve the customer experience.
The company is in a leading position in all market segments, and customers, technology, and data create solid barriers.
From an industry perspective, the company's industry solutions mainly cover the four aspects of government informatization, judicial informatization, customs informatization, and environmental informatization; from a product perspective, the company's products mainly include information security, collaborative management, big data and system integration, all of which are in a leading position in the industry.
Three areas have built a deep moat: 1) customer resources. The company focuses on the field of digital government, rich customer resources and mature service experience; 2) technology research and development, and has achieved technological innovation in the fields of innovation, cloud computing, big data, mobile office cloud platforms, smart government, smart cities, small and medium-sized enterprise informatization; 3) industry data, with outstanding ability to understand industry business, and has accumulated a large amount of industry data in the process of serving various industries. It is expected that big data and artificial intelligence will be integrated in the future.
Dragged down by the slowdown in acceptance progress, the company's performance in the first half of 2023 was under short-term pressure, and fund-raising projects generated considerable revenue. In the first three quarters of 2023, the company achieved a total revenue of 303 million yuan, a year-on-year decrease of 20.95%; the main reason is that “the company's customers are mainly government agencies, enterprises and institutions. Due to the impact of temporary force majeure factors in the early stages, project implementation and acceptance progress has slowed down”. As project acceptance returns to normal, full-year revenue is expected to return to normal levels. On June 7, 2023, the board of directors of the company passed a targeted additional distribution plan to invest in integrated government innovation platforms and digital intelligence platform projects focusing on industry application scenarios. After three years of delivery, the estimated annual revenue is 680 million, with an average annual profit of 160 million yuan.
[Investment advice]
We believe that benefiting from the localization of innovation and the development of artificial intelligence and big data, the company is expected to return to the growth channel. We expect the company's 2023-2025 operating income to be 645/824/1.04 billion respectively, net profit of 0.28/0.83 /121 million yuan, and EPS 0.05/0.13/0.20 yuan respectively, corresponding PE of 150/51/35 times, respectively. We selected Wanda Information, Massive Data, Zhongke Information, and Gering Deep Pupil as comparable companies. According to the average price-earnings ratio of comparable companies, we gave the company 75 times PE in 2024, corresponding to the target price of 9.75 yuan/share within 12 months. First coverage, and a “buy” rating.
[Risk Reminder]
Project implementation and acceptance progress fell short of expectations;
The input and output of the fund-raising project fell short of expectations;
The investment of the government, enterprises and institutions in informatization fell short of expectations;