Introduction to this report:
The company is a core participant in the OpenEuler and OpenHarmony communities and has recently won consecutive awards. It is expected that in the future, it will benefit from rare development opportunities and achieve growth beyond expectations.
Summary:
Maintain the “increase in holdings” rating and maintain the target price of HK$16.00. Maintaining the profit forecast, the company's 2023-2025 EPS is expected to be $0.30, 0.41, and $0.51, respectively, and maintain the target price of HK$16.00 (using an exchange rate of HK$1 = $0.92), corresponding to 35.77 times PE in 2024.
The company's autonomous operating system has won consecutive awards, demonstrating its leading position in the industry. At the 2023 Operating System Conference held on December 15, the company's self-developed “Rock Operating System” won the “Outstanding Contributor to the OpenEuler Community in 2023” award after a comprehensive evaluation of multi-dimensional indicators such as technology, governance, and ecological construction. At the 2023 Open Atom Developers Conference held on December 17, the company and Shenzhen Kaihong exhibited software and hardware products equipped with KaiHongOS, and 12 open source contributors received awards. At the same time, with their outstanding contributions to the OpenHarmony open source ecosystem construction over the past 3 years, the company won the “Open Source Leaders Three-Year Anniversary Cup” and the “Open Source Three-Year Donation Memorial Cup”, which is a full recognition of the company's leading position in the construction of the open source ecosystem.
The company is a core technology participant in the two major open source operating systems, and the technical barriers are deep. In the OpenEuler community, in 2015, the company participated in R&D as one of the earliest outsourcing partners of the Huawei Euler project. After Huawei fully open source Euler in 2019, the company began to contribute code. Up to now, the company has ranked 8th in the number of code merger requests in the OpenEuler community, and the ranking continues to improve with version updates. In the OpenHarmony community, the company's shareholding company Shenzhen Kaihong contributed 4.51% of the total code to the main stock, making it the second largest code contributor after Huawei. The contribution amount is almost equal to the sum of all contributors other than Huawei. A deep understanding of the source code has created a deep technical barrier for the company to make operating system products.
Domestic operating systems are facing golden development opportunities, and future business development is expected to exceed expectations. With the complete discontinuation of CentOS on June 30, 2024, the domestic server operating system represented by OpenEuler will usher in broad development opportunities. At the same time, OpenHarmony is accelerating its exploration of the blue ocean market for IoT operating systems. As a core technology participant and distribution product supplier, the company's future commercialization progress is expected to exceed expectations.
Risk warning: risk of downstream demand falling short of expectations, failure in development of new versions, and increased competition