The company was born out of the IT department in the US in 2005 and gradually developed from ERP implementation business to self-research and development of intelligent manufacturing software. Currently, it is a digital solution provider for 360° enterprises in China. The company's 1-3Q23 revenue reached 1.68 billion yuan, net profit to mother reached 130 million yuan, comprehensive gross margin reached 33.1%, and net profit margin to mother reached 7.6%.

Industry Be ta - big water, big fish, domestic replacement. When the ERP circuit industry was in progress - According to iResearch, China's ERP market reached 62.1 billion yuan. Although the overall localization rate is high, the localization rate of middle and high-end ERP is only about 25%, and large central enterprises use SAP and Oracle products extensively. In the context of Xinchuang, high-end ERP replacement brings more space to domestic manufacturers. The MES track has a low penetration rate and there is plenty of room for growth - According to Huajing Industry Research Institute, China's market size accounts for only 4% of the world, and new industrialization helps rapid development.

Company Alpha - two-wheel drive, endogenous epitaxial. Endogenous - From ERP to pan-ERP, from MES to MOM, the scope of product iteration capabilities is continuously expanded through R&D.

Extension - Expanding the boundaries of technology, industry, and customer capabilities based on investment and mergers and acquisitions. The company uses core ERP as the fulcrum to build 360° planning capabilities from contract to delivery, develop industry maps to bind benchmark customers, and optimize the customer base structure to reduce revenue risk. In September 2020, the company issued convertible bonds to raise capital of 320 million yuan, mainly for intelligent manufacturing solution upgrade projects, etc. The conversion price was 22.58 yuan. The convertible period was from March 22, 2021 to September 15, 2026.

Three recent catalysts: 1) the core target of the Huawei chain, benefiting from Meta ERP promotion opportunities, is expected to enter the middle and high-end markets; 2) the AIGC manufacturing model was launched as an important scenario for the B-side of AI applications to reduce internal costs and increase efficiency and enhance product competitiveness externally; 3) the competitive landscape is scattered. During the recent downturn in prosperity, the company actively attacked, which is conducive to market clarification and optimization of the driving pattern.

The company's revenue for 23-25 is estimated to be RMB 24.9/31.4/3.85 billion yuan, net profit to mother of RMB 275/3.48/RMB 434 million, and EPS of RMB 0.67/0.85/1.06, respectively. The price-earnings ratio method was used to value the company, and 3 comparable companies were selected, and the company was given a 24-year 35 times PE valuation, with a target price of 29.67 yuan/share. First coverage, giving a “buy” rating.

Risk of fluctuations in IT expenditure for core customers; risk of downstream industry and customer sentiment recovery falling short of expectations; risk of increased industry competition; risk that convertible debt-to-stock prices are higher than market prices and cannot be converted into shares.