A leading domestic middleware manufacturer. The company was founded in 2002. At the beginning of its establishment, it was committed to solving computing problems in distributed environments, launched the first self-developed application server middleware product, and gradually developed a series of products. The company's series of products have core technology, independent intellectual property rights, and are fully adapted to current cutting-edge technologies such as big data, the Internet of Things, and cloud computing. The core products have the ability to replace the products of mainstream foreign middleware manufacturers Oracle and IBM on a large scale. They are promoted and applied in key industries and fields such as party, government, and military industry, and have accumulated a number of leading customers in key industries, forming typical scenario cases.
Xinchuang Dongfeng arrived, and domestic basic software ushered in a golden period of development. At the end of September 2022, the state issued Document No. 79, requiring 100% of central enterprises and state-owned enterprises to complete the replacement of Xinchuang by 2027. The scope of replacement covers the fields of chips, basic software, operating systems, middleware, etc. According to World Accounting Information, it is estimated that by 2026, China's overall middleware market will reach 14.42 billion yuan, including 7.46 billion yuan for basic middleware and 6.96 billion yuan for general middleware. The company has the highest market share in the domestic middleware market, and is a major supplier in the military and party and government markets. As the overall size of the middleware market grows in the future, the company is expected to develop further.
The middleware product matrix is perfect, and it is deeply involved in the party, government, and military markets. The company is deeply involved in the field of middleware and has formed a pattern of collaborative development of basic middleware and general middleware. The main products include ten types of middleware products, including application server middleware, workflow middleware, IoT monitoring platform software, and PaaS platform software. In terms of revenue composition, the share of revenue from the Party and government in 2020-2022 reached more than 47% each year. At the same time, the company has continued to explore and practice in the military market in recent years, with 2022 revenue reaching 26.7261 million yuan. The company's share of revenue from party government+military industry continues to increase, and it is deeply involved in key areas of Xinchuang.
Reasonable valuation range: The company's net profit from 2023 to 2025 is expected to be 0.66, 0.81, and 101 million yuan, respectively, with year-on-year growth rates of 50%, 24%, and 24%, respectively. According to the “National Economic Industry Classification” (GB/T4754-2017) and the “China Association of Listed Companies Industry Statistical Classification Guidelines” (2023), the company belongs to the software and information technology service industry (code I65). As of February 5, 2024, the average static price-earnings ratio for the industry in the last month issued by China Securities Index Co., Ltd. was 50.98 times.
Considering the company's product technology advantages and future growth trends, the demand for domestic software brought by Xinchuang has increased dramatically, and combined with comparable company data to comprehensively consider relative valuation and absolute valuation. We believe that the reasonable market value range for the company after the IPO is issued is 1,823-1,970 billion yuan, and the valuation range per share is 21.43 to 23.16 yuan/share. Based on the 2022 audited net profit of 39 million yuan, the corresponding PE range is 47-51 times; based on the 2022 audited net profit of 44 million yuan, the corresponding PE range is 42-45 times; based on the 2023 forecast net profit of 66 million yuan, the corresponding PE range is 28-30 times.
Risk warning: 1. Risk of changes in profit forecasts and valuation analysis due to changes in key assumptions; 2. Risk of macroeconomic downturn or decline in downstream demand; 3. Risk of secondary market fluctuations; 4. Risk of company valuation higher than the 2024 average of comparable companies; 5. Risk of falling average sales price of products; 6. Risk of high accounts receivable (inventory) balance and risk of bad debts; 7. Risk of changes in preferential tax policies; 8. Risk of market competition with open source middleware manufacturers; 9. Legal risks due to intellectual property rights, etc.