Results grew rapidly in 2023. According to the company's 2023 performance report announcement, in 2023, the company obtained total operating revenue of 824 million yuan, an increase of 37%; net profit to mother of 62 million yuan, an increase of 888% year on year; profit after deducting non-return to mother -78 million yuan, compared to -67 million yuan in the same period last year. At the product level, in 2023, the company's leading products ZWCAD and ZW3D both released 2024 new versions. The efficiency, stability and functional richness of the products were significantly improved, and the excellent product quality was recognized by customers, which directly drove the growth of performance. At the business level, the “Sales Network Upgrade Plan” and “Overseas Market Localization Strategy” that have been implemented in recent years have gradually shown results. Domestic market performance achieved steady growth in 2023, and overseas market performance increased significantly in 2023.

Leading domestic CAD software. The company has focused on industrial design software for more than 20 years, and has accumulated rich experience in technology R&D and software development, and has built a team of R&D talents with strong professional ability, high comprehensive quality and innovative thinking. Through long-term R&D investment and technology integration, the company has mastered core technologies such as two-dimensional CAD platform technology, 3D geometric modeling core technology, EIT algorithms, mesh segmentation technology, and pre- and post-processing technology, and has established a product matrix based on “autonomous two-dimensional CAD, three-dimensional CAD/CAM, electromagnetic/structure, etc.” The ability to provide secondary development solutions to meet the application needs of industrial enterprise users throughout the “design-verification-manufacturing/engineering construction” process.

At the same time, the company lays out the domestic commercial market, overseas market and domestic education industry, and is one of the few domestic industrial software companies with a comprehensive and in-depth business layout. Currently, sales of Zhongwang series products have covered more than 90 countries and regions around the world, serving more than 1.4 million users. It has obvious brand advantages in the field of domestic R&D and design industrial software, and has become a representative enterprise in the second field of R&D and design industrial software.

Products are constantly being iterated to meet the needs of multiple industries. In the first half of 2023, the company's leading products ZWCAD and ZW3D both released 2024 new versions. On the basis of maintaining high quality performance, ZWCAD 2024 further optimizes and enhances the five core capabilities of the software: compatibility, stability, speed, intelligence, and expansion. Compared with the previous version, ZWCAD 2024 uses technology such as hardware acceleration and incremental storage to greatly improve the efficiency of basic functions such as drawing, editing, selection, and panning, and further meet users' needs for efficient, stable and convenient use. In addition, ZWCAD 2024 version adds key features such as variable blocks, point clouds, and DGN basemaps to meet users' more advanced application needs. In terms of Xinchuang, the company released the ZWCAD2024 Linux version in the first half of 2023. Its functional command completeness is close to the level of the Windows version, and the ability to adapt and certify domestic software and hardware environments has been further improved. By opening up and strengthening the secondary development interface of the ZWCAD Linux version, the company is gradually building a more complete domestic software and hardware application ecosystem in the field of innovation.

3D CAD is the focus of development, and product strength continues to improve. The company continues to polish and verify industrial scenes on the basis of key core technologies such as an independent 3D geometric modeling core, data conversion engine, and 3D graphics rendering engine, and has now achieved significant improvements in the three core capabilities of 3D design CAD, structural simulation CAE, and product processing CAM. ZW3D 2024 version adds and optimizes a number of useful features compared to the previous generation. The company has comprehensively upgraded key functions such as intelligent modeling, multi-scene assembly, and CAM parts processing to further enhance modeling design and parametric modeling capabilities and large assembly capabilities, significantly improve CAM processing quality, and greatly improve the basic functions and stability of the platform. Furthermore, ZW3D 2024 added a flagship version to further provide customers with higher-level professional design capabilities for mechanical equipment.

Acquired the British commercial fluid simulation software PHOENICS and continued to improve multidisciplinary multiphysics simulation solutions.

According to the company's WeChat account, in October 2023, the company announced the acquisition of CHAM, an established British commercial fluid simulation software developer, as a wholly-owned holding. After the acquisition is completed, the company will have all the source code and core technology for CHAM's fluid simulation software PHOENICS, and all of its R&D and business teams in the UK and Japan will join Zhongwang Software. PHOENICS is a general fluid simulation software. It not only has a general CFD calculation module and specialized modules for two-phase flow calculation, chemical vapor deposition, building HVAC simulation, and medical flow analysis, but also provides rich CAD interfaces, 3D modeling functions, PARSOL mesh generation technology, flexible in-form user customization functions, and up to 20 types of turbulence models, fully supporting various fluid simulation analysis application scenarios such as combustion, radiation, and multiphase flow. Zhongwang officially entered the field of commercial fluid simulation to accelerate the construction of Zhongwang multidisciplinary multiphysics simulation solutions covering structures, electromagnetism, and fluids.

Profit forecasts and investment recommendations. We believe that as a leader in domestic CAD software, the company will continue to consolidate the competitive advantage of 2D CAD, continue to cultivate 3D CAD, improve product capabilities, and is expected to achieve steady growth in the medium to long term. Since 2023, the company's domestic and overseas business have achieved restorative growth. The company continues to launch new software versions and continues to expand the downstream industry. We assume that the company's business expansion is smooth, and that continuous improvement in product strength will drive the increase in the company's market share. The main business's self-produced software has achieved steady growth in 23-25 years, and its revenue growth rate is expected to be 38%, 27%, and 22%, respectively. We expect the gross margin of the company's self-produced software business to remain stable. At the same time, assuming that the company can receive stable government subsidies, other earnings for 23-25 years were 1.12/1.25/140 million yuan, respectively.

We expect the company's revenue for 2023-2025 to be 8.24/10.44/1.272 billion yuan, net profit to mother of 0.62/0.66/ 142 million yuan, respectively, and corresponding SPS of 6.80/8.61/10.49 yuan, respectively. Combining the current stage of the industry and the company's growth rate and barriers, the company was given 14 times the 2024 PS, with a target price of 120.48 yuan, maintaining a “superior to the market” rating.

Risk warning. The company's business progress falls short of expectations, and industry policy risks.