The Zhitong Finance App learned that Zheshang Securities released a research report stating that the analysis of investment opportunities on the industrial software circuit gives priority attention to R&D, design and production control industrial software opportunities. In recent years, China's domestic R&D design and production control industrial software has continued to make breakthroughs. With China's requirements for new quality productivity and the continuous advancement of new industrialization processes, the overall localization rate of China's core industrial software is still at a low level, and core industrial software tracks such as CAD, CAE, PLM, DCS, and PLC are expected to lead to important development opportunities.
It is recommended to focus on the targets: Baoxin Software (600845.SH) (large domestic PLC, industrial Internet platform), Central Control Technology (688777.SH) (domestic DCS software), Nengke Technology (603859.SH) (industrial Internet digital center), Keyuan Intelligence (002380.SZ) (domestic DCS software), Zhongwang Software () (domestic CAD software), Suochen Technology (DBA) (domestic CAE software). 688083.SH 688507.SH
The main views of Zheshang Securities are as follows:
Zheshang Securities believes that new industrialization and new quality productivity are inextricably linked — both are technology-based productivity to achieve high-quality development away from traditional industries and integrate digital industrialization. Encouraged at the national policy level, as a core element of new industrialization and new quality productivity, the industrial software circuit has ushered in important development opportunities.
The introduction of new quality productivity is expected to accelerate China's new industrialization process and drive the development of the industrial software circuit. Since the 13th Five-Year Plan, China has continued to advance the new industrialization process. Indicators such as the maturity of China's manufacturing enterprises, the rate of digitalization of key processes, and industrial value added have improved markedly. However, by 2022, China's industrial software scale will account for only 7.24% of the global market size. Compared with industrial value added (20.34%), there is plenty of room for growth. With the focus on new quality productivity at the national policy level, China's industrial software circuit is expected to usher in important opportunities.
From an industry perspective, China's industrial software vendors have maintained a steady growth trend in recent years. The compound growth rate of overall revenue and net profit from 2016 to 2022 reached 23.40% and 32.46%, and profitability continued to increase. The overall gross margin/net margin increased from 41.65%/9.22% in 2016 to 42.73%/15.80% in 2022. At the same time, manufacturers continued to increase R&D investment to continuously improve the coverage and core competitiveness of domestic industrial software. The future is expected to benefit from national policy-driven superposition localization and replacement processes.
Localization+intelligence+cloudization+platformization, China's industrial software has ushered in multiple development momentum:
(1) Localization: In 2021, the localization rate of R&D design/production control/information management in China's industrial software market was 12%/31%/71%, respectively. It is expected that the localization rate will increase to 26%/52%/78% by 2025, respectively. Currently, the localization rate of industrial software for R&D, design and production control in China is low, and it is expected that the domestic substitution process will be accelerated under policy impetus.
(2) Intelligence: Combining AI in the field of industrial software can organically combine big data artificial intelligence, professional industrial software, and the expertise of industrial enterprises in their respective fields. Since the outbreak of generative artificial intelligence in 2023, domestic and foreign manufacturers have had a presence in the AI+ industry, and future big models are expected to deeply empower industrial enterprises to increase their productivity in the field of industrial software.
(3) Cloudification: With the continuous development of the digital economy, the role of data as a factor of production in the manufacturing industry is becoming more and more prominent. Enterprise data on the cloud is expected to effectively transform data assets into important productivity for manufacturing enterprises. China's industrial cloud market is expected to reach 78.5 billion yuan by 2025, and the CAGR is expected to be about 33.1% in 2021-2025, maintaining a rapid growth trend.
(4) Platformization: The industrial Internet platform includes four major elements: data collection, infrastructure, industrial PaaS, and industrial applications, which provide an important basis for industrial enterprise decision-making and optimization of manufacturing resources. The overall penetration rate of industrial Internet platforms in China is low, and the penetration rate is expected to increase rapidly in the next few years. China's industrial Internet platform application penetration rate will increase from 14.7% in 2020 to 22.2% in 2022, and the penetration rate is expected to reach 45% by 2025.
Risk warning
1. Risk of increased competition in the industry; 2. Risk of core technology iteration falling short of expectations; 3. Risk that domestic substitution related policy support falls short of expectations.