Core logic:
Alpha side: The company is a leading domestic CAD manufacturer. It is deeply involved in “All-in-One CAx”. The product is continuously iteratively upgraded to narrow the gap with overseas giants, and actively promoted in domestic commercial/education and overseas markets; beta side: the long-term drive of industrial digitalization+localization of high-end industrial software is highly deterministic, and leading manufacturers in the segment are expected to maintain a long-term growth logic.
Key points of investment:
Domestic CAD leader, deeply involved in the industry for 26 years: The company is an All InOne CAx (CAD/CAE/CAM) solution provider and the first A-share R&D and design industrial software listed company. It has been deeply involved in the industry for 26 years, and its products sell well in more than 90 countries and regions around the world. In 2023, the company's revenue was 824 million yuan, an increase of 37%, and net profit to mother was 62 million yuan, an increase of 888%. Thanks to the company's active market expansion, the strategic results of deepening the industry's major customers and sinking small and medium-sized enterprises are showing.
Demand for CAD localization is strong, and localized supply is scarce. The CAD market size in 2022 is nearly 5 billion yuan. The top three mainstream foreign manufacturers account for more than 50%, and it is expected to rank fourth with a 10% share. Domestic software has obvious cost performance advantages in the two-dimensional field; there are alternative opportunities for domestic software in the general 3D field, and the gap in high-end 3D is still large. In the context of CAD legalization and subscription systems, the pressure on downstream procurement costs has increased, and the cost performance advantages of domestic software have been further demonstrated.
Product strength is improving at an accelerated pace, and the product matrix is constantly being enriched. 1) The new version of the company's leading product, ZWCAD/ZW3D, has achieved significant improvements in performance and fluency, and has a scarce autonomous geometric core engine, and the product has been successfully used by leading customers in many industries; 2) Launched the 1.0 version of the 3D CAD graphics platform (Goku Platform) in 2023 and actively explored the industry's landing path; 3) The education sector has a rich product matrix for higher education/vocational education/general education; 5) The field of innovation has the first domestic support Linux CAD and full-stack adapts to the Xinchuang ecosystem; 6) The cloud can provide industrial users with cloud 2D/3D/CAE products and services.
The three major sectors of business+education+overseas travel go hand in hand. 2023H1 domestic commercial market/domestic education market/ overseas market/ revenue of 1.6/0.51/68 billion yuan, up 30.9%/+23.54%/109.16% year over year, accounting for 57%/18.9%/24.72% of overall revenue.
Domestic commercial market companies implement the basic strategy of “sinking small and medium-sized enterprises” + “focusing on big customers” for stable development. Domestic education market companies are deeply cultivating the “integration of industry and education”, and overseas market companies have set up branches to optimize the global channel provider network system and expand brand influence.
Profit forecast and investment rating: The company is a leader in the domestic CAD field. The product side is being iterated at an accelerated pace, and the product matrix is constantly being improved; and domestic commercial/education and overseas markets are actively promoted. We expect the company's net profit for 2023-2025 to be RMB 0.62/1.59/ 256 million yuan respectively, EPS of 0.51/1.31/2.11 yuan/share, respectively. The current stock price for 2024 and 2025 PE is 59.25/36.68X, respectively. First coverage, giving a “buy” rating.
Risk warning: Technology research and development risks, risk of product planning not meeting market demand, risk of losing core technical personnel, macroeconomic downturn affecting downstream demand, and industry competition intensifies.