Mobile gateway orders won large sums, and a fundamental inflection point is expected to occur. On March 7, 2024, the company announced that it won the bid for China Mobile's centralized procurement of smart home gateway products from 2024 to 2025 (public procurement portion). The selected items and shares are as follows: Purchase Package 1: GPON - Dual Band WiFi6 (including GPON - Dual Band WiFi 5), the selected share is 15.94%; Purchase Package 2:10G GPON-WiFi6, the selected share is 15.22%; Purchase Package 4:10G GPON - No WiFi WiFi, with a share of 14.49%; a total of 11.6838 million units; estimated total bid amount: 1,149 million yuan (tax included). According to the company's 23-year performance report, the revenue for 23 was 2.17 billion yuan, and the winning bid amount accounted for 52.92% of the revenue in '23. We believe it is expected to have a positive impact on the company's performance.
A variety of open source Hongmeng products have been evaluated to empower thousands of industries. According to OpenHarmony's official website, as of April 1, 2024, a total of 38 products from Jiulian Technology and Jiulian Kaihong (a wholly-owned subsidiary of the company) have passed the OpenHarmony community evaluation, including 23, 13, and 2 certified modules/development boards, commercial devices, and distributions, respectively. According to the official account of Jiulian Technology, the company is working with Dayu Water Saving, China Southern Power Grid, and Huayi Information to build an open source Hongmeng ecosystem in the water conservancy, power Internet of Things, and chemical industries. We believe that the company's products may gradually expand in these industries as the open source Hongmeng ecosystem expands.
Together with the Institute of Information and Communications Technology, the Xinchuang business is ready to go. On March 20, 2024, the company issued an announcement, reached a cooperation agreement with the Chinese Academy of Information and Communications Technology and signed a framework agreement. The two parties agreed to cooperate on the digital security service platform project, jointly build a digital security service platform, and provide digital security services for government agencies, public institutions and state-owned enterprises (including state-owned enterprises) in business scenarios such as instant communication, audio and video calls, audio and video conferencing, email, and OA related business scenarios based on the platform. Among them, the Chinese Academy of Information and Communications Technology is responsible for platform construction, business operation and maintenance of cooperative projects, and is responsible for leading market expansion and contract signing for target groups; the company is responsible for product development and system operation and maintenance related technical capability support for cooperative projects, responsible for system safety and reliability, ensuring normal operation of the system, and providing technical support for the marketing of platform products. We believe this cooperation will help further expand the scope of the company's business and enhance the company's market competitiveness in the field of Xinchuang.
Profit forecast and investment suggestions: We expect the company's revenue for 2024-2025 to be RMB 3.389 billion and RMB 4.536 billion respectively, net profit to mother of RMB 145 million, RMB 264 million, and EPS of RMB 0.29 and RMB 0.53, respectively. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given a 2024 dynamic PE range of 50-55X, corresponding to a reasonable value range of 14.53-15.99 yuan, which is “superior to the market” rating.
Risk warning: operators' capital expenditure falls short of expectations; market expansion of new businesses such as Hongmeng and Xinchuang falls short of expectations; market competition intensifies.