Incident: According to the official WeChat account released by the company on May 9, 2024, in the “Shenzhen Airlines Aircraft Maintenance Al+ Application Innovation Competition”, the “Large Model Maintenance Assistance Decision System” jointly developed by the company and Huawei won first place in this competition. The company's performance in technical safety and innovation, as well as the company's professional ability to explore business value scenarios and implement intelligently, have been highly recognized by the industry, demonstrating the company's technical strength in promoting the digital transformation of the industry.

Deeply cultivate fertile ground for scientific and technological innovation and consolidate barriers in the digital industry. The company forms and promotes core key application scenarios in the field of digitalization and high-end electronic equipment in key industries, ensures safe and controllable equipment in key industries, lays out new quality productivity, and promotes high-quality development. In 2023, the company's digital products business segment achieved revenue of 712 million yuan, an increase of 14.45% over the previous year. Among them, revenue from digital intelligence application software products was 136 million yuan, an increase of 102% over the previous year.

The company's digital intelligence application product software empowers thousands of industries with digital intelligence, and has been promoted and applied in scenarios such as traffic target recognition, water conservancy video integration, geological data modeling, and power operation scheduling. In terms of intelligent computing hardware products, the first domestic switch hardware product with a high-precision time stamp was developed, and the performance reached picosecond accuracy.

Join hands with Huawei to carry out in-depth cooperation and achieve high order growth by relying on leading technology. The company deepens strategic cooperation with leading manufacturers, and is at the top of the scale of cooperation with major manufacturers. It is also an important strategic partner of Huawei. The company actively expands business services such as solution consulting and certification, product adaptation optimization, technology promotion and training, and open source software governance. In 2023, the company's Xinchuang contract scale reached 2,385 billion yuan, an increase of 34.21% over the previous year. In terms of financial credit innovation, the company became a member unit of the Securities Fund Industry Credit Innovation Alliance, promoted the application of more than 140 financial credit innovation pilot units in three batches, delivered to the Shanghai Stock Exchange Securities Fund Industry Xinchuang Laboratory, and jointly built the Xinchuang Joint Laboratory with Human Insurance Technology to launch the Bank of Communications open source governance platform. Furthermore, in accordance with the requirements of industry supervisory authority documents, the company helped central state-owned enterprise customers interpret policies and break down innovation tasks, provided all-round protection for the enterprise's autonomous and controllable digital transformation, and successfully won the bid for the Second Civil Aviation Institute's scientific and technological innovation project with 249 million yuan.

Steady performance lays the foundation for the company and opens up new operating models in the field of new digital infrastructure. According to the company's 2024 quarterly report, in the first quarter of 2024, the company achieved operating income of 1,994 million yuan, an increase of 1.19% over the previous year, and realized net profit of 51 million yuan, an increase of 11.65% over the previous year. The company focuses on data center infrastructure engineering business capabilities, vigorously carries out innovation in low-carbon energy saving technology, expands intelligent computing data center construction and liquid cooling services, improves data center energy efficiency, improves the level of digital operation and maintenance management, and successfully implemented important projects such as Bank of China, Shanghai Stock Exchange, Shanghai Unicom, Volkswagen, and Shanghai Airport. The construction of a standard section of the financial cloud base data center was completed, and data center operation services began to be provided to industry customers, and a new operating model was successfully developed.

Investment advice: As a leading domestic digital solution provider for the industry, the company continues to build a “1+2+N” industry digital architecture system. We expect the company's 2024-2026 revenue to be 112.37, 127.52, and 14.653 billion yuan, net profit to mother of 5.88, 7.10, and 839 million yuan, and EPS of 0.85, 1.03, and 1.22 yuan/share, corresponding PE of 23, 19, 16 times, maintaining the “recommended” rating.

Risk warning: The development of subsidiaries fell short of expectations, and market competition intensified.