Committed to becoming a leading digital culture industry group in China, covering the first time to give it a “buy” rating

The company actively builds a “digital culture +”, “digital technology+” and “data operation+” development ecosystem, responds to the national digital economy strategy call, and actively participates in the wave of digital reform. “Digital Culture +” is developing steadily, and is game-based, providing incremental growth in diverse product matrices; continuing to cultivate the “Digital Technology +” matrix, IDC's business continues to grow, and AI is expected to lead media automation using AI; “Data Operation +” explores new business models, which is expected to contribute to valuation flexibility. We expect the company to have a net profit of 7.3/82/92 billion yuan in 24-26 years. Using the segmented valuation method, the target market value is 16.34 billion yuan, corresponding to the target price of 12.91 yuan, which is the first time coverage is given a “buy” rating.

Fully embracing digital technology & data operations, Zhejiang and China's digital economic development pioneer company continues to expand its digital technology business. The subsidiary Fuchun Cloud Technology promotes the construction and operation of IDC projects. The existing contracted cabinets maintain a high charging rate, and are steadily expanding the existing cabinet market. In 2023, Fuchun Cloud achieved revenue of 380 million yuan and net profit of about 73 million yuan. The company's IDC project has strong customer and location advantages, and the business is expected to increase the number of random cabinets and the increase in charging rate to further contribute to the increase in performance.

Spread the implementation of the big vertical model of the brain and explore new business models. In terms of data operations, the company pioneered the card data element market transaction and circulation process through the Zhejiang Big Data Trading Center (the only data trading center with a provincial license in Zhejiang Province, where the company holds 48.2% of the shares). There is potential room for the company's subsequent digital services, and the scale of data transactions is expected to continue to expand. Furthermore, actively laying out a new digital marketing circuit, it is expected to lead to increased performance in the future.

The digital culture industry is developing steadily, and diversified product matrices innovate and stabilize the basic market. The company is actively exploring diverse development paths in the field of digital culture. In terms of domestic casual games, the company has formed a nationwide business layout with Zhejiang as the center. As an established manufacturer of casual board games, the company's core products include “Zhejiang Game Hall”, “Shushan Sichuan Mahjong”, and “Winger Whipped Egg”. Currently, the total number of registered users has exceeded 100 million, monthly active users have reached 10 million, and several mini program versions of classic board games have been launched.

Whipped Egg Games contributed to the growth of the game business. By the end of January 2024, “Winger Whipped Egg” had surpassed one million DAU, ranking first in the country. In addition, the company is expanding new forms of online literature and creating a diverse product matrix.

Continuing reform and transformation, digital culture is growing steadily. Digital Technology Star Sea Company, formerly known as Zhejiang News Media Group Co., Ltd., the first listed media management asset company in the country, implemented a major asset restructuring in 2017 and successfully transformed into an Internet digital culture industry group. In recent years, the company has continued to innovate, focusing on the core capabilities of digital technology development. The company's digital technology business in 2023 (i.e.:

(Digital Technology+Data Operation) accounts for about 20% of revenue. The company's “Digital Technology+” and “Data Operation+” businesses are rich in content. Among them, the three major business growth highlights of IDC, communication brain, and big data operations are expected to continue to improve.

Risk warning: Data element policy risk, IDC progress falling short of expectations, investment business falling short of expectations, etc.