The company's recent situation

On June 5, the company held a global product launch conference in Singapore and unveiled UCS (Universal Control System, Universal Control System) and TPT (Time-series Pre-Trained Transformer, Large Time Series Pre-Trained Transformer).

reviews

Next generation control system UCS: Achieve software-defined control. The company launched a new generation control system UCS (product name Nyx), which revolutionized the DCS architecture of the past few decades. 1) Control data center: UCS's core device, based on software-defined control, has high scalability and high stability, so that the control system does not require a large number of control cabinets. 2) Optical fiber network: can save 80% of copper wiring costs and greatly improve communication performance; 3) Smart field ecosystem: cloud-native apps can be developed with ecosystem partners to achieve rich functions. Furthermore, NYx enables the control system to connect to AI capabilities to achieve functions such as AI programming, AI predictive maintenance, and AI operation and maintenance. We believe that the control system with a next-generation architecture can, on the one hand, reduce the cost of cabinet deployment and enhance the richness of functions for customers. On the other hand, it is also expected to promote changes in the company's business model and achieve a subscription-based billing model. At present, Nyx has been implemented by Longsheng Group to reduce deployment costs for customers.

TPT, the big model for the process industry: An experiment in the implementation of industrial AI. Compared with common language models such as LLM, industrial AI is progressing relatively slowly. The company continues to explore industrial AI in the process industry, release a large pre-trained transformer model based on time series, process time series data in the process industry through pre-training methods, and has certain generalization capabilities. At the press conference, the company gave two examples of predicting alkali concentration trends in chlor-alkali plants and predicting boiler oxygen content in boiler plants, which demonstrated TPT's ability to predict in process industry scenarios. Looking forward to the future, the company plans to gradually add mechanical knowledge and multi-modal capabilities to subsequent versions to achieve continuous upgrading of TPT.

Industrial software capabilities continue to be upgraded, and “AI+ data” creates competitiveness. We believe that the release of the two new products shows the continuous upgrading of the company's industrial software capabilities. Based on the software-defined control system UCS and the industry-leading process industry model TPT, both show the company's firm investment and solid progress in industrial software. We are optimistic that the company will continue to increase its share of control systems with new products, and “AI+ data” will continue to consolidate the competitiveness of industrial software; while software definition brings the possibility of business model optimization to the company. We believe that the subscription model starting from industrial apps is expected to gradually be promoted.

Profit forecasting and valuation

Keep the profit forecast unchanged, and maintain the outperforming industry rating and target price of 52 yuan (based on 31 times the 2024 price-earnings ratio). The target price has 17.8% upside compared to the current stock price. The current price corresponds to 26.3/21.5 times the 2024/2025 price-earnings ratio.

risks

New product development falls short of expectations; overseas business progress falls short of expectations; AI implementation falls short of expectations.