Recently, Bowei Wisdom Technology Co., Ltd. (referred to as "Bowei Wisdom") submitted an application for listing to the Hong Kong Stock Exchange, with China Tonghai corporate financing as the exclusive sponsor.

Speaking of Bowei Wisdom, most people may not be familiar with it, because this is an IT solution market company that "originated in Macau and thrived in Macau".

Zhitong Financial APP learned that Bowei Wisdom is an IT solutions market company from Macau with a history of more than 10 years, mainly providing enterprise IT solutions (including professional IT services, escrow services, maintenance and consulting services), distribution and resale of hardware and software. Services to customers include banks and financial institutions, betting and hotels, education, government, telecommunications and media.

In recent years, with the development of 5G network and the progress and popularization of data analysis, the infrastructure demand for emerging technology applications in banking, financial institutions, gaming and hotel industries has also increased significantly, and the IT solution market has sprung up. With the rapid development of this industry, what is the texture of Bowei's wisdom as a company in the IT solution market? Can you rely on your own strength to get out of the circle?

Performance fluctuation growth, "small but not beautiful" Bowei wisdom?

According to the prospectus, Bowei ranks first in Macau's IT solutions market by income, with a market share of 20.9 per cent in 2019. At the same time, during the track record period, the company is also one of the few IT service providers in Macau with technical capabilities and resources, mainly providing comprehensive end-to-end solutions for customers in Macau.

In other words, Bowei Smart Technology still has a certain leading edge in the IT solution market in Macau.

However, from the performance point of view, although as a small leader of Macao, its overall performance growth still shows a relatively volatile growth state.

Specifically, from 2018 to 2020, the company's realized income was HK $354 million, HK $503 million and HK $475 million respectively, up 42 per cent and down 5 per cent respectively over the same period last year, while its annual profit was HK $15 million, HK $2.522 billion and HK $2.986 billion respectively, up 72.6 per cent and 18.6 per cent respectively in the last two years.

Unlike the fluctuating growth in operating performance, profitability is in a rising state: from 2018 to 2020, the company's gross profit margin was HK $59 million, HK $86 million and HK $94 million, respectively, increasing year by year. In the same period, the gross profit margin was 16.6%, 17.0% and 19.7%, respectively.

In addition, the level of cash flow is also in a state of relatively fluctuating growth: from 2018 to 2020, the net cash income from Bowei Smart Technology's operating activities was HK $6.22 million, HK $33.07 million and HK $20.24 million, respectively; in the same period, cash and cash equivalents were HK $17.17 million, HK $28.52 million and HK $29.9 million, respectively.

In addition, it is important to point out that most of Bowei Smart's business is located in Macau, which may play a role in its expansion.

Zhitong Financial APP understands that Bowie's smart technology customers include companies or institutions in gambling and money pickup, the government and telecommunications, media and technology industries, and these customers are concentrated in Macau-during the reporting period, revenue from Macau business accounted for 70.6%, 78.8% and 73.6% of the total revenue for the same period, respectively. In response, the company warned in its prospectus that if any significant adverse changes occur in Macau, which in turn affect the demand and price of services or products, the company's business, financial position and prospects may be significantly adversely affected.

On the whole, although Bowei Smart Technology occupies a certain market position in the IT solution market in Macau, its performance fluctuates greatly, and its main business is limited to the performance of Macau, which makes it have a certain "small but not beautiful" atmosphere.

The market is growing steadily, but the pressure of competition is not to be underestimated.

It is understood that Bowei Smart Technology is mainly engaged in the provision of enterprise IT solutions and the distribution and resale of hardware and software. If you want to further understand its growth power, you also need to start with the size of its market.

According to the prospectus, driven by the increasing application of information technology and digitization in all industries in Macau, Bowei Smart Technology's IT solution market has increased from 1139.1 million patacas in 2014 to 1950.8 million patacas in 2019, with a compound annual growth rate of about 11.4 percent, reflecting certain steady growth characteristics.

In addition, although Macau's IT solution market was hit by public health events in 2020, the market will recover later as Macau continues to accelerate business innovation and digital transformation-the market size of the IT solution market is expected to grow from 1729.3 million patacas in 2020 at a compound annual growth rate of about 10.1 percent to 2540.4 patacas in 2024.

In addition, if we look at the performance of the market scale of Macao IT solutions market by scope, we can also see the growth of the industry in which it is located.

According to the prospectus, the growth of Macau's IT solution market is mainly supported by the rapid development of professional services, including supply and installation, managed services and maintenance, with a compound annual growth rate of about 12.6% from 2014 to 2019. At the same time, the trade and distribution of IT products accounted for a large share of the overall IT solution market, growing from 898.5 million patacas in 2014 to 1515.9 million patacas in 2019, representing a compound annual growth rate of about 11.0 percent.

Looking ahead, driven by the increasing demand for digital investment and related products and services, trade in IT products and professional services is expected to grow at a compound annual growth rate of about 9.6% and 11.8% respectively from 2020 to 2024, reaching 1942.5 million patacas and 598.0 million patacas by the end of 2024, respectively.

However, it should be noted that although Macau's IT solution market is growing steadily, there is actually no lack of fierce competition.

According to Zhitong Financial APP, there are about 200 market participants in Macau's IT solution market in 2019. In addition, the market for IT solutions in Macau is relatively concentrated, with the top five participants accounting for about 67.9 per cent of the market in terms of revenue. The Group recorded revenue of about 407.9 million patacas from providing IT solutions, accounting for about 20.9 per cent of the Macau market.

Judging from the above industry data, the competition in Macao's IT solution industry is still relatively fierce. Although Bowei Wisdom has a certain leading advantage, it is not very far behind other leading enterprises, and it is still unknown whether it will fight or not.

From the above point of view, Bowei intelligent technology, which is not dominant in fundamentals, may not be very helpful from the industry, and its overall growth still needs to be improved.