Incident summary: On August 26, 2022, Denke Digital announced its semi-annual report for 2022. The company achieved revenue of 4.189 billion yuan, a year-on-year decrease of 0.09%; net profit of 161 million yuan, a year-on-year decrease of 3.04%; net profit after deducting non-return net profit of 148 million yuan, a year-on-year decrease of 1.27%; the company's sales expenses and R&D expenses were 2.86 billion yuan and 161 million yuan respectively, up 18.70% and 4.77% year-on-year, demonstrating the company's determination to develop.
The “1+2+N” system is stable, focusing on fintech to help customers transform. Focusing on the new strategic position of “building a leading enterprise with integrated digital solutions based on digital, networked and intelligent next-generation information technology with various industries”, the company actively expanded R&D investment to increase the company's competitiveness, and built a “1+2+N” digital architecture system for the industry, with cloud network integration, security and trustworthiness as a starting point to build an integrated digital infrastructure foundation for industry customers. According to the company's semi-annual report, the company achieved industry digital business revenue of 3,906 billion yuan, an increase of 2.68% over the same period last year.
The company focuses on financial technology, vigorously expands innovative financial digital applications, and builds solutions such as digital operation of financial data centers and high-speed transaction service platforms, and forms market breakthroughs through strategic cooperation with leading customers. At the same time, the company is actively developing financial innovation, relying on the Shanghai Financial Innovation and Innovation Joint Research Base and the Financial Innovation Ecology Laboratory authorized by the People's Bank of China to continue to build a financial application ecosystem and service capabilities to help financial customers digitally transform. The company has now successfully signed contracts with ICBC, Bank of Communications, Construction Bank, China Merchants Bank and other institutions.
The acquisition of Baifei was approved by the Securities Regulatory Commission, and the company's business capacity was further improved. On May 13, 2022, the company issued shares to purchase 100% of the shares of Shanghai Baifei Electronics and was unconditionally approved by the Merger and Acquisition Committee of the Securities Regulatory Commission. Currently, the company is handling matters relating to the issuance of shares and the purchase of assets. Baifei Electronics is a key software and hardware supplier for embedded systems in China. Its localized design capabilities have been extended from board card design to basic software design and overall machine design. Among them, nearly 60 products are based on Longcore processors, nearly 30 products are based on Feiteng processors, and nearly 10 products are based on Shenwei processors. The acquisition of Baifei Electronics has greatly improved the company's technical capabilities in edge computing and edge intelligence, further broadened the breadth of the company's industry applications, continuously explored the depth of industry intelligence, focused on the entire life cycle of data generation, transmission, processing and application in key industries such as fintech, transportation, and intelligent manufacturing, created the company's autonomous and secure key software and hardware products, and built a highly secure and high-performance “cloud-edge-end” integrated digital solution.
Investment suggestions: As the first listed company in the IT industry in China, the company has accumulated more than 20 years in the industry, has strong comprehensive competitiveness, and has been recognized by many customers in the industry. Considering that the company's acquisition of Baifei Electronics has already passed, we predict that the company's revenue for exam preparation in 2022-2024 will be 10.619, 128.85, 15.318 billion yuan; net profit for exam preparation will be 547, 6.26, 702 million yuan; EPS will be 0.99, 113, 127 million yuan; the corresponding PE price will be 19, 17, and 15 times higher, maintaining the “recommended” rating.
Risk warning: The progress of corporate restructuring falls short of expectations; competition in the software and technical services industry is intensifying.
