Dameng Data: Leading the Xinchuang database industry, with full-stack products. 1) After more than 40 years of technology accumulation, the company's core team was listed on the Shanghai Stock Exchange Science and Technology Innovation Board on June 12, 2024. The company has mastered core cutting-edge technology in the field of data management and data analysis, has independent intellectual property rights for all core source codes of major products, and is a key driver for the development of the domestic database infrastructure software industry. 2) The company formed a business layout based on “software product license+solution+operation and maintenance”, extending from general relational database products to full-stack data products. Among them, the share of software product licensing business increased year by year, accounting for more than 90% of revenue in 2023. 3) The shareholding structure is stable, and founder Feng Yucai has a deep technical background; as of June 12, 2024, China Software's shareholding ratio was 18.91%, and the actual controller was China Electronics. 4) Revenue and net profit increased significantly; structural improvements in gross profit are expected to boost the company's long-term profitability; and R&D investment is growing steadily, and talent in technology-intensive industries continues to be replenished.

Industry: High qualification barriers to party and government databases, industry database selection technology is king. The domestic database market is expanding, and domestic databases are catching up with international vendors. The share of overseas databases in 2023 decreased by 29.6% compared to 2019. Among them, the share of Dameng databases and Huawei databases increased significantly. Currently, Party and Government Xinchuang are taking the lead in testing the waters and promotion. Industry Xinchuang has entered the stage of large-scale application. Among them, Party and Government Xinchuang mainly uses centralized databases and has hard requirements for qualifications; industry Xinchuang currently has a relatively high share of centralized databases, and distributed databases are penetrating the core system at an accelerated pace, putting more emphasis on technology and cost performance.

Centralized database: Build high barriers and accelerate the implementation of the Party, Government, and Innovation Core System. 1) Technical self-research: The company code is 100% self-developed, independently writes the core source code for database products, masters all implementation principles and system frameworks, and has full decision-making power on the direction of product technology development, and has less risk exposure. 2) Migration compatibility: Flexible migration reduces costs and fully adapts to a broad ecosystem. Migration and compatibility are difficult points in replacing domestic databases. The flexible migration solution is convenient for data migration and reduces migration costs; the design ideas of the DM8 database are similar to Oracle and are basically consistent with the use of SQL syntax, and the learning cost is lower after migration. 3) Channel construction: Improve quality service capabilities from within, and strengthen channel construction from the outside. Channel construction influenced early market expansion. The company adopted a business model with channels as the main channel and direct sales as supplements. The company has leading internal service capabilities and levels, and the service system determines customer stickiness; external channel construction has been strengthened, and dealers are expanding at an accelerated pace. Currently, the company relies on excellent business service capabilities, and the company has accelerated implementation in the party and government core+industry OA.

Next-generation database products: full-stack layout, industry innovation opens up long-term space. 1) Cluster databases: Benchmark Oracle RAC and launch DMDSC and DMMPP to break the technology monopoly of shared storage clusters; 2) Distributed databases:

Applicable to massive data scenarios, it is an important choice to replace core financial systems, adopting native distributed database technology; 3) Cloud databases: Cloud deployment products have matured, and the proportion of cloud-native databases has expanded. In order to improve the Dameng Cloud system, cloud-native DMCDB has been introduced to expand deployment methods such as public cloud, private cloud, and hybrid cloud deployment. 4) Graph database: Dream Map Database (GDM) has completely independent intellectual property rights. Shu Tianmengtu has developed a distributed graph database management system. NoSQL databases are suitable for complexity data, and graph databases are widely used.

Profit forecasting, valuation and investment ratings: First coverage, giving a “buy” rating. The company is leading the Xinchuang database industry. The database is highly commercialized. The centralized database DM8 technology is self-developed, the migration is smooth and widely compatible, the channel construction area is sound, and it has full-stack database product capabilities to help Xinchuang enter the core system to replace the deep-water area, which can give a certain valuation premium. The company's net profit for 2024-2026 is expected to be 0.35, 0.418, and 0.51 billion yuan respectively. Based on the closing price on July 22, 2024, the corresponding PE is 50.8x, 42.5x, and 34.8x, respectively.

Risk warning: There is a risk that Xinchuang's progress falls short of expectations, technology implementation progress falls short of expectations, market competition intensifies, and public data used in research reports may lag behind or not be updated in a timely manner.