Deeply involved in databases for more than 40 years, benefiting from Dongfeng localization

Dameng Data was founded in 2000. The founder is Feng Yucai, the father of domestic databases. The company has iterated 8 generations of products and has established a product ecosystem with a database management system as the core. Among them, DMDSC pioneered breakthroughs in the localization of core technologies such as shared storage clusters, breaking the technological monopoly of foreign database vendors. Thanks to the acceleration of localization and substitution, the company's profitability increased rapidly. From 2019 to 2023, the company's revenue compound growth rate was 27.34%, and net profit to mother was 35.04%.

Localized alternatives or mainly centralized ones. The Xinchuang database can be expected to have a 10 billion dollar space. Under the digital transformation of Xinchuang and enterprises, the market size of traditional databases is expected to exceed 10 billion dollars. According to IDC forecasts, China's relational database market is expected to reach 70.56 billion yuan (based on the USD/RMB exchange rate = 7.2) by 2028, with a 5-year CAGR of 20.9%. Among them, the market size of locally deployed traditional databases is expected to exceed 14 billion. At the same time, considering compatibility, application transformation, and operation and maintenance costs, we believe that the localization replacement may still be mainly centralized. We believe that competition between the four golden flowers and cloud vendors is limited, and market share may gradually be concentrated on leading companies, and the Matthew effect is prominent.

Leading domestic database, four major competitive advantages

Under the major trend of localization, Dameng has the advantages of performance, ecology, channel services and benchmark projects, and its market share is expected to continue to increase. (1) Performance advantages: Dameng took the lead in breaking through centralized shared clusters, and achieved full coverage of demand scenarios based on a common kernel; (2) Ecological advantages: Dameng supports mainstream software and hardware platforms at home and abroad, and can achieve full compatibility with Oracle to reduce switching costs; (3) Channel and service advantages: Dameng launched a nationwide layout around 2010, and the number of Taoists rose from 168 to 551, established the original factory with 600+ technicians, 1000+ partners, 4000+ certified engineers Service system, service radius continues to expand; (4) Benchmarking project advantages: Localized replacement is gradually moving towards core system replacement. Based on benchmarking applications from major customers, the company has successfully broken through core system cases from leading customers such as CITIC Construction Investment, China Life Insurance, and State Grid.

Profit forecasting and valuation: Dameng Data is a leading domestic database company with a high degree of product standardization.

We expect the company's net profit to grow from 0.33 billion yuan to 0.532 billion yuan in 2024 to 2026. We chose Jinshan Office and Zhongwang Software as comparable companies and gave it 60XPE in 2024, corresponding to a target price of 260.55 yuan, and a target market value of 19.8 billion yuan. It was covered for the first time and gave it an “gain” rating.

Risk warning: intensifying market competition, falling short of expectations, technological progress falling short of expectations, risk of falling inventory prices, risk of channel sales revenue concentration