Matters:

On August 5, Dameng Data won the bid for the 47th batch of procurement (second equipment tender and procurement for the digitization project) scheduling software relational database package of the State Grid Co., Ltd. in 2024. Following winning the bid for all of the scheduling software relational database software packages purchased by China Grid Co., Ltd. in 2024 (the first equipment tender procurement for the digitization project), Dameng once again won the bid for the State Grid procurement project.

Commentary:

Customers in the superior area are highly sticky, and once again won the bid for the power grid project. Since 2008, Dameng Data has provided strong data support to China Grid Co., Ltd. for 16 consecutive years, and its market share in related industries has remained leading for many years. On August 5 of this year, the company once again won the bid for the national grid collection project. This achievement strongly proves the company's product strength and service capabilities in its superior fields, and the high stickiness of the high-quality customer base is expected to help the company's revenue sustainability.

It is one of the high-quality leaders in the industry, and its performance continues to grow steadily. The company has been deeply involved in databases for many years and has grown into one of the leading domestic databases. It has launched a variety of products, including a new generation of large-scale general relational databases, distributed databases and cloud databases, covering the entire data life cycle, and has built a matrix-style full-stack data product solution. In recent years, the company has developed rapidly. In 2018-2023, the company's revenue expanded rapidly, with a CAGR of 29.62%; net profit to mother surpassed from 0.089 billion yuan in 2019 to 0.296 billion yuan in 2023.

2024Q1, the company's revenue was 0.166 billion yuan, up 26.79% year on year; net profit was 54.3633 million yuan, up 66.52% year on year; net interest rate was nearly 32.77%, with significant commercialization and scale effects.

The industry is growing rapidly, and there is plenty of room for development. Benefiting from policies such as “863” and “nuclear high base”, the domestic database “Four Little Dragons” was established. According to CCSA TC601 estimates, China's database market size is 40.36 billion yuan in 2022, and is expected to reach 128.68 billion yuan by 2027, with a compound market growth rate of 26.1%.

At the same time, the 2024 industry credit innovation cycle was launched, and the 2+8+N industry credit innovation process continued to advance. In March of this year, the government work report mentioned that it plans to issue ultra-long-term special treasury bonds for several consecutive years starting this year, dedicated to implementing major national strategies and security capacity building in key areas, and issuing 1 trillion yuan in 2024. As a strategic emerging industry to guarantee the country's basic information security and security in key areas, Xinchuang undertakes the important mission of self-reliance in science and technology. Special treasury bonds are expected to bring important financial security to the industry.

Adhere to independent innovation, and multiple industries blossom on target. According to the prospectus, in the first half of 2024, the company expects operating income of 0.317-0.34 billion yuan, up 10.27%-18.27% year on year, and net profit to mother is 0.086-0.1 billion yuan, up 17.25%-36.34% year on year. By industry, in the first half of 2024, the company expects a sharp year-on-year increase in revenue of 0.077-0.082 billion yuan, with a year-on-year change of 30.57%-39.05%, followed by the financial sector, which is expected to be innovative Revenue was 0.056-0.059 billion yuan, a year-on-year change of 10.31%-16.22%. The energy sector achieved slight growth. It is expected to generate revenue of 0.054-0.058 billion yuan, a year-on-year change of 4.59%-12.34%. The party and government sector saw the smallest increase. It is expected to generate revenue of 0.102-0.11 billion yuan, an increase of 2.28%-10.30% year on year.

Investment advice: As a leading database product development service provider in China, the company has been deeply involved in the database field for many years. The main software licensing business is growing rapidly, and the operation and maintenance business, industry solutions, and database all-in-one business can all achieve steady growth. Based on this, we expect the company's 2024-2026 revenue to be 0.974/1.229/1.517 billion yuan, net profit to mother of 0.368/0.443/0.524 billion yuan, corresponding EPS of 4.84/5.83/6.90 yuan/share. We select Aerospace Software, Taiji Co., and Oracle (ORACLE) as comparable companies. The average PE in the industry in 2024 is 43.5x. Considering Dameng's market position in the industry, high-quality customers will build confidence in development. It was given 55xPE in 2024, corresponding to a market capitalization of 20.24 billion yuan and a target price of 266.2 yuan, giving it a “strong push” rating.

Risk warning: market competition risk, market expansion risk, market product iteration and technological innovation risk.