\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 845 Shanghai Baosight Software Co.Ltd(600845) )
Event: on March 28, 2022, the company released its annual report for 2021. In 2021, the company achieved a total revenue of RMB 11.759 billion, a year-on-year increase of 15.01%, a net profit attributable to the parent company of RMB 1.819 billion, a year-on-year increase of 35.92%, and a net profit deducted from non attributable to the parent company of RMB 1.718 billion, a year-on-year increase of 38.95%.
Comments:
The performance met expectations and comprehensively promoted the large-scale development of domestic independent and controllable high-end products
According to the company’s announcement, the company realized a revenue of 4.354 billion yuan and a net profit attributable to the parent company of 410 million yuan in Q4 in 2021. The company’s performance growth mainly comes from the business development of Baowu group and the improvement of intelligent manufacturing demand. The company’s revenue from automation, informatization and cloud services with high gross profit margin has increased.
In the dual carbon era, the company, as an information high-tech company under the central enterprise and a domestic software provider, has deeply implemented national strategies such as “new infrastructure”, “industrial chain security” and “independent and controllable”, continued to increase R & D investment around the localization of key core technologies to replace and solve the “neck” problems of the industry, comprehensively promoted the large-scale and industrialized development of domestic independent and controllable high-end control systems, and enabled the intelligent industry.
In terms of informatization and automation, the company has expanded from MES, ERP, Bi and other industrial software to large-scale PLC in the metallurgical industry. Large-scale PLC in the metallurgical industry has high threshold and great difficulty. As the first enterprise to layout large-scale PLC in China, the company has fully proved that it has reached China’s leading level in the field of industrial control and intelligent manufacturing. At the same time, it plans to develop domestic SCADA software for distributed whole process in the metallurgical industry within this year and form a pilot application, In the future, there will be a large space for vertical and horizontal expansion; In terms of industrial Internet, the company independently researched and developed xincube platform, promoted the development of relevant components of industrial Internet platform, and successively released data middle platform, business middle platform and artificial intelligence middle platform during the year; In terms of IDC, the company is actively promoting the construction of computer rooms in major bases such as Shanghai and Xuanhua.
In terms of business, software development services achieved a revenue of RMB 8.502 billion in 2021, with a year-on-year increase of 19.1%, accounting for 72.3%; The service outsourcing business achieved a revenue of RMB 3.121 billion in 2021, with a year-on-year increase of 8.87%, accounting for 26.54%; The system integration business achieved a revenue of 129 million yuan in 2021, a year-on-year decrease of 39.40%, accounting for only 1.1% of the revenue, which is not the focus of future development.
The dividend proportion of the company has continued to increase in recent years. According to the announcement of profit distribution and conversion of reserve fund into share capital in 2021, the company plans to distribute cash dividends of 10 yuan (including tax) to all shareholders for every 10 shares. As of the disclosure date of the announcement, the total share capital of the company is 1.520 billion shares. Based on this calculation, the total cash dividends to be distributed are 1.520 billion yuan, accounting for 83.58% of the net profit attributable to the parent in the consolidated statements of the year.
Gross profit margin increased and profitability continued to increase
The company’s overall gross profit margin increased to 32.52% in 2021, reflecting the continuous strengthening of the company’s overall profitability. In terms of business structure optimization, the gross profit margin of the software development branch increased to 27.88% year-on-year; The gross profit margin of service outsourcing business (mainly IDC) increased to 46.72% in 2021, with a year-on-year increase of 3.68 percentage points, mainly reflecting the company’s competitive advantage in IDC. In the future, with the continuous extension of the company’s “soft to hard” integrated layout, the intelligent manufacturing business with automation, informatization and industrial Internet platform as the core will bring great room for improving the gross profit margin of the company’s software development business. At the same time, under the dual carbon policy, the scarcity of IDC room resources in the company’s core area is becoming increasingly prominent, and the profitability is expected to continue to improve.
The operating cash flow increased rapidly, and the investment in R & D increased continuously
The company achieved an operating net cash flow of 1.928 billion yuan in 2021, with a year-on-year increase of 25.68%, mainly due to the expansion of sales scale and the increase of operating profit this year, which reflects the good operation of the company. Meanwhile, the company’s R & D expenditure has maintained a rapid growth in recent years. In 2021, the R & D expenditure was 1.290 billion yuan, with a year-on-year increase of 29.60%, mainly due to the company’s addition of R & D investment in Shanghai Dzh Limited(601519) manufacturing, industrial Internet and big data.
The company continues to adhere to technological innovation, focusing on key core technology breakthroughs and self-control. It continues to invest heavily in emerging fields such as industrial Internet, big data center, PLC products, industrial Siasun Robot&Automation Co.Ltd(300024) , process model, green and low carbon, focuses on artificial intelligence, data governance automation, digital twins and other fields, deeply carries out research on “brain of iron and steel industry”, and is committed to building a leader in intelligent manufacturing.
In terms of IDC, the company actively participated in the “counting from the east to the west” project, adhered to the business strategy of distributing important towns and ring important towns, consolidated the Shanghai base, deeply cultivated the first tier cities and surrounding areas such as Beijing, Shanghai, Guangzhou and Shenzhen, and cooperated with strategic customers to carry out the national layout of baozhiyun IDC industry. Further tap the potential of energy conservation and emission reduction in the construction mode, technology, standards and renewable energy utilization of the data center to ensure the realization of the “double carbon” goal; We will further promote the deployment of cloud computing and information network across the country, and further enhance the capacity of cloud computing infrastructure and information delivery.
Release large PLC in metallurgical industry, and intelligent manufacturing leader is ready to go
After ten years of research and development, the company officially released large PLC products in the metallurgical industry. We believe that the release of Baoxin PLC products has great strategic significance, which means that Baoxin has gradually transformed into a leading enterprise of intelligent manufacturing. There are two main reasons why the market did not recognize the company’s industrial software valuation before: 1) the company is mainly backed by Baowu and iron and steel industry. The market believes that the market is relatively single and the market space has a ceiling; 2) The company’s industrial software is mainly MES, Bi, ERP, etc. the market has questioned the company’s industrial software ability.
We believe that the release of Baoxin’s large-scale PLC products is equivalent to proving that the company has reached a leading level in the field of industrial control / industrial software in China. From two dimensions: 1) the threshold of large-scale PLC is high: large-scale PLC has very high requirements for stability. In addition to the technical difficulties, whether customers are willing to accept it is very important. The market share of China’s large-scale PLC is basically in the hands of Siemens, Schneider and other European and American enterprises, The development of PLC industry is relatively mature. General enterprises are unwilling to replace PLC easily because of business stability. For Baoxin, Baowu has become a natural customer for the development of Baoxin PLC products. After ten years of testing and verification, Baoxin has created its unique competitive strength; 2) High threshold of PLC in iron and steel metallurgy industry: in all industries, the requirements of PLC in iron and steel metallurgy industry for accuracy and stability rank among the top. For Baoxin, being a PLC in iron and steel metallurgy industry means having the strength of cross industry expansion. The release of large PLC in Baoxin iron and steel industry is a proof of its own industrial software strength. In the future, the company will have a large space for “vertical and horizontal” expansion, continuously expand its product series vertically and expand across industries horizontally. We believe that Baoxin intelligent manufacturing valuation needs to be reshaped urgently, and there is a large space for profit + valuation improvement in the future.
The industrial Internet business continues to advance, and the core benefits from the promotion of the “carbon neutrality” strategy
Backed by China’s largest iron and Steel Group, the company is the software leader of China’s iron and steel industry. Since 2016, the iron and steel industry has gradually recovered and the overall profitability has been continuously improved, making the steel enterprises have the ability to transform the original information and automation systems; At the same time, the pace of M & A and reorganization of Baowu is accelerating. With the transformation of 100 million tons of Baowu digital intelligence, the demand for informatization and automation is expected to continue to release; Under the background of “carbon neutrality”, steel enterprises are facing great pressure of transformation and upgrading. In addition, steel enterprises are also able to invest capital expenditure to transform and layout the industrial Internet, so as to open long-term space for the company’s industrial Internet business.
As early as five years ago, Baoxin established the industry 4.0 project department to advance the layout of industrial Internet technology. In December 2020, the company released the independently developed industrial Internet platform xin3plat, promoted the development of big data “5S” components, and completed the construction of iron making interconnected intelligent control platform (blast furnace) demonstration project; At the beginning of 2021, Baowu established China Baowu industrial Internet Research Institute and China Baowu big data center to work together with Baoxin to coordinate Baowu industrial Internet Framework Design and cutting-edge technology research and development.
Relying on the strong R & D strength accumulated in the field of industrial software and professional experience in the iron and steel industry for many years, the company independently developed the industrial Internet platform and artificial intelligence platform, and actively built the industrial Internet Ecosystem of the iron and steel industry with iplat and eplat as the two wings, opening up a new growth track and broader development space for future development. In 2021, Baoxin industrial Internet platform continued to be shortlisted as the “double span” platform of the Ministry of industry and information technology, and its ranking increased steadily; The platform won the honors of one of the first batch of China’s most advanced digital maturity iomm excellence certification, one of the first batch of four enterprises of “five-star platform for service security evaluation of industrial Internet platform”, and the runner up of the third China Industrial Internet competition. The company’s industry status, market competitiveness, independent innovation ability and brand strength continued to improve.
IDC has a unique ability endowment. It is located in the core area of the country and has full expansion potential
In the Shanghai Baosight Software Co.Ltd(600845) in-depth report “interpreting the long-term deterministic value of the new infrastructure leader from three major Expectation Differences”, we clearly emphasize that the market usually attributes the single reason for Baoxin’s success in IDC to resource endowment. We believe that the market does not fully recognize the company’s unique IDC capability, which is mainly reflected in the combination of “resource endowment + industrial software capability”. 1) From the perspective of resource endowment: backed by Baowu, the company has unique resource advantages in land, water, electricity and energy consumption acquisition; 2) From the perspective of industrial software capability: the company is the only enterprise in the market to undertake all the tasks independently, including design (with independent Meishan Design Institute), construction and operation (the only enterprise in the market that conducts comprehensive independent research and development of informatization and automation in the IDC field). It is endowed with excellent cost control ability and strong operation and maintenance ability. The company’s computer rooms are high-quality computer rooms, which have been praised by the Shanghai municipal government Highly affirmed by upstream suppliers and downstream customers. The company has clear strategic development ideas, adheres to the self built model, continues to expand diversified high-quality customers in the front line, and appropriately develops the base business of key customers, with strong expansion potential and profitability.
Profit forecast and investment rating
As a hard technology leader with scarce in-depth layout of “intelligent manufacturing + industrial Internet + IDC cloud computing” in China, the company has strong long-term growth certainty and is firmly optimistic about the company’s long-term development space. It is estimated that the net profit of the company from 2022 to 2024 will be 2.234 billion yuan, 2.938 billion yuan and 3.894 billion yuan respectively. The current share price corresponding to PE is 32.05 times, 24.37 times and 18.38 times, maintaining the “buy” rating.
Risk factors
IDC construction and launch fell short of expectations, Baowu restructuring and M & A fell short of expectations, and 5g development fell short of expectations
