Digital China Group Co.Ltd(000034) 2021 annual report comments: revenue exceeded 100 billion for the first time, cloud + Xinchuang two wheel drive

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Event: the company released its annual report for 2021, and the company achieved an operating revenue of 122385 billion yuan, a year-on-year increase of 32.94%; Deduction of non net profit was 672 million yuan, with a year-on-year increase of 3.14%. Performance exceeded market expectations.

Key investment points

The independent brand business performed well, and the cloud computing and digital transformation business grew rapidly: in terms of business, the revenue of it distribution and value-added business was 116838 billion yuan, a year-on-year increase of 31.79%. In 2021, the acceleration of core shortage and localization substitution promoted the rapid improvement of the overall prosperity of the semiconductor industry. Under this background, the microelectronics business of the company achieved significant growth during the reporting period. The revenue of cloud computing and digital transformation business was 3.885 billion yuan, a year-on-year increase of 45.71%. Among them, the revenue from cloud resale business (AGG) was 3.44 billion yuan, a year-on-year increase of 45%, and the revenue from cloud management services and digital transformation solutions business (MSP + ISV) was 450 million yuan, a year-on-year increase of 54%. The revenue of independent brand business was 1.65 billion yuan, a year-on-year increase of 126.86%. The main reason for the rapid growth of independent brand business is the breakthrough development of Xinchuang business, with a revenue of 1.15 billion yuan in 2021, a year-on-year increase of 236%.

Continuously increase R & D investment to boost the take-off of Xinchuang and cloud business: in 2021, Digital China Group Co.Ltd(000034) cumulative R & D investment was 240 million yuan, a year-on-year increase of 32%, and improve the product technology of Yunhe Xinchuang. In terms of cloud business, in 2021, Digital China Group Co.Ltd(000034) was selected into Forrester’s first report on cloud migration, modernization and management services in China and the first panorama of hybrid cloud industry released by the Institute of information and communications technology, and the MSP service capability was recognized again. From 2021 to 2022, China Mobile won the bid of “centralized procurement of PC equipment” and “centralized procurement of PC equipment in China’s mobile industry” from 2021 to 2022. In terms of production capacity, the phase I project of Shenzhou Xinchuang Hefei production base has officially started construction, helping to accelerate the implementation of Xinchuang industry.

In 2022, the industry’s Xinchuang was launched on a large scale, and the company’s Xinchuang business has full momentum: the development of Party and government Xinchuang in recent years has promoted the improvement of domestic software and hardware ecology, and the domestic ecology is becoming more and more mature, laying the foundation for the large-scale development of industry Xinchuang. In 2021, finance, telecom operators and other industries have started large-scale pilot projects and accumulated relevant experience. In 2022, the market space of industrial credit creation is expected to be further opened. Digital China Group Co.Ltd(000034) credit creation products have experienced the pilot trials of Party and government credit creation and industrial credit creation, and are deeply recognized by customers. In terms of production capacity, the company’s production lines in Xiamen and Hefei ensure sufficient production capacity. Based on this, the company’s credit creation business is expected to usher in leapfrog development.

Profit forecast and investment rating: Digital China Group Co.Ltd(000034) Yunhe Xinchuang business products have superior performance and have been recognized by customers. The market space of Xinchuang in the industry has been opened, and the company is expected to obtain a large market share. Considering that the company will increase R & D investment and improve product performance, we lowered the net profit attributable to the parent company from 2022 to 2023 to 869 (- 1.54) / 999 (- 332) million yuan, and it is expected that the net profit attributable to the parent company in 2024 will be 1.134 billion yuan, maintaining the “buy” rating.

Risk warning: the credit innovation policy is not as expected; Risk of aggravation of the epidemic; The progress of product research and development is less than expected

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