\u3000\u3 Guocheng Mining Co.Ltd(000688) 083 Zwsoft Co.Ltd(Guangzhou)(688083) )
Event overview
Recently, Zwsoft Co.Ltd(Guangzhou)(688083) released the report for the first quarter of 2022. The company achieved an operating revenue of 862624 million yuan in Q1 of 2022, with a year-on-year increase of 1.24%; The net profit attributable to the parent company was -197142 million yuan, a year-on-year decrease of 440.78%; The net profit deducted from non parent company was -368626 million yuan, a year-on-year decrease of 120630%. In the first quarter, the company maintained the investment intensity since the second half of last year. In addition, the external environment affected the progress of some business lines, resulting in short-term pressure on performance and decline in profits. However, the current investment laid the foundation for future harvest, and the equity repurchase demonstrated confidence in future growth.
The slowdown in performance growth is due to the disturbance of the external environment, and the long-term growth trend remains unchanged
Affected by the cyclical fluctuation of macro economy and the repeated covid-19 epidemic and other external factors, the overall growth of the company’s performance in the first quarter of 2022 was relatively flat, which was specifically reflected in two aspects. First, in the business line of China’s education market, the repeated epidemics in major cities in the first quarter led to more strict sealing and control measures for customers of various local colleges and universities, which hindered the promotion of the company’s education business and project acceptance. In this regard, Zhongwang has taken more diversified online support measures to strengthen the service guarantee for Chinese education users and maintain customer stickiness.
Second, in the business line of overseas commercial market, uncertain factors such as the tense international situation, the intensification of the conflict between Russia and Ukraine and the change of foreign exchange rate jointly led to the year-on-year decline of the company’s overseas business revenue in the first quarter. In order to deal with the above problems, the company launched the overseas channel upgrading strategy last year. In mid January this year, we hope to officially register and establish a wholly-owned subsidiary in Japan to carry out sales promotion and technical services locally. With the promotion of the above overseas layout, the international business of the company will be less and less affected by various uncertain factors. In addition to the above two business lines, the company’s revenue in China’s commercial market continues to grow. According to the company’s announcement, in the first quarter, China’s commercial software increased by 20.30% year-on-year, of which the revenue of 3dcad product line increased by 33.69% year-on-year. Although the base of CAE product line is small, the revenue still increased by 48.39% year-on-year. It can be said that the long-term growth trend of the company’s core products has not changed.
Profits fell due to continued high investment and equity incentives, and repurchase strengthened confidence
In Q1 2022, the company continued the high investment strategy since the second half of last year and made efforts from R & D, sales and ecological construction. The R & D expenses increased by 55.48% and the sales expenses increased by 39.42% year-on-year. As a software company, talents are the core competitiveness of Zhongwang. To this end, the company began to increase recruitment efforts last year, vigorously attract talents with industrial software industry background all over the world, and improve the construction of talent echelon. According to the company’s announcement, in the first quarter of 2022, the number of employees of the company increased by 58% over the same period of last year; Among them, there are 689 R & D personnel, accounting for 46% of the company’s total employees. While the number of employees increased significantly, the company continued to optimize and improve the salary and welfare level, implemented the equity incentive plan, and continued to increase the investment in sales promotion and R & D, resulting in a significant increase in expenditure in the short term.
On April 15, in order to enhance investors’ confidence in the company and safeguard the interests of the majority of investors, the company issued the announcement on the repurchase report of shares repurchased through centralized bidding transaction, which repurchased the company’s shares through centralized bidding transaction with over raised funds. The shares repurchased this time will be used for ESOP or equity incentive at an appropriate time in the future, in order to establish and improve the company’s long-term incentive mechanism, fully mobilize the enthusiasm of the company’s employees, and effectively combine the interests of shareholders, the company and employees. We believe that under the current market environment, the equity repurchase carried out by Zhongwang management fully demonstrates its confidence in the company’s future development prospects and recognition of the company’s value.
Investment advice
It is estimated that the company will realize an operating revenue of RMB 840 / 11.4 / 1.56 billion and a net profit attributable to the parent company of RMB 240 / 3.0 / 410 million in 2022 / 23 / 24 Zwsoft Co.Ltd(Guangzhou)(688083) focusing on the all in onecax strategy for business layout and market expansion is the core target of the localization 3.0 stage of R & D basic tools. Maintain the investment rating of buy-a. As the company is in the investment period, the net profit can not fully reflect the company’s profitability, so we use PS for valuation. The six-month target price is 270.65 yuan, equivalent to 20 times PS in 2022.
Risk warning: the research and development of core technology is not as expected; Product promotion and industrial ecological construction were not as expected.
