ICBC International: DC Holdings (00861) focuses on core capabilities growth and accelerates expansion in overseas markets.

On September 10, Industrial and Commercial Bank of China International (ICBC) released a securities research report on DC HOLDINGS (00861). The report pointed out that after a series of organizational and business adjustments, the company's core business revenue has steadily grown, with the proportion of innovative businesses such as big data continuously increasing, and overseas revenue achieving a high-speed growth of 55% year-on-year. Looking ahead, DC HOLDINGS will leverage its knowledge graph and AI big model ecological platform capabilities to help enterprises efficiently build AI applications, improve operational efficiency, and reduce costs. The company is committed to achieving low-code, no-code development, accelerating cross-industry standardization and replication, and expanding overseas markets with a localization strategy, while continuously enhancing its competitiveness in domestic and international markets through business innovation and value chain extension. The report analyzed in detail the development of various business segments of DC HOLDINGS, with the following main points and views: The big data products and solutions business provides data software products sales centered around big data and artificial intelligence, as well as data intelligent solutions around core scenarios such as smart cities, smart supply chains, and smart finance. In the first half of 2024, the revenue of big data products and solutions reached 1.3 billion yuan, an increase of 17% year-on-year, with a compound annual growth rate of 26% over the past four years. The gross profit was 315 million yuan, a decrease of 18% from the same period last year, with a compound annual growth rate of 9% over the past four years, mainly due to downstream market demand declining at the subsidiary Digital China Information Service Group and increased investment in new product lines. Excluding the impact of Digital China Information Service Group, revenue from big data products and solutions increased by 31% year-on-year, with a compound annual growth rate of 51% over the past four years; gross profit increased by 11% year-on-year, with a compound annual growth rate of 40% over the past four years. From the first half of 2021 to the first half of 2024, the revenue of big data products and solutions increased from 9% to 18%, and the gross profit increased from 18% to 33%. In addition, the company has ample orders on hand, with the big data division signing 2.4 billion yuan in outstanding orders in the first half of the year, an increase of 15% year-on-year, laying a solid foundation for long-term, stable, and solid growth of the big data business. The company continues to deepen the "City CTO + Enterprise CSO" innovation model, leveraging years of government resource advantages to accelerate expansion into industry and enterprise fields, which has been effectively validated by customers and quickly replicated and promoted. In terms of technology research and development, the company adheres to standardized products and solutions, with business twins built on knowledge graphs and AI big model ecological platform capabilities as dual technical drivers, helping enterprises quickly build AI intelligent applications and achieve modularization and platformization of products and solutions. The software and operational services business provides end-to-end supply chain operational services driven by data technology, as well as software development, testing, and operation services based on cloud technology, automation, and artificial intelligence technology, which are important support for the development of big data products and solutions business. Under China's Belt and Road Initiative, DC HOLDINGS, along with Chinese companies such as Huawei, Honor, ZTE, and BYD Company Limited, is expanding overseas to provide end-to-end supply chain operational services and intelligent services including international and domestic transportation, domestic and international warehousing, import and export, cross-border e-commerce, and cross-border live streaming. The company successfully won bids for BYD Company Limited's overseas supply chain business orders in Thailand and Vietnam, providing end-to-end integrated supply chain services for overseas raw materials and components to BYD Company Limited. The innovation and traditional service business provides integrated services and e-commerce supply chain services centered around integrated solutions, which are important sales channels for the development of big data products and solutions, software and operational services businesses. This segment also includes related businesses such as investments, property sales and leasing. The overseas market is the future revenue growth engine for the company. In the first half of 2024, the company's overseas revenue was 465 million yuan, an increase of 55% year-on-year. The proportion of overseas revenue continues to increase, from 1% in the first half of 2022 to 7% in the first half of 2024, opening up the company's second growth curve. The company collaborated with NVIDIA to successfully deliver the first phase of the Hong Kong Smart Computing Center project, becoming an important partner in the Hong Kong Special Administrative Region government's big data development. The company also successfully won the bid for the Macau University of Science and Technology ocean weather forecasting project, further expanding its strategic footprint in the Guangdong-Hong Kong-Macao Greater Bay Area. Other overseas revenues in the reporting period include cross-border e-commerce operation services for companies such as Huawei and Honor, as well as overseas warehousing and logistics supply chain services for companies such as ZTE and BYD Company Limited. Looking ahead, ICBC International believes that as a technology-driven software product company, DC HOLDINGS will further focus on standardized product and application research and development, with business twins built on knowledge graphs and AI big model ecological platform capabilities as dual technical drivers, helping enterprises quickly build AI intelligent applications and achieve modularization and platformization of products and solutions. The company aims to use AI tools and in-depth insights into industries to help enterprises dynamically analyze and process business processes in complex and changing market environments and provide optimal solutions, thereby improving operational efficiency, reducing costs, promoting business innovation, and enhancing core competitiveness. The company will continue to enhance the autonomous decision-making capabilities of AI intelligent applications, achieve rapid development targeting business personnel and architects with low-code or even no-code development, and drive multi-industry expansion and customer-oriented standardization replication. In the increasingly competitive domestic market, the company will also accelerate its international market layout, adopt a localization strategy, seek cooperation opportunities, and actively explore overseas markets. At the same time, the company will lead the domestic ecosystem, integrate into the international ecosystem, and continuously extend its value chain.