Haitong: DC Holdings (00861) performs well in big data and overseas business.

Recently, Haitong issued a securities research report on DC HOLDINGS (00861), affirming the outstanding performance of DC HOLDINGS in big data and overseas business. They believe that the feasibility of the company's "big data + artificial intelligence" strategy has been fully validated, and the outstanding performance of the company's overseas business has opened up a second growth pole for the company, making long-term development worthy of expectation. Therefore, Haitong gives DC HOLDINGS a PE ratio of 15-18 times, corresponding to a reasonable value range of HK$4.99-5.98, and maintains an "outperform" rating on the company. The main contents of the research report are as follows: The company's revenue is steadily increasing, with short-term impact on profitability due to Digital China Information Service Group. The company released its 2024 interim results, with overall revenue of 7.014 billion yuan in the first half of 2024, a 5% year-on-year increase; net profit attributable to the parent company was 10.81 million yuan, a 73% year-on-year decrease; and gross profit was 957 million yuan. The decrease in profit in this period is mainly due to the increasing competition in the market of Digital China Information Service Group, a subsidiary not wholly owned by the company, and the continued increase in related line investments. Excluding this part of the impact, the company's business maintained healthy and stable development, with revenue excluding Digital China Information Service Group at 2.936 billion yuan, a 20% year-on-year increase; net profit attributable to the parent company was 40.96 million yuan, a 380% year-on-year increase. DC HOLDINGS is actively promoting the commercialization of high-quality data and AI application scenarios, focusing on empowering government and enterprises with AI technology, innovatively proposing a commercial model of "City CTO + Enterprise CSO," focusing on key scenes such as smart cities, smart supply chains, and smart finance, and creating a rich, comprehensive, and practical matrix of data intelligence products and solutions. Through data-driven decision-making and operations, the company achieves customer success and creates value. Significant breakthroughs have been made in the big data business, and a substantial backlog of orders supports the future development of the business. In the first half of 2024, the company's big data business maintained strong growth, with revenue from big data products and solutions amounting to 1.277 billion yuan, a 17% year-on-year increase, with a compound annual growth rate of 26% over the past four years; gross profit was 315 million yuan, an 18% year-on-year decrease, with a compound annual growth rate of 9% over the past four years, mainly due to downstream market demand decline and increased investment in new product lines from the subsidiary Digital China Information Service Group. Excluding the impact of Digital China Information Service Group, revenue from big data products and solutions grew 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. Driven by the healthy and rapid development of the big data business, the company's overall business structure has been further optimized, with the proportion of revenue from big data products and solutions increasing from 9% to 18% over the past four years, and the proportion of gross profit increasing from 18% to 33%. In addition, the company's big data business has a substantial backlog of orders, with a signed but unsold backlog of 2.424 billion yuan in the first half of 2024, a 15% year-on-year increase, laying a solid foundation for the long-term, stable, and solid growth of the big data business. High emphasis on technological research and development, continuous advancement in AI scenario application. In terms of technological research and development, the company adheres to standardized products and solutions, using the dual-core technology drivers of business twinning body constructed by knowledge graph and AI large-scale model ecological platform capabilities to help enterprises quickly build AI intelligent applications and achieve modularization and platformization of products and solutions. The company aims to use AI tools and deep industry insights to help businesses dynamically analyze and process business processes in complex and changing market environments and provide optimal solutions to enhance operational efficiency, reduce costs, promote business innovation, and strengthen core competitiveness. The company deeply embeds technology into big data products and solutions, focusing on key scenarios such as smart cities, smart supply chains, and smart finance, continuously enhancing the autonomous decision-making capabilities of AI applications, achieving rapid development and deployment for business personnel and architects with low-code or even no-code options, and driving horizontal expansion across industries through the "3+N" approach and standardized replication on the customer side with "1N." In the first half of 2024, the company's overall research and development expenses were 320 million yuan, leading in the industry. As of June 30, 2024, the company led and participated in 161 national and industry standards, with 84 approved and released, and 77 under research; a total of 2,835 pieces of knowledge property rights such as software copyrights and patents were obtained. The proportion of overseas revenue continues to increase, and overseas business opens up a second growth pole. In the first half of 2024, the company's overseas revenue was 465 million yuan, a 55% year-on-year increase; the proportion of overseas revenue continued to increase, rising from 1% in the first half of 2022 to 7% in the first half of 2024, opening up a second growth curve for the company. Leveraging more than 20 years of experience in empowering the digital transformation of mainland Chinese governments, the company has a clear advantage in deepening its presence in the Hong Kong market. It has participated in various technology research and development projects for multiple departments of the Hong Kong Special Administrative Region government and, in collaboration with NVIDIA, successfully delivered the Phase 1 project of the Hong Kong AI Computing Center, becoming an important partner for the Hong Kong Special Administrative Region government in big data development. Building on this foundation, the company recently won the bid for the marine meteorological forecasting project of the University of Macau in the first half of 2024, providing scientific basis for marine research, environmental protection, disaster prevention, and maritime traffic management in Macau. This successful bid marks the completion of the company's strategic layout in the Guangdong-Hong Kong-Macau Greater Bay Area and highlights the forward-looking deployment and practice of the "City CTO" model in the region, demonstrating the technical capabilities of the "City CTO" and the replicability of this model in the Greater Bay Area. Under China's Belt and Road Initiative, the company is also working with Chinese companies such as Huawei, Honor, ZTE, and BYD Company Limited as customers to expand globally.The sea provides end-to-end one-stop supply chain operation services and digital services including international and domestic transportation, domestic and overseas warehousing, import and export, cross-border e-commerce, and cross-border live streaming for customers. In the first half of 2024, the company successively won the bid for BYD Company Limited's supply chain outbound business orders in Thailand and Vietnam, providing end-to-end integrated supply chain services for overseas raw materials and accessories for BYD Company Limited. Prior to this, the company had been cooperating with BYD Company Limited in the domestic market for over a decade. After winning the bid, the company successfully established global cooperation with BYD Company Limited in end-to-end supply chain operation and digital services both domestically and internationally. In the future, the company will continue to build a one-stop cross-border service platform using the "Enterprise CSO" model, providing end-to-end cross-border supply chain solutions for enterprises going global, and utilizing cutting-edge AI technology to assist in decision-making and empower customers to reduce costs, increase efficiency, and innovate in business operations.The innovative model of "city CTO + enterprise CSO" continues to deepen and is rapidly replicated and promoted. The company continues to deepen the innovative model of "city CTO + enterprise CSO", leveraging the government resource advantages accumulated over the years to accelerate expansion into the industry and enterprise fields. It has received effective validation from the customer side and is rapidly replicated and promoted. In the first half of 2024, the company continued to focus on urban development, successively winning bids for major projects such as the Jilin Changchun New Area Artificial Intelligence New Infrastructure (Intelligent Computing Center) project, the second phase of the Changchun Computing Power Center AI+ Industry Model Software and Service project, and the Jilin Province Smart Water Conservancy project. It will continue to iterate vertical industry software models on the independently developed intelligent computing center "three-in-one" industrial brain platform to empower thousands of industries. The company participates in the overall digital transformation of cities, establishes a city data resource operation system, explores the value of data resources, and promotes the integrated application of digital technology in urban governance, industry chains, supply chains, and other scenarios. By using the big scene of urban digitization as an entry point, it organizes the core industrial ecology of cities with big data and AI technology, thereby serving the digital transformation of leading enterprises and achieving a continuous transformation from early construction-type income to operational income. In terms of serving enterprise customers, the company insists on market demand as a traction point, focusing on solving the pain points of digital transformation in customer end-to-end supply chain operations. It has successfully signed and implemented big data product and solution orders with top customers in industries such as technology, consumer goods, and manufacturing. For example, in cooperation with the leading domestic chip company Jihai Microelectronics, the company helped the customer build a data governance system from scratch using its independently developed intelligent data platform series, establishing a unified data governance platform and supporting the establishment of the corresponding data governance organization structure, process system, and corporate data standards. This project has successfully been delivered and has been fully recognized by the customer. The company will continue to iterate modular and platform-based products and solutions on this basis, using AI to help customers address the automation of complex business logic decisions and empower their digital transformation.