New stock preview | J-Weitiantian enters the arena for the third time, the performance of the trillion-dollar telecommunications service track remains mediocre.

Telecom service track "veteran" Jingwei Tiandi has yet to become a "newcomer" in the capital market. After two failed IPO attempts, on November 10th, Jingwei Tiandi once again submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Kaisheng and Ed Financial as joint sponsors. Increase in revenue without an increase in profit The prospectus shows that Jingwei Tiandi is a China Telecom Corporation network support and information and communication technology (ICT) integration service provider. The company started its business in 2003, developing and providing telecommunication network performance analysis systems for the Personal Handy-phone System (PHS). It later expanded its business to provide telecommunication network support services and ICT integration services. During the reporting period, the company engaged in the provision of telecommunication network support services, including telecommunication network optimization services and telecommunication network infrastructure maintenance and engineering services; ICT integration services; and network-related software development services. In 2022, the company's revenue from wireless telecommunication network optimization services, telecommunication network infrastructure maintenance and engineering services, ICT integration services, and telecommunication network-related software development services accounted for approximately 0.8%, 0.01%, 0.03%, and 2.5% of the relevant industry market share in China, respectively. From a performance perspective, the trend of Jingwei Tiandi's increasing revenue without an increase in profit is becoming more pronounced. From 2020 to the first half of 2023 (hereinafter referred to as the reporting period), Jingwei Tiandi's revenue was approximately 196 million yuan, 203 million yuan, 227 million yuan, and 114 million yuan, respectively; during the same period, its net profits were 29.66 million yuan, 25.52 million yuan, 24.26 million yuan, and 14.65 million yuan, respectively. In terms of business segments, by the end of the 2022 fiscal year, telecommunication network support services were the company's largest business, accounting for 64.8% of total revenue; ICT integration services accounted for 24.1% of revenue; and telecommunication network-related software development accounted for 11.1% of revenue. In terms of business development trends, the scale of telecommunication network support services has been growing slowly, from 133 million yuan in 2020 to 147 million yuan in 2022, with a compounded annual growth rate of 3.4%; during the same period, ICT integration services showed remarkable growth, increasing from 38.515 million yuan in 2020 to 54.592 million yuan in 2022, with a compounded annual growth rate of 12.3%; the development of telecommunication network-related software development business has been slow, with the scale increasing from 23.728 million yuan in 2020 to 25.269 million yuan in 2022, with a compounded annual growth rate of 2.1%. In short, Jingwei Tiandi's main business is not experiencing strong growth, leading to weak performance. According to understanding, the ICT integration services business, which has seen significant growth, will put significant pressure on the company's cash flow. Assuming an additional 10% increase in initial project costs for ICT integration projects, the additional initial project costs will be approximately 2.5 million yuan, 2.7 million yuan, 3.1 million yuan, and 2.2 million yuan; accounting for approximately 18.6%, 10.9%, 18.2%, and 34.4% of net cash generated from operating activities. This result means that the company is already unable to manage the mismatch between the initial project costs of significant projects/engineering and the recoverable/recovered cash flow, which may harm Jingwei Tiandi's financial condition and prospects and pose liquidity or debt repayment risks. In terms of cash flow performance, Jingwei Tiandi's net cash flows generated from operating activities were 13.232 million yuan, 25.019 million yuan, 16.962 million yuan, and 6.501 million yuan, with significant fluctuations. Furthermore, Jingwei Tiandi has a heavy reliance on major customers. In each of the past years, the total revenue from the top five customers accounted for approximately 117 million yuan, 123 million yuan, and 116 million yuan, respectively, representing approximately 59.6%, 61.0%, and 51.0% of total revenue; during the same period, revenue from the largest customer accounted for approximately 21.2%, 24.0%, and 23.8% of total revenue. Jingwei Tiandi stated in the prospectus that it has not entered into any long-term service agreements with its major customers, apart from regular agreements related to routine telecommunication network optimization services and telecommunication network infrastructure maintenance services. As these customers generally have no obligation to maintain further business relationships with the company, there is no guarantee that major customers will continue to use the company's services to the same degree or in any manner. Therefore, if any unfavorable developments in the businesses of these customers or any other reasons lead to the deterioration or termination of the company's business relationship with major customers, the company's business, financial condition, operating performance, and prospects may be significantly negatively affected. The industry's "large water, small fish" situation From an industry perspective, the slow growth of Jingwei Tiandi's main business is related to the slowing growth rate and fragmented competitive landscape in the company's niche market. Taking the Chinese wireless telecommunication network optimization services market as an example, as telecommunication network users' demand for high-quality mobile network quality continues to increase, telecommunication operators have invested heavily in improving network speed and stability. The market size has expanded from 9.1 billion yuan in 2018 to 12.2 billion yuan in 2022, with a compound annual growth rate of 7.4%. According to understanding, the growth rate of wireless telecommunication network optimization services is expected to slow down in the future, mainly due to technological progress leading to increasingly structured services. It is estimated that telecommunication operators will maintain a stable budget. By 2027, the market size (based on revenue) is expected to further expand to 15.5 billion yuan, with a compound annual growth rate of 4.9% from 2022 to 2027. While the growth rate of the industry is slowing down, the market concentration is not high, and the competitive landscape is fragmented. The top five network optimization service providers accounted for approximately 24.3% of the market share (based on revenue) in 2022. In 2022, Jingwei Tiandi's revenue from wireless telecommunication network optimization services reached 102 million yuan, accounting for approximately 0.8% of the market share (based on revenue). Encouragingly, the communications industry continues to benefit from policy support and the promotion of new technologies such as 6G, and Jingwei Tiandi is expected to share in the industry's development dividends to some extent. From a policy perspective, it was proposed at the National Industrial and Information Work Conference held in Beijing in January that in 2023, efforts should be made to promote the upgrade of the information and communication industry, accelerate the development of the 6G network, and deepen the integration of the communication industry with other industries. This indicates that the company's future development prospects are promising. However, it should be noted that Jingwei Tiandi's business still faces risks due to the existing problems. The company's focus on its core business and the development of its core products and services will be crucial to its future growth and success.Accelerate the development of the information and communication industry, promulgate policy measures to promote the coordinated development of new information infrastructure construction, speed up the construction of 5G and gigabit optical networks, comprehensively promote the research and development of 6G technology, and it is estimated that the favorable policies will maintain a steady and healthy growth rate in the telecommunications industry in the coming years.In conclusion, the main business of Longitude and Latitude Earth has experienced slow growth, leading to the trend of increasing revenue but not increasing profit becoming more evident. The slowdown in performance growth is related to the slowing growth rate and fragmented competitive landscape of the company's business in the segmented market. On the financial side, the pressure from dependency on large clients, as well as fluctuations in cash flow, have caused Longitude and Latitude Earth to be "small and not beautiful".