Investment Rating - The report assigns a "Buy" rating for the company with a target price of HKD 8, representing a significant upside from the current price of HKD 4.57 [8] Core Views - The company is a leading provider of office IT integrated solutions in China, focusing on customer IT experience and offering flexible subscription-based services [8] - The company has a strong market position with a 14.3% market share in China's pay-per-use office IT services in 2021, exceeding the combined share of the second to fifth players [8] - The company's active enterprise customers reached 45,040 with approximately 1,150,000 devices in service as of FY2023H1 [8] - The company's average customer retention rate was 72% and average net cash retention rate was 114% from 2020 to 2022 [8] - The company's revenue in FY2022 was RMB 1.372 billion, with 85% coming from pay-per-use office IT integrated solutions [8] Business Overview - The company provides a full lifecycle solution for office IT services, including hardware, software, and services [25] - The core business is the pay-per-use office IT integrated solution, which offers IT equipment and managed IT services on a subscription basis [25] - The company has a strong remanufacturing capability, with a standardized process and automated testing technology that can extend device lifespan from 3 years to 7-10 years [28] - The company has developed its own infrastructure system called "Star Cloud" to manage devices and provide customized customer service [30] - The company has entered into a strategic cooperation with Beijing Xinnuo Times Technology to expand the market for Microsoft Azure OpenAI products and solutions [31] Market Outlook - The pay-per-use office IT market in China has significant growth potential, with the penetration rate of 4.5% in 2021 compared to 53% in the US [126] - The number of small and medium-sized enterprises in China is expected to grow from 48.77 million in 2021 to 84 million in 2026, with a CAGR of 11.5% [12] - The office IT integrated solutions market in China grew from RMB 400 million in 2017 to RMB 5.1 billion in 2021, with a CAGR of 95.4% [149] - The company's market share in China's pay-per-use office IT services was 14.3% in 2021, exceeding the combined share of the second to fifth players [152] Financial Performance - The company's revenue in FY2022 was RMB 1.372 billion, with 85% coming from pay-per-use office IT integrated solutions [8] - The company's adjusted net profit turned positive in FY2023H1, reaching RMB 28.33 million [91] - The company's gross profit margin was 45.67% in FY2022 and 44.46% in FY2023H1 [101] - The company's operating cash flow turned positive in FY2022, reaching RMB 595.55 million [104] Valuation and Forecast - The report forecasts the company's total revenue to be RMB 1.273 billion, RMB 1.456 billion, and RMB 1.677 billion for FY2023, FY2024, and FY2025, respectively [15] - The report forecasts the company's adjusted net profit to be RMB 16 million, RMB 88 million, and RMB 102 million for FY2023, FY2024, and FY2025, respectively [15] - The report values the company at 3x PS for 2024, corresponding to a market capitalization of RMB 4.368 billion and a target price of HKD 8 [15] Competitive Advantages - The company has a strong remanufacturing capability, with a standardized process and automated testing technology that can extend device lifespan from 3 years to 7-10 years [28] - The company has developed its own infrastructure system called "Star Cloud" to manage devices and provide customized customer service [30] - The company has a grid-based service layout, providing efficient IT hosting services with 7*24 online support and 2-4 hours on-site service [159] - The company has a strong bargaining power with upstream suppliers and downstream customers, which helps to reduce costs and improve profitability [157]

Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 635,963,000, a decrease of 3.0% compared to RMB 655,473,000 for the same period in 2022[4] - Gross profit decreased by 15.2% to RMB 282,769,000 from RMB 333,426,000 year-on-year[4] - Adjusted net profit for the period was RMB 28,328,000, down 61.6% from RMB 73,734,000 in the previous year[4] - The company reported a net loss of RMB 881,683,000 for the period, compared to a net loss of RMB 624,504,000 in the same period last year, indicating a 41.2% increase in losses[188] - The company reported a loss before tax of RMB 876,353,000, compared to a loss of RMB 609,526,000 in the prior year, representing an increase in loss of 43.8%[188] - The total loss for the first half of 2023 was RMB 881,683,000, compared to a loss of RMB 624,504,000 in the first half of 2022, representing a 41.2% increase in losses year-over-year[96] - The adjusted EBITDA (non-IFRS measure) for the first half of 2023 was RMB 303.5 million, down 17.1% from RMB 366.2 million in the first half of 2022[96] Customer Metrics - The number of active customers increased by 11.8% to 45,040 as of June 30, 2023, maintaining a high customer retention rate[6] - As of June 30, 2023, the company had approximately 45,040 active enterprise customers, an increase of 11.8% from 40,282 active customers as of June 30, 2022[23] - The number of subscription customers reached 43,976, up from 39,525 a year earlier, reflecting a growth of 11.8%[23] - The number of SaaS customers increased to 2,080, up from 2,018 in the previous year, marking a growth of 3.1%[23] - The number of installment payment customers increased to 1,064, up from 757 a year earlier, showing a growth of 40.5%[23] - The average number of subscriptions per new customer rose from 13 to 15, indicating a 15.4% increase in subscription depth[27] Revenue Breakdown - Revenue for the six months ended June 30, 2023, was RMB 635,963 thousand, a decrease of 2.6% from RMB 655,473 thousand in the same period of 2022[188] - The revenue from on-demand office IT integrated solutions was RMB 553.4 million, representing 87.0% of total revenue, down 5.0% from RMB 582.7 million in the previous year[55] - Equipment sales revenue increased by 10.0% to RMB 73.9 million, up from RMB 67.2 million in the same period last year, accounting for 11.6% of total revenue[58] - SaaS and other services revenue surged by 56.0% to RMB 8.7 million, compared to RMB 5.6 million in the previous year, representing 1.4% of total revenue[59] Cost and Expenses - Sales cost increased by 9.7% to RMB 353,194,000 compared to RMB 322,047,000 in the previous year[4] - The company's cost of sales for the six months ended June 30, 2023, was RMB 353.2 million, an increase of 9.7% from RMB 322.0 million in the same period last year[60] - The cost of sales for on-demand office IT integrated solutions was RMB 272.0 million, up 6.3% from RMB 255.8 million in the previous year[64] - The cost of sales for equipment sales rose by 22.6% to RMB 80.3 million, compared to RMB 65.5 million in the same period last year[65] Operational Developments - The company launched its self-developed remanufacturing technology, receiving multiple awards for digital transformation and green development initiatives[6] - The company has developed an internal management system named "Nebula" to enhance operational efficiency by integrating various management functions[11] - The company is focused on integrating ESG principles into its business model, promoting sustainability and reducing carbon emissions through its remanufacturing technology[46] - The company has implemented a new customer-oriented strategy, segmenting target city markets into smaller units and assigning dedicated sales personnel to enhance customer acquisition[26] Financial Position - Cash and cash equivalents increased to RMB 602.1 million as of June 30, 2023, up from RMB 505.8 million at the end of 2022, reflecting a growth of 19.0%[99] - The average balance of current and non-current borrowings was RMB 1,436.5 million, a decrease of 7.1% from RMB 1,547.0 million in the previous year[100] - The capital expenditure for the first half of 2023 was RMB 259.3 million, compared to RMB 299.6 million in the same period of 2022, indicating a reduction of 13.5%[106] - The company’s total liabilities decreased to RMB 2,168,359 thousand as of June 30, 2023, down from RMB 4,947,941 thousand as of December 31, 2022[193] - As of June 30, 2023, total equity amounted to RMB 1,242,219 thousand, a significant improvement from a total equity deficit of RMB 1,910,348 thousand as of December 31, 2022[193] Shareholder Information - The total number of issued ordinary shares is 574,259,030[140] - Dr. Ji holds 77,372,780 shares, representing 13.47% of the company's equity[144] - Mr. Zhang owns 51,581,860 shares, accounting for 8.98% of the company's equity[144] - The total equity interest of Yuanma is 121,789,300 shares, representing 21.21% of the company's equity[144] - The company has a diverse shareholder base with significant stakes held by major shareholders[144] IPO and Fund Utilization - The company went public on May 25, 2023, with the stock code "2416" on the Hong Kong Stock Exchange[6] - The company completed its IPO on May 25, 2023, raising funds through the issuance of 58,575,000 shares at a price of HKD 10.19 per share[52] - 40% of the net proceeds are allocated for marketing and service network improvements, with HKD 2.3 million already utilized[132] - 30% of the net proceeds are designated for R&D investments and diversification, with HKD 1.1 million already utilized[132] - 20% of the net proceeds are aimed at enhancing remanufacturing capabilities and operational efficiency, with HKD 4.3 million already utilized[132] - 10% of the net proceeds are reserved for working capital and general corporate purposes, with HKD 2.9 million already utilized[132]

Financial Performance - For the six months ended June 30, 2023, the group's revenue was RMB 636.0 million, a decrease of 3.0% compared to RMB 655.5 million for the same period in 2022[2]. - The group's cost of sales for the same period was RMB 353.2 million, an increase of 9.7% from RMB 322.0 million in the prior year, primarily due to increased costs in on-demand IT solutions and equipment sales[5]. - The group's gross profit decreased by 15.2% to RMB 282.8 million from RMB 333.4 million for the same period in 2022[8]. - The group reported a net loss of RMB 881.7 million for the six months ended June 30, 2023, compared to a loss of RMB 624.5 million for the same period in 2022[18]. - The company reported a loss before tax of RMB 876.35 million, an increase of 43.8% from RMB 609.53 million in the prior year[50]. - Adjusted net profit for the period was RMB 28.33 million, a significant decline of 61.6% from RMB 73.73 million in the same period last year[50]. - The company reported a net loss attributable to equity holders of RMB (881,683) thousand for the six months ended June 30, 2023, compared to RMB (624,504) thousand for the same period in 2022, indicating a worsening of 41.2%[118]. Profitability Metrics - The gross profit margin for on-demand IT solutions fell to 50.8% from 56.1%, attributed to depreciation cost increases due to lower subscription device prices and higher sales volumes[9]. - Gross profit for the same period was RMB 282.77 million, down 15.2% from RMB 333.43 million in the previous year, resulting in a gross margin of 44.5% compared to 50.9%[48]. - The average financing cost rate declined from 9.0% to 8.2% during the same period[16]. - The group’s adjusted EBITDA for the period was RMB 28.3 million, down from RMB 73.7 million in the prior year[19]. Cash Flow and Financing - Financing costs decreased to RMB 71.7 million from RMB 84.5 million, with the average interest-bearing debt balance dropping by 6.5% to RMB 1,756.2 million[16]. - The company anticipates sufficient financial resources to meet its operational funding needs for the next twelve months, based on cash flow forecasts and available financial resources[78]. - The company’s cash and cash equivalents rose to RMB 602,109,000 from RMB 505,803,000, showing a growth of 19.1%[4]. - Interest income from banks increased significantly to RMB 5,570 thousand for the six months ended June 30, 2023, compared to RMB 2,237 thousand in the same period of 2022, representing a growth of 149.5%[114]. Investments and Utilization of Proceeds - The company has allocated 40% of the net proceeds from its IPO for improved investments, with 38.8% already utilized as of the announcement date[33][44]. - Research and development investments for service content and diversification account for 30% of the net proceeds, with 29.1% already utilized[33][44]. - The company aims to enhance remanufacturing capabilities and operational efficiency, allocating 20% of the net proceeds for this purpose, with 19.4% already utilized[33]. Customer Metrics and Market Position - The number of active customers as of June 30, 2023, was 45,040, representing an 11.8% year-over-year growth[105]. - The number of subscription customers increased to 43,976 as of June 30, 2023, up from 42,343 as of December 31, 2022, reflecting a growth of 3.9%[135]. - The company maintained a high customer retention rate, consistent with the previous year[105]. - The company is exploring market expansion opportunities and enhancing its IT solutions offerings to drive future growth[4]. Operational Efficiency - The company launched a self-developed remanufacturing technology, which received multiple awards for excellence in digital transformation and green development[105]. - The average remanufacturing cost per unit decreased from RMB 66 to RMB 65, indicating improved operational efficiency[164]. - The company implemented comprehensive inventory management measures, achieving an equipment utilization rate of approximately 89%[171]. Revenue Breakdown - Revenue for the six months ended June 30, 2023, was RMB 635,963,000, a decrease of 2.4% compared to RMB 655,473,000 for the same period in 2022[4]. - The revenue from on-demand office IT integrated solutions was RMB 553.36 million, accounting for 87.0% of total revenue, while equipment sales generated RMB 73.86 million, representing 11.6% of total revenue[177]. - SaaS and other services revenue reached RMB 8,738,000 for the six months ended June 30, 2023, compared to RMB 5,600,000 in the previous year, marking a growth of 55.4%[84]. Liabilities and Assets - The company’s total liabilities as of June 30, 2023, were RMB 4,131,591,000, compared to RMB 2,007,887,000 as of December 31, 2022, indicating a significant increase in liabilities[74]. - The total assets as of June 30, 2023, amounted to RMB 3,410,578,000, an increase from RMB 3,037,593,000 at the end of 2022[4]. - Non-current liabilities increased to RMB 574,093,000 from RMB 3,408,306,000, indicating a significant reduction in financial liabilities[4]. Technology and Innovation - The company’s self-developed keyboard testing robot is set to enhance testing efficiency and improve keyboard yield rates, reflecting ongoing investment in technology and automation[146]. - The company has diversified its service offerings, including self-service IT management tools, to enhance customer experience and operational efficiency[142].