Core Viewpoint - Cathay Securities initiates coverage on XunCe Technology (03317) with a "Buy" rating and a target price of HKD 104.78, corresponding to a target market capitalization of HKD 33.8 billion, highlighting the company's potential to replicate a "Chinese version of Palantir" model across various sectors, leveraging its core capability in "data flow" during a critical transition in AI large models from general capabilities to vertical scenarios [1] Industry Transition - The AI industry is undergoing a strategic shift from "larger models" to "better data flows," emphasizing that true commercial value from large models requires differentiation in vertical scenarios rather than just algorithmic advantages [1] - The report identifies a significant opportunity in China's real-time data processing market, noting a transition from fragmented to holistic data management approaches, which enhances strategic efficiency by embedding global algorithmic models into business and data flows [1] Company Positioning - XunCe Technology has established a strong foothold in the real-time data infrastructure sector over the past decade, with its unified data platform capable of collecting, cleaning, managing, and analyzing heterogeneous data from multiple sources within seconds, aligning perfectly with the immediate decision-making needs of enterprises [3] - The company has built a comprehensive lifecycle solution covering investment monitoring, order execution, valuation, risk management, and compliance, positioning itself as a leader in the real-time data field by 2024 [3] - The market for real-time data infrastructure and analytics in China is projected to grow at a CAGR of 46.1% from 2020 to 2024, with an expected market size of RMB 50.5 billion by 2029, indicating significant growth potential as AI large models catalyze market expansion [3] Diversification and Growth - XunCe is actively expanding its business across various industries, including financial services (beyond asset management), urban management, production management, and telecommunications, with revenue from diversified sectors increasing from 26% in 2022 to 61% in 2024, becoming a key growth driver [4] - The company has demonstrated sustainable business model viability, with the number of paying customers increasing from 182 to 232 and ARPU rising from RMB 1.58 million to RMB 2.72 million from 2022 to 2024, indicating enhanced pricing power as brand recognition and solution optimization improve [4] - Cathay Securities forecasts XunCe's revenue to reach RMB 1.183 billion, RMB 2.177 billion, and RMB 3.311 billion in 2025, 2026, and 2027, respectively, with growth rates of 87%, 84%, and 52%, and anticipates a return to profitability with a net profit of RMB 101 million in 2026, further increasing to RMB 311 million in 2027 [4]