CS&S(SH:600536) Minsheng Securities·2024-06-27 02:30Investment Rating - The report initiates coverage with a "Buy" rating for the company [1]. Core Views - The company is positioned as a key player in the domestic software industry, focusing on self-reliant and secure products and services, with a comprehensive product chain from operating systems to application products [1][7]. - The company is expected to benefit from dual opportunities in the "Xinchuang" (self-reliance in technology) sector and state-owned enterprise reform, with significant support from government policies and funding [1][36]. - The company has a strong long-term growth outlook, driven by its core assets such as Kylin Software and Dameng Data, which maintain leading positions in their respective markets [1][47]. Summary by Sections 1. Company Overview - The company is a major high-tech listed enterprise controlled by China Electronics, recognized as a "national team" in the software industry [1][7]. - It has a clear shareholding structure, with China Electronics as the actual controller [10]. 2. Market Opportunities - The issuance of long-term special government bonds is expected to support the development of the Xinchuang industry, focusing on high-level technological self-reliance [36]. - The company is poised to benefit from the ongoing state-owned enterprise reform, which is a key focus for both China Electronics and China Electronics Technology Group in 2024 [41][44]. 3. Core Assets and Growth Potential - Kylin Software has maintained the top position in the Chinese Linux market for 12 consecutive years, with revenue and net profit growing at compound annual growth rates of 28% and 37% from 2020 to 2023 [1][47]. - Dameng Data is recognized as a leader in the domestic database industry, actively promoting digital transformation across various sectors [54]. 4. Financial Forecasts - The company is projected to achieve a net profit of 133 million, 225 million, and 311 million yuan for the years 2024, 2025, and 2026, respectively, with corresponding price-to-earnings ratios of 181X, 107X, and 78X [2][1]. 5. Business Segments - The company's main business segments include self-developed software products, industry solutions, and service-oriented businesses, with significant contributions from each segment [19][22]. - The self-developed software products segment, led by Kylin Software, accounts for 24.35% of total revenue, while industry solutions contribute 51.33% [19].