ZWSOFT(SH:688083)2024-09-24 01:37Investment Rating - The report initiates coverage with a "Buy" rating for Zhongwang Software (688083) [3][8]. Core Views - The report identifies three key expectation gaps that could drive growth for Zhongwang Software, emphasizing its leadership in the domestic CAD market and potential for revaluation [3][6][8]. - The company's growth is driven by expanding product categories, increasing the rate of software legalization, market share growth, and overseas revenue [6][20]. Summary by Sections 1. Market Data - Closing price: 67.50 CNY - Market capitalization: 8,188 million CNY - Price-to-book ratio: 3.1 - Dividend yield: 0.67% [3][4]. 2. Financial Performance - Expected revenue for 2024-2026: 9.93 billion CNY, 12.06 billion CNY, and 14.80 billion CNY, with year-on-year growth rates of 20%, 21%, and 23% respectively [6][8]. - Expected net profit for the same period: 0.98 billion CNY, 1.45 billion CNY, and 2.12 billion CNY, with growth rates of 60%, 48%, and 46% respectively [6][8]. 3. Growth Drivers - Strategic focus on 3D product breakthroughs and a comprehensive CAx integration strategy [22][24]. - The company has established a solid foundation in technology and has introduced three core technologies to enhance its product capabilities [6][22]. - The "Wukong Plan" aims to penetrate high-end 3D fields, while acquisitions like CHAM and Beijing Bochao expand its capabilities [6][22]. 4. Market Positioning - Zhongwang Software's 3D CAD products are priced significantly lower than international competitors, with a five-year licensing cost approximately 25% of similar foreign products [6][20]. - The company is enhancing its distribution strategy by focusing on direct sales to small and medium-sized clients, which is expected to leverage channel efficiencies [6][20]. 5. Legalization Trends - The report highlights the long-term trend towards software legalization in China, driven by the country's status as a global manufacturing hub [6][20]. - If China achieves a legalization rate similar to that of the U.S., the domestic market's potential for growth could double [6][20]. 6. Investment Analysis - The report suggests a target market capitalization of 109 billion CNY for 2024, indicating a potential upside of 33% based on a price-to-sales ratio of 11x [6][8]. - Comparable companies in the sector include Guangliwei, Gai Lun Electronics, and Suo Chen Technology, which provide a benchmark for valuation [6][8].