Shanghai Suochen Information Technology (688507)2024-11-27 08:00Investment Rating - The report assigns a "Buy" rating to the company, Suochen Technology (688507.SH) [2]. Core Views - Suochen Technology has been focused on CAE software development for over a decade, with a compound annual growth rate (CAGR) of approximately 28.88% in revenue from 2019 to 2023, and a gross margin maintained above 60% [11][12]. - The CAE industry has high barriers to entry and significant potential for domestic substitution, with the domestic CAE market growing rapidly, projected to reach a CAGR of 18.4% from 2022 to 2026 [12][38]. - The company has accumulated dual advantages in algorithms and technology, which are expected to provide long-term growth potential [13]. - Suochen Technology has established strong relationships with high-quality clients in military and research institutions, which supports its future expansion into the civilian market [14]. Company Overview - Suochen Technology, founded in 2006, specializes in the research, development, sales, and service of CAE software, covering multiple disciplines such as fluid dynamics, structural analysis, electromagnetics, acoustics, and optics [11][16]. - The company has developed various engineering simulation software to meet the complex simulation needs of industries like aerospace, defense, marine, heavy machinery, nuclear industry, electronics, and ground transportation [11][16]. Industry Analysis - The CAE industry is characterized by its comprehensive nature and high barriers to entry, requiring a solid foundation in multiple disciplines such as physics, mathematics, engineering, and computer science [41]. - The domestic CAE market has seen an increase in localization rates, rising from 7% in 2016 to 16.2% in 2022, indicating a long-term trend towards domestic software substitution [12][38]. Financial Analysis - In 2023, the company's total revenue reached 320 million yuan, a year-on-year increase of 19.52%, with a CAGR of approximately 28.88% from 2019 to 2023 [24][26]. - The gross margin for the company in 2023 was 69.44%, with a net profit margin of 18.12% [29]. - The company has maintained a high level of R&D investment, with R&D expenses accounting for over 30% of total revenue from 2018 to 2023 [32].