SIE(SZ:300687) Yong Xing Zheng Quan·2024-04-24 12:00Investment Rating - The report initiates coverage with a "Buy" rating for the company [1]. Core Insights - The company's pan-ERP business is expected to benefit from the acceleration of domestic substitution processes, while its smart manufacturing business is likely to gain from the growth of downstream markets and the gradual increase in MES penetration rates. Future revenue is anticipated to maintain stable growth, with a steady increase in gross profit margins [1]. Financial Projections - Revenue projections for 2023-2025 are estimated at 2.542 billion, 3.053 billion, and 3.735 billion yuan, with year-on-year growth rates of 11.93%, 20.09%, and 22.36% respectively. The net profit attributable to the parent company is projected to be 278 million, 338 million, and 416 million yuan, with year-on-year growth rates of 11.36%, 21.72%, and 22.99% respectively. Corresponding EPS for these years are expected to be 0.68, 0.82, and 1.01 yuan [1]. Business Segmentation - The company has transitioned from a focus on pan-ERP to include MES, providing dual growth drivers. The pan-ERP business has seen a slowdown in growth, while the smart manufacturing segment has experienced significant growth, with a compound annual growth rate (CAGR) of 53.16% from 2018 to 2022 [15][19][26]. - The smart manufacturing business accounted for approximately 35.63% of total revenue in 2022, up from 16.18% in 2018, while the pan-ERP business's share decreased from 75.31% to 54.60% during the same period [19][22]. Market Context - The overall MES market in China is projected to exceed 12.54 billion yuan, with significant room for penetration improvement across various industries, including automotive, pharmaceuticals, and electronics, where current MES penetration rates are below 30% [91][100]. - The domestic ERP market is expected to reach approximately 68.2 billion yuan by 2027, with an average annual growth rate of around 11%, indicating substantial potential for domestic vendors to increase their market share in the high-end ERP segment [49][91]. Competitive Position - The company has established strong ties with major clients, including Huawei, which is its largest customer, contributing to 10.14% of total accounts receivable as of June 30, 2023 [108]. The company is positioned as a core partner in Huawei's MetaERP initiative, enhancing its competitive edge in the market [86].