Core Viewpoint - The company, China Software, is experiencing growth in its operations, particularly in the tax industry and digitalization, while also being a significant player in the domestic operating system market [2][8]. Group 1: Company Overview - China Software is involved in a complete business chain from operating systems to application systems, covering critical sectors such as taxation, finance, and energy [2]. - The company is the only entity with a LINUX operating system and holds a 50% stake in Zhongbiao Software, which offers various software products [2]. - As of June 30, the company had 156,200 shareholders, with an average of 5,401 circulating shares per person, reflecting a 9.92% decrease in shareholder numbers [8]. Group 2: Financial Performance - For the first half of 2025, China Software reported a revenue of 2.242 billion yuan, marking a year-on-year increase of 13.01% [8]. - The net profit attributable to shareholders was -74.5263 million yuan, showing a significant year-on-year improvement of 72.67% [8]. - The company has distributed a total of 415 million yuan in dividends since its A-share listing, with 13.8956 million yuan in the last three years [8]. Group 3: Market Activity - On September 19, the stock price of China Software increased by 0.80%, with a trading volume of 1.175 billion yuan and a turnover rate of 2.85% [1]. - The main capital inflow for the day was 49.8755 million yuan, representing 0.05% of the total market activity, with the industry ranking at 4 out of 131 [4]. - The average trading cost of the stock is 49.84 yuan, with the current price near a support level of 48.66 yuan [6]. Group 4: Institutional Holdings - As of June 30, 2025, the top ten circulating shareholders included Hong Kong Central Clearing Limited and Southern CSI 500 ETF, with notable increases in their holdings [9]. - The company is categorized as a "Zhongzi" stock, with its actual controller being a state-owned entity [3].

Investment Rating - The report maintains a "Recommended" rating for the company [6][7]. Core Views - The company reported a revenue of 5.198 billion yuan in 2024, a year-on-year decline of 22.69%, with a net profit attributable to shareholders of -413 million yuan. For Q1 2025, revenue was 640 million yuan, down 8.85%, with a net profit of -80.625 million yuan [3][4]. - Despite short-term performance pressure, the long-term positive trend remains intact. The company is positioned as a leader in the domestic operating system market and is expected to benefit from the national strategy for information technology innovation [3][4]. - The company's self-developed software business showed improvement, with revenue reaching 1.719 billion yuan in 2024, up 5.01% year-on-year, and a gross margin of 77.38%, an increase of 4.49 percentage points [4][5]. - The subsidiary, Kylin Software, continues to lead the Chinese Linux market for 13 consecutive years, with 2024 revenue of 1.438 billion yuan and a net profit of 502 million yuan, reflecting growth from the previous year [4][5]. - The company is enhancing its collaboration across the industry chain, with advancements in its Kylin operating system across various platforms and integration with AI technologies [5]. - The company is also making strides in the tax sector with the successful implementation of the Golden Tax Phase IV project, which significantly reduces transaction costs [5]. Financial Summary - The projected revenues for 2025-2027 are 6.923 billion yuan, 7.855 billion yuan, and 8.915 billion yuan, respectively, with growth rates of 33.2%, 13.5%, and 13.5% [9][10]. - The net profit attributable to shareholders is expected to recover to 127 million yuan in 2025, 255 million yuan in 2026, and 345 million yuan in 2027, with corresponding growth rates of 130.8%, 100.8%, and 35.3% [9][10]. - The report forecasts a PE ratio of 303X for 2025, 151X for 2026, and 112X for 2027, indicating a potential for valuation improvement as profitability returns [6][9].