Core Viewpoint - China Software International (00354) has signed a strategic cooperation agreement with Shenzhen Kaihong Digital Industry Development Co., Ltd. and Beijing Yiswei Computing Technology Co., Ltd. to build a dual open-source ecosystem centered on "Open Source Harmony + RISC-V" [1][2] Group 1: Technical Aspects - The three parties will establish a joint technical team focusing on deep adaptation and collaborative development of "RISC-V chips + KaihongOS," addressing key technical areas such as operating system kernel adaptation, driver development, performance optimization, security reinforcement, and AI empowerment [1] - The collaboration aims to create a stable and efficient software-hardware collaborative foundation [1] Group 2: Product Development - The partnership will leverage each company's strengths to jointly develop edge computing products and industry solutions, including traffic MEC, education IWB, and industrial quality inspection AOI, as well as chip products and solutions in smart home, robotics, and industrial sectors [1] - The initiative will gradually expand to smart terminals based on "RISC-V + KaihongOS" [1] Group 3: Market and Ecosystem Expansion - The market strategy will initially focus on smart transportation and gradually extend to public services and various industry sectors, while also exploring overseas market opportunities to enhance the international competitiveness of the domestic dual open-source ecosystem [2] - The collaboration will participate in open-source community building and technical standard formulation, promoting interface recognition and resource sharing [2] - The dual open-source ecosystem aims to construct a self-sufficient technology system encompassing "chip architecture - operating system - applications," breaking the global monopoly of X86 and ARM [2] - The initiative is driven by market demand, promoting deep collaboration among chips, software, and terminal entities to create new scenarios, applications, and models in the era of intelligent connectivity [2]

Core Viewpoint - The strategic cooperation agreement signed between China Software International, Shenzhen Kaihong Digital Industry Development Co., Ltd., and Beijing Yiswei Computing Technology Co., Ltd. aims to build a dual open-source ecosystem centered on "Open Source Hongmeng + RISC-V" to promote digital transformation across various industries [1][2][3] Technical Aspects - The three parties will form a joint technical team focusing on key technology areas such as operating system kernel adaptation, driver development, performance optimization, security enhancement, and AI empowerment [1][2] - The collaboration will reference the "Wintel model" to achieve deep adaptation and coordinated development of "RISC-V chips + KaihongOS" [1][2] Product Development - The partnership will leverage each company's strengths to jointly develop edge computing products and industry solutions, including applications in transportation, education, and industrial quality inspection [2] - There will be a gradual expansion into smart terminals based on "RISC-V + KaihongOS" [2] Market Strategy - The initial focus will be on smart transportation, with plans to expand into public services and various industry sectors, while also exploring overseas market opportunities [2] - The collaboration aims to enhance the international competitiveness of the domestic dual open-source ecosystem [2] Ecosystem Development - The three companies will participate in open-source community building and technical standard formulation to promote interface recognition and resource sharing [2] - Activities such as technology forums and developer conferences will be organized to cultivate the "Open Source Hongmeng + RISC-V" industrial ecosystem and lower innovation barriers [2] Strategic Importance - The dual open-source ecosystem aims to establish a comprehensive independent technology system encompassing "chip architecture - operating system - applications," breaking the global monopoly of X86 and ARM architectures [2] - The collaboration is expected to replicate the successful logic of Wintel and AA combinations, creating a globally competitive third-generation mainstream software and hardware ecosystem [2][3]

Core Insights - Shenzhen Kaihong Digital Industry Development Co., Ltd. (referred to as "Kaihong") has completed an A+ round of financing, with the amount undisclosed, involving several investment institutions [1][2]. Group 1: Financing Details - The financing round was participated by institutions including Shanke Wisdom Investment, Hechuang Capital, Shandong Guohui, Houwei Capital, and China Insurance Investment Fund [1][2]. - Previous financing rounds include an A round on September 5, 2024, and an angel round on January 11, 2022, with various investors involved [2]. Group 2: Company Focus and Strategy - Kaihong aims to be a leader in intelligent IoT operating systems, focusing on the development and continuous innovation of KaihongOS based on OpenHarmony [1]. - The company targets multiple sectors including finance, government, energy, transportation, industry, and consumer markets, emphasizing digital terminals, digital life, and digital production [1]. - Kaihong is committed to building a multi-win IoT operating system ecosystem, expanding industry boundaries, and enabling connectivity across various sectors [1].

Market Overview - China's gold bar consumption increased by 25% in the first three quarters[3] - The Hang Seng Index closed at 26,649 points, up 407 points or 1.6% on the previous day, with a total turnover of HKD 214.788 billion, a daily increase of 2.5%[6] - The Dow Jones Industrial Average rose by 381 points or 0.81%, closing at 47,368 points, driven by hopes of ending the U.S. government shutdown[6] Index Performance - The Hang Seng Index year-to-date performance is up 30.82%[5] - The Technology Index decreased by 1.80% on the previous day but has a year-to-date increase of 30.64%[5] - The Financial Index has a year-to-date increase of 19.27%[5] Commodity Prices - New York gold futures closed at USD 4,009.80, up 0.47% year-to-date increase of 52.28%[5] - Brent crude oil closed at USD 63.63, with a year-to-date decrease of 14.56%[5] Company Highlights - Alibaba (9988.HK) rose by 2.1%, Tencent (700.HK) by 2.4%, and Meituan (3690.HK) by 1.3%[6] - The company Tongda Group (698.HK) plans to invest RMB 10 million in various wealth management products, expecting annual returns between 1.95% and 3.09%[7] Technical Analysis - The Hang Seng Index successfully broke through the October 30 high of 26,588 points, indicating a potential continuation of the upward trend as long as it holds above 26,000 points[10]

Core Viewpoint - China Software International (00354) has signed a strategic cooperation agreement with Shenzhen Kaihong Digital Industry Development Co., Ltd. and Loongson Technology Co., Ltd. to jointly develop the "Longhong System" based on "Open Source Harmony + LoongArch" [1][2] Technical Aspects - The three parties will focus on deep adaptation of "LoongArch chips + KaihongOS" to optimize the performance of the Loongson platform, ensuring stable software and hardware integration [1] - A joint technical team will be established to work on kernel adaptation, driver development, performance optimization, security enhancement, and AI empowerment [1] Product Development - The collaboration aims to create edge computing gateways, AI terminals, and customized industry solutions for core scenarios such as industrial control, government affairs, and smart living [1][2] Market Strategy - The three parties will collaborate on domestic projects, prioritizing implementation in key cities like Shenzhen, Beijing, and Jiangsu, while also planning to expand into overseas markets [2] Ecological Development - The partners will participate in open-source community building and industry standard formulation, promoting standardization of technical interfaces and resource sharing [2] - The "Longhong System" is designed to provide a complete closed-loop technology system for national critical information infrastructure and core industries, ensuring system-level security and control [2] Long-term Vision - The collaboration is expected to deepen technological integration and industrial synergy, accelerating the large-scale implementation of an independent information technology system, thereby creating long-term value for shareholders and contributing to national technological self-reliance [2]

Core Viewpoint - The report from Shenwan Hongyuan maintains the profit forecast for China Software International (00354), projecting revenues of 17.8 billion, 19.46 billion, and 22.14 billion yuan for 2025-2027, with net profits attributable to ordinary shareholders of 610 million, 730 million, and 890 million yuan respectively, and maintains a "buy" rating [1] Group 1: Hongmeng Ecosystem Development - The company has been selected as a city partner for the open-source Hongmeng innovation application and ecosystem construction in the field of intelligent transportation in Xi'an, playing a full-stack service role in "hardware access + software adaptation + scenario development" within the Hongmeng ecosystem [1] - The company has deep-rooted core technologies in operating systems, building an IoT digital foundation based on KaihongOS and releasing the distributed heterogeneous robot operating system M-Robots OS, while continuing to lead in code contributions to the open-source Hongmeng community [1] - The company has a significant advantage in the PC ecosystem, having developed the "Hongyun Virtual Machine" solution to achieve compatibility with the Windows ecosystem, providing crucial support for the initial promotion of Hongmeng in the PC sector and the trust-based market expansion [1] Group 2: ERP Business and New Orders - The company has recently won a bid for the centralized procurement project for human outsourcing services from Sinochem Information Technology Co., Ltd. for 2025-2027, covering three key categories: consulting services, ERP, and implementation and operation maintenance [1] Group 3: AI Model Implementation and Cloud Computing - On June 21, the company collaborated with Silicon-based Flow to launch a joint solution that includes four core platforms: a high-performance AI platform integrating heterogeneous computing power and vector databases, a graph database, and a search engine, unifying model training and deployment processes to facilitate efficient knowledge retrieval [1] - The company is developing a native AI digital foundation by integrating cloud and computing power, with Huawei Cloud continuing to lead in cloud business scale, ecosystem share, and CTSP cloud transformation service provider share [1] - The company's computing power operation business is expanding its footprint in collaboration with Huawei and local governments [1]

Group 1 - The core viewpoint of the report is that China Software International (00354) maintains its profit forecast, expecting revenues of 17.8 billion, 19.46 billion, and 22.14 billion yuan for 2025-2027, with net profits attributable to ordinary shareholders of 610 million, 730 million, and 890 million yuan respectively, and maintains a "Buy" rating [1] - The chairman of China Software International, Dr. Chen Yuhong, has shown confidence in the company's long-term development by increasing his shareholding, acquiring 2 million shares on July 18 and an additional 1.5 million shares on September 23 [1] Group 2 - The company has been recognized as a city partner in the open-source HarmonyOS innovation application and ecosystem construction in the intelligent transportation sector in Xi'an, positioning itself as a full-stack service provider in the Harmony ecosystem [2] - The company has deep-rooted technology in operating systems, having developed a digital foundation based on KaihongOS and released a distributed heterogeneous robot operating system, M-Robots OS, while leading in code contributions to the open-source Harmony community [2] - The company has a significant advantage in the PC ecosystem, having developed a "Hongyun Virtual Machine" solution that ensures compatibility with the Windows ecosystem, supporting the initial promotion of HarmonyOS in the PC sector [2] Group 3 - The company has successfully secured a place in the centralized procurement project for human outsourcing services from Sinochem Information Technology Co., Ltd. for 2025-2027, covering key areas such as consulting services, ERP, and implementation operations [3] - This win further consolidates the company's penetration advantage in state-owned enterprises and lays a solid foundation for advancing its strategic layout [3] Group 4 - The company is developing an AI-native digital intelligence foundation by integrating cloud and computing power, leading in the Huawei cloud ecosystem in terms of business scale and market share [4] - The company is expanding its computing power operations by collaborating with Huawei and local governments to establish a "new triangle" model for domestic computing power, transitioning from simple computing power leasing to comprehensive AI services including model training and scenario development [4]

Group 1 - The core viewpoint of the report maintains the profit forecast for China Software International, expecting revenues of 17.8 billion, 19.46 billion, and 22.14 billion yuan for 2025-2027, with net profits attributable to ordinary shareholders of 610 million, 730 million, and 890 million yuan respectively, and maintains a "buy" rating [1] - The chairman of China Software International, Dr. Chen Yuhong, has increased his shareholding in the company, demonstrating confidence in its long-term development by purchasing 2 million shares on July 18 and an additional 1.5 million shares on September 23 [1] Group 2 - The company has been selected as a city partner for the open-source HarmonyOS innovation application and ecosystem construction in the intelligent transportation field in Xi'an, positioning itself as a full-stack service provider in the HarmonyOS ecosystem [2] - The company has deep-rooted technology in operating systems, having developed a digital foundation based on KaihongOS and released the M-Robots OS for distributed heterogeneous robotic systems, leading in code contributions to the open-source Harmony community [2] - The company has a significant advantage in the PC ecosystem by developing the "Hongyun Virtual Machine" solution, which ensures compatibility with the Windows ecosystem, supporting the initial promotion of HarmonyOS in the PC sector [2] Group 3 - The company has successfully secured a new order for human resource outsourcing services from Sinochem Information Technology Co., covering consulting, ERP, and implementation services, further solidifying its penetration in state-owned enterprises [3] - The collaboration with Silicon-based Flow aims to implement a high-performance AI platform that integrates heterogeneous computing power and vector databases, facilitating the large-scale deployment of intelligent agents across various industries such as manufacturing, healthcare, and finance [3] Group 4 - The company is developing an AI-native digital intelligence foundation by integrating cloud and computing power, leading in Huawei's cloud ecosystem in terms of scale and market share [4] - The company is expanding its computing power operations by collaborating with Huawei and local governments to establish a "new triangle" model for domestic computing power, transitioning from simple computing power leasing to comprehensive AI services [4]

Investment Rating - The report maintains a "Buy" rating for the company [4] Core Views - The company is a leading player in the domestic IT services sector and a deep partner of Huawei, with over 40% of its revenue coming from Huawei [4][6] - The cloud intelligence business is experiencing significant growth, and the initial completion of the HarmonyOS ecosystem is expected to benefit the company as its collaboration with Huawei Cloud deepens [4][5] - The report has adjusted the profit forecast for 2025 and introduced forecasts for 2026-2027, estimating net profits of 564 million, 628 million, and 708 million yuan for 2025-2027, respectively [4][7] Summary by Sections Company Overview - Established in 2000, the company has been a strategic partner of Huawei since 2009 and has evolved into a leading comprehensive software and IT service provider in China [15][16] Financial Performance - The company reported a revenue of 17.17 billion yuan in 2024, with a slight decline of 0.3% year-on-year, while net profit was 513 million yuan, down 28.1% [7][20] - The gross margin has been under pressure, dropping from 29.20% in 2020 to 22.07% in 2024, but there are efforts to improve margins through high-value projects and AI product deployment [22][27] Business Segments - The core ICT services business has seen a decline in revenue from 133.87 billion yuan in 2022 to 96.36 billion yuan in 2024, while the cloud intelligence business has grown from 2 billion yuan in 2019 to 73.15 billion yuan in 2024 [27][28] - The company aims to transition from a traditional outsourcing model to an AI technology service provider, leveraging its partnership with Huawei [31][54] Strategic Partnerships - The company is a key partner in Huawei's cloud strategy, benefiting from the growth of the HarmonyOS ecosystem and the increasing demand for AI-driven solutions [6][60] - The collaboration with Huawei has allowed the company to expand its customer base and enhance its service offerings, particularly in sectors like energy, finance, and government [41][42] Market Outlook - The IT services market in China is projected to grow steadily, with a total market size expected to reach 525.6 billion USD in 2024, driven by digital transformation across various sectors [32][36] - The cloud computing market in China is anticipated to exceed 2 trillion yuan by 2027, with significant contributions from AI and big data applications [61][69]

Investment Rating - The investment rating for Chinasoft International is Neutral, with a target price of HK$5.50, reflecting a potential upside of 11.8% from the current price of HK$4.92 [10][13]. Core Insights - The company is optimistic about growth driven by the HarmonyOS ecosystem and generative AI opportunities, while traditional IT services remain modest [1][8]. - Management emphasizes the transition from traditional IT services to intelligent cloud services, which is expected to enhance profitability through higher gross margins and efficiency improvements [7][8]. Summary by Sections HarmonyOS Ecosystem - Chinasoft International is collaborating closely with Huawei on HarmonyOS initiatives, focusing on application migration and developing Harmony-version virtual machines. Increased adoption of Harmony PCs is anticipated to create more business opportunities [2][3]. Generative AI Opportunities - As a full-stack AI service solutions provider, the company is capitalizing on the growing demand for generative AI in China. Their services span AI infrastructure, foundation models, and application software development. The establishment of AI computing centers with local governments is also highlighted [3][7]. 2025 Outlook - Management expects traditional IT services to see better growth from sectors such as financial institutions, internet companies, automotive, and state-owned enterprises. The company anticipates a higher profit level due to the expansion of intelligent cloud services and AI deployment [7][8].