Summary of Conference Call Notes Industry Overview - The focus is on the IT services industry in China, specifically highlighting companies Chinasoft International and iSoftstone - There is a significant shift towards AI computing and AI models, with approximately 50% of new projects being AI-related solutions [1][4][9] Key Insights - Project Wins: Recent project wins for Chinasoft International and iSoftstone are primarily from sectors such as finance, transportation, telecom, and government [1][9] - AI Demand: The demand for AI solutions has surged since the introduction of enhanced local AI foundation models in December 2024, leading to a notable increase in AI computing and application projects [1] - Project Value: The value of new projects ranges from RMB 1 million to RMB 650 million, indicating a diverse scale of investment in AI solutions [1] - Integrated Solutions: The industry is moving towards integrated AI solutions that encompass computing platforms, AI models, and applications, which support clients in deploying AI models effectively [1] - Algorithm Optimization: There is a focus on optimizing AI algorithms to improve training and inferencing efficiency, which is crucial for enhancing service delivery [1] Company-Specific Developments - Chinasoft International: - The company has been shortlisted for a significant ERP and consulting project with SinoChem Info, reflecting its capabilities in handling large-scale SOE clients [10] - Gross margin (GM) improved to 22% in 1H25, up from a trough of 21.2% in 2H24, driven by increased productivity and AI technology adoption [11] - The development of AI sales assistants through the R1-AgentDIM platform is enhancing sales efficiency and contributing to top-line growth [11] - iSoftstone: - The company has secured multiple project wins in local AI server solutions and AIGC applications, with project values reaching up to RMB 427 million [10] Financial Outlook - Valuation: Chinasoft International has a Neutral rating with a 12-month target price of HK$6.8, based on an 18x P/E for 2026E, reflecting concerns over growth visibility due to soft IT services budgets [15] - Risks: Key risks include fluctuations in customer diversification, IT services budget recovery, R&D investments, and product mix upgrades [16] Additional Considerations - The report emphasizes the importance of AI technology in improving internal efficiencies and the overall delivery process within IT service companies [11] - The ongoing trend towards AI solutions is expected to continue shaping the IT services landscape in China, presenting both opportunities and challenges for companies in the sector [1][10]