Event overview:

On January 7, Zhuoyi disclosed the "Announcement on the Repurchase of the Company's Shares by Centralized Bidding Transaction to Reach 1% and the Progress of Repurchase": As of January 5, 2025, the company has repurchased a total of 1,280,100 shares through centralized bidding transactions, accounting for 1.06% of the company's total share capital, an increase of 0.11% compared with the last disclosure, with the highest purchase price of 38.3295 yuan / share and the lowest price of 31.5989 yuan / shares, and the total amount paid was RMB 45,739,548.84 (excluding transaction costs).

Strengthen R&D investment and repurchase to demonstrate the company's confidence in long-term development

Recently, Zhuoyi Information has newly registered the software copyrights of 2 projects, including "Zhuoling Smart Park Digital Base Cloud Platform V1.0", "Zhuoling Building Digital Twin Management Platform V1.0", etc.

According to the 2024 interim report and the third quarter report, the company continued to strengthen research and development, investing 34.0187 million yuan in the first half of 2024, a year-on-year increase of 46.58%; In the first three quarters, the total investment in R&D was 52.5961 million yuan, a year-on-year increase of 25.71%, accounting for 21.61% of the operating income, demonstrating the company's determination to increase R&D and improve product technology supply capacity.

In November 2024, Zhuoyi Information held the 21st meeting of the fourth session of the board of directors, deliberated and approved the "Proposal on the Third Phase of 2024 Centralized Bidding Transaction Repurchase Plan of the Company's Shares", and agreed that the company will repurchase part of the company's issued RMB ordinary shares (A shares) through the Shanghai Stock Exchange trading system through centralized bidding with its own funds and the special loan for share repurchase provided by Everbright Bank Co., Ltd. Wuxi Branch. The repurchased shares will be used for employee equity incentives or stock ownership plans at an appropriate time in the future, with a repurchase price of no more than RMB 44.00 per share (inclusive), and the total amount of repurchase funds shall not be less than RMB 30 million (inclusive) and not more than RMB 60 million (inclusive), of which the total amount of repurchase loan funds shall not exceed RMB 35 million.

Layout of tool software, acquisition of Epyang to extend the information and innovation industry chain

Zhuoyi Information's current main business includes providing cloud computing equipment core firmware (BIOS/BMC) products and services for CPU and computing equipment manufacturers, as well as providing end-to-end cloud products and cloud services for government and enterprise customers. Since 2009, the company has successively undertaken the national "nuclear high-base" project, the "863" plan and other information innovation-related research tasks, and has been deeply engaged in the field of information and innovation firmware for a long time. In 2023, the company acquired a 52% stake in IDE tool software developer Apyang, and in September 2024, it announced again that it would acquire the remaining 48% stake in Epyang held by minority shareholders. As one of the few professional IDE tool software developers in China, Epyang has formed a series of domestic tool software products including SnapDevelop, PowerBuilder, PowerServer, etc. through independent research and development in the field dominated by foreign manufacturers, and has served more than 18,000 customers around the world, including many Fortune 500 companies.

We believe that the localization of information and innovation has experienced two waves in the past, the first round is the domestic substitution represented by the PC machine, server, intelligent terminal, the second round is the domestic substitution represented by the basic software and basic hardware, and the current third round of domestic substitution is more upstream supporting basic tools software and hardware evolution, the market share of domestic manufacturers is low, and the future growth space is large. China's application software industry is relatively mature driven by the mobile Internet, and basic software has also made great progress in the promotion of new waves in recent years, but there is still a very big gap between the products, technology and ecology of tool software and foreign countries. It can be said that if basic software and application software want to develop well independently, they must have their own tool software. Zhuoyi Information's acquisition of Apyang is actually an evolution from basic software and hardware to basic tool software, which will help further extend the layout of its information and innovation industry chain.

Investment Advice

Zhuoyi Information is a leading enterprise in the field of BIOS firmware product development in China, and has supplemented the scarce supply capacity of professional IDE tool software through acquisitions. We expect the company's operating income in 2024/25/26 to be 4.01/5.18/678 million yuan, and the net profit attributable to the parent company to be 0.74/1.02/125 million yuan respectively, maintaining the investment rating of buy-A. The 6-month target price is 33.72 yuan, which is equivalent to 40 times PE in 2025.

Risk Warning:

Risks of the core firmware business model of cloud computing equipment; Intel authorized cooperation, there is a risk that it cannot be renewed; Market competition risk.