(Report producer/author: Guotai Junan Securities, Li Xuewei)
1.AI ability accumulation is abundant, and the double track consolidates the moat
1.1. Consolidate smart cities and focus on public safety
Jichuang Intelligent is a national high-tech enterprise focusing on the field of smart city and smart security. The company is committed to promoting the industrialization and application of a new generation of information technology such as Internet of Things, cloud computing, big data, artificial intelligence in the field of smart city and smart security, and provides customers with full-cycle comprehensive solutions covering business consulting, program design, equipment procurement, product research and development, system integration and operation and maintenance. The company started in the field of smart city, and then began the national strategic deployment, after the acquisition of Beijing Lanma Starworld, formed a linkage R & D pattern in Beijing, Wuhan and Guangzhou, and completed the whole industrial chain layout of operation, R & D and production. The field of smart security is the company's key business area to expand, products have been widely used in public security management, for the public security organs case investigation and security and stability maintenance work to provide strong support, the company has cooperated with customers covering Guangdong, Hainan, Hunan, Hubei, Jiangsu, Heilongjiang and other places of public security departments, has formed a good brand image and market reputation.
The company has accumulated rich accumulation in the field of artificial intelligence, and the technology research and development has made rapid progress. The company is the first batch of artificial intelligence enterprise storage units in Guangzhou, with Guangdong Province Doctoral Workstation, Guangdong Province Biometric Identification Chip and Application System Engineering Technology Research Center, Guangzhou Enterprise Research and Development Institute, and jointly established "Guangdong Province Internet of Things Identification Chip Design and Packaging Testing Engineering Technology Research Center" and "Guangzhou Key Laboratory of Internet of Things Identification and Perception Chip" with Guangzhou Smart City Development Research Institute, etc., to undertake Guangdong Province Science and Technology Development Special Fund Project, Guangdong Province Key Area R&D Plan" A generation of artificial intelligence" major science and technology special projects and many other scientific research projects. The company and its holding subsidiaries have obtained 36 authorized patents (including 21 invention patents and 15 utility model patents), 205 software copyrights and 37 invention patents under review. Among them, 8 new invention patents and 9 software copyrights were applied for in the first half of 2022, and the technical achievements have progressed rapidly.
The company has built a comprehensive, complete and leading qualification system in the new smart city construction industry, effectively supporting the continuous expansion of various business segments. The company's qualifications include special grade A for building intelligent system design, level A for secret-related information system integration, level I for professional contracting of electronic and intelligent engineering, level 1 for computer information system security service certificate, level 1 for audio and video integration engineering enterprise qualification, CS3 for information system construction and service capability, level 1 for information system security integration service, level 2 for information system security operation and maintenance service, etc., and can provide customers with a full range of services. The company has passed the highest certification CMMI level 5 of the international software capability maturity certification assessment and ISO9001, ISO14001 and other certifications, marking that the company's software technology development ability and quality management level have reached the international first-class level.
Obtain high-threshold qualifications in the field of public safety and build an industry moat. The company's communication security management product application field has a high qualification entry threshold, and sales to the Ministry of Public Security and its subordinate units need to obtain the qualification certified by the Ministry of Public Security. In 2018, the company passed the qualification review of the Ministry of Public Security and obtained the qualification of public security system installation, in 2019 and 2020, the company's many data collection products have been completed and sold to the public security department, product models cover 2G, 3G, 4G, and 5G products have been installed. At the same time, the requirements for equipment customization of public security departments at all levels in various places are high, so cooperation with suppliers pays attention to the history of cooperation and requires business continuity. The company is deeply engaged in the industry and has established good cooperative relations with public security departments in many places. Have a deep understanding of its needs, can better grasp the customized requirements of customers, and further provide advantages and convenience for future business development.
With the help of the "Belt and Road" east wind, actively explore opportunities for foreign cooperation and development. As a leading comprehensive service provider in the field of smart city and public safety in China, the company has participated in the construction of the "Belt and Road" under the joint development of partners in central enterprises, and has built a variety of public security products and systems for countries along the "Belt and Road" (such as Myanmar, Thailand, Malaysia, Sri Lanka, Pakistan, Saudi Arabia, etc.) in the form of project as the carrier and "technology + product + service" model. In recent years, the company's self-developed FireEye Golden Eye system, password cracking server, LTE reconnaissance system and other products have been widely used in airports, ports, criminal investigation and other fields in Asian, African and Latin American countries, providing a strong technical backing for the construction of safe cities.
1.2. The full-stack technology framework is complete, and the smart city subdivision solutions are rich
The main business is clear, and the subdivision solution covers a wide range. The company's main products and services are mainly focused on smart city and smart security. In the field of smart city, the company focuses on smart people's livelihood, urban management and services, data center and other subdivisions, based on the accumulation of customer industry knowledge and key technologies, relying on artificial intelligence, big data analysis and other technologies, to create a general technology platform, formed a series of mature solutions, for construction, energy, transportation, parks, education, medical care, data center construction and other fields of application, widely served government, public institutions, large and medium-sized enterprises, etc. In the field of smart security, based on the core technologies such as self-developed special high-performance computing technology and signal and protocol analysis technology, the company provides customized software and hardware integrated solutions for social security management and communication security management for security management departments to meet the needs of informatization and intelligence in business execution and management.
The company has a complete technical framework to create a full-stack solution from the network layer to the presentation layer. According to the company's own main business characteristics and technical advantages, the company has built a relatively complete basic technical framework with reference to the national standard "GB/T34678-2017 Smart City Technology Reference Model", mainly including six layers: network layer, facility layer, cloud data layer, shared components and middle layer, platform layer and performance layer. The network layer includes the Internet, communication networks, and the Internet of Things; The facility layer includes front-end sensing devices and network convergence centers; The cloud data tier includes application databases, topic databases, and big databases; Shared components and middle layers include data exchange components, unified authentication components, analysis and presentation components, and basic middleware based on SOA architecture. The platform layer includes a comprehensive service platform for various industries or fields, which provides a development, operation and control environment for application services, integrates various smart application modules, and provides integrated information applications and services; The presentation layer includes visual interface, single sign-on, system setup, portal management, app publishing, content synchronization, collaborative management, and information retrieval. The technical framework forged the company's foundation for various application scenarios, and the versatility and adaptability of the technology platform made the company have outstanding project practice capabilities.
Deeply understand customer needs and provide overall solutions for network-wide convergence. The company's smart city comprehensive solution is based on a deep understanding of customer needs, based on industry experience and software and hardware product performance, functional characteristics, to solve the compatibility problems in various complex application environments, quickly break through the integration barriers between various devices or systems, promote the integration of the whole network, and finally provide an overall solution. Specifically, in the fields of smart people's livelihood, urban management and IDC management, various solutions aim to integrate the new generation of information technology such as Internet of Things, 5G, big data, artificial intelligence, and BIM with specific subdivisions and scenarios, so as to realize massive centralized and real-time sharing of information, efficient collaboration of information applications, and residents' access to information services anytime and anywhere, so as to help achieve the management goals of safe, reliable and intelligent operation. The deep understanding of customer needs and the accumulation of a large number of industry customer solutions help the company to bid with high quality and efficiency to meet customer needs, and stand out among many bidders.
The company's integrated data center solution business is different from the main business of Internet data center (IDC) company. The main business of A-share listed companies in the Internet data center (IDC) industry is to provide customers with cabinet rental, broadband leasing, server hosting, agency operation and maintenance and other services, while the company's data center comprehensive service business is different from the main business of Internet data center (IDC) companies in terms of service content, business model, service customers, etc. The company focuses on providing integrated solutions for data centers, providing design consulting, system integration and operation and maintenance services for customers including third-party IDC service providers, and does not have independent data centers or Internet data services; In addition, the company charges customers for engineering services such as design consulting, system integration and operation and maintenance services agreed in the contract; In addition, the company mostly serves large and medium-sized enterprises and institutions, government agencies, such customers for data security and other considerations, usually build their own data centers, and the company provides them with full-process comprehensive solution services covering pre-design, project implementation and follow-up maintenance.
1.3. Security products are rapidly deployed to build core application scenarios of artificial intelligence
Acquisition of a subsidiary in the security sector to create a second curve of business growth. Through the acquisition of Lanma Starworld, the company has successfully expanded its business to the field of security management, created a smart security segment that includes social security management integration solutions and communication security management products, and further improved the company's business segment to achieve a comprehensive layout of smart city and smart security. After the company acquired all the shares of Lanma Xingji, the company's overall business scale and technical level were further improved, and the smart security business segment became a new growth point for the company's business.
The company's artificial intelligence technology deeply empowers the field of public safety management. The field of public safety is one of the most important application scenarios of artificial intelligence, and with the rapid expansion of the company's security business, it provides a broad space for the application of artificial intelligence. Security management products can realize functions such as face recognition and video supervision in the field of public security by collecting scene data information such as device perception layer, network layer, platform application layer, and cloud storage. However, with the explosive growth of data volume and the escalation of security threats, traditional public security protection methods are becoming increasingly ineffective, so the application of artificial intelligence in the field of public safety is extremely advantageous. AI technologies such as big data intelligent analysis based on the company can fully realize the functions of correlation security situation analysis, self-learning emergency response and defense, and accurate identification of threats, thereby improving the efficiency of sensitive information screening of relevant departments, for example, it can provide efficient, accurate and intelligent solutions for the police situation handling needs of public security departments. At present, the company has landed a number of AI-based public safety projects, which is expected to achieve rapid deployment across the country.
Communication security management is mainly based on product sales, and the proportion of product revenue has increased rapidly. The company's product sales business is the direct external sales of communication security management products, and the proportion of revenue has been increasing in recent years. In 2021, the company's product sales business achieved revenue of 122 million yuan, a year-on-year increase of 166.72%, accounting for about 13.01% of the total revenue, an increase of 6.82%. In the first half of 2022, the product sales business achieved revenue of 12 million yuan, accounting for about 2.99% of the total revenue, accounting for a decline.
The company's smart security business focuses on two subdivisions: social security management and communication security management. In the field of smart security, the company mainly provides "one-to-one" customized product development and professional overall solutions according to the actual needs of security management departments and units at all levels, focusing on the two subdivisions of social security management and communication security management. The business model in the field of security is mainly based on the project, as a "general contractor" or "product seller" to sign a contract with the owner, provide system integration services and product sales services. With the company's continuous investment in the research and development of communication security management products, the company's business model in the field of smart security has gradually changed to self-developed data perception collection products, data transmission networking products, and data storage and analysis products as the core, providing users with a complete "customized products + integrated construction + technical services" comprehensive solution.
The company's security products mainly include data perception collection products, data transmission networking products, and data storage and analysis products. The company's safety products are software and hardware integrated equipment, the core work of product design is completed by the company itself, the company after the completion of product research and development and design work, according to the sales order to formulate the production plan, combined with the company's inventory, purchase the required raw materials and accessories, the company implements the "to sell production, maintain appropriate safety stock" production policy. The company's safety product production mode is "combination of self-processing and outsourcing processing", and the production links include PCB board making, PCB patch, welding, module assembly, machine assembly, testing and other processes. The company's self-processed links are mainly assembly and testing processes, and do not involve large-scale substantive hardware manufacturing.
Under the guidance of the "Belt and Road", the company emphasizes international cooperation and opens up overseas security product markets. On October 29, 2018, the company brought high-tech intelligent security products to the Qatar International Military Police Equipment Exhibition, which is the most influential military and police equipment exhibition in the Middle East and the best channel for national defense equipment enterprises around the world to enter the Middle East market. During the exhibition, the company focused on displaying self-developed UAV reconnaissance and positioning control system, password cracking server, fire eye golden eye system, LTE detection system and other high-tech products, and launched police security solutions to further deepen the overseas market layout of enterprises under the guidance of the "One Belt, One Road" policy.
1.4. Self-developed high-performance computing and AI technologies to lay the cornerstone of innovative business
The company continues to explore the in-depth research and development of three basic technologies: dedicated high-performance computing technology, artificial intelligence technology and signal and protocol analysis technology. Based on the three basic core technologies, according to the industry development trend and specific business application needs, the company explores the industrialization application of special high-performance computing technology, multi-component hybrid intelligent computing technology, big data intelligent analysis technology, data protocol exchange technology based on microservice architecture, intelligent system equipment communication protocol analysis technology, wireless signal active and passive positioning technology, wireless signal analysis technology, audio and video intelligent identification and processing technology, etc., to form a target for smart people's livelihood, urban management and services, data center construction, Customized solutions and products in the fields of social security management and communication security management provide a solid foundation for the steady development of the company's main business and the gradual expansion of the application field.
Application-oriented innovation, targeted research and development of core technologies. The company has 8 core technologies, of which special high-performance computing technology is the core technology independently developed by the company, which provides high-performance computing support for the company's smart city, smart and safe big data analysis applications, and data protocol analysis applications; Four technologies, including multiple hybrid intelligent computing technology, big data intelligent analysis technology, data protocol exchange technology based on microservice architecture and intelligent system equipment communication protocol analysis technology, are the company's technology formed by targeted technology research and development and application innovation based on industry development trends, business application scenarios, and different customer needs on the basis of the underlying technology common to the industry, and are widely used in the company's smart city comprehensive solutions; Wireless signal active and passive positioning technology, wireless signal analysis technology and audio and video intelligent identification and processing technology and other three technologies, are in response to the needs of the security management department, starting from the underlying technology research and development, according to the specific application scenarios and personalized security needs, the application module technology research and development and innovation of the technology formed, applied to the research and development of communication security management products.
The leading technical performance of the company and the versatility of the research and development results ensure the overall competitiveness of the company. The in-depth research of basic core technologies and the continuous construction of a series of general technology platforms enable the company to achieve rapid development and rapid deployment in specific project applications, reduce repeated investment, effectively save project costs, and ensure the price competitiveness of the company's products and services. In terms of technology research and development, the company takes the market as the starting point and adheres to independent innovation, and the process covers five stages: concept, planning, development, testing and output. The company understands the market demand through market research and user feedback, and discusses, analyzes and reviews according to the market demand to ensure that the products to be developed meet the actual needs of users. In the process of project research and development, according to the originality of the relevant technology and the company's intellectual property protection needs, the new products and new technologies formed are protected by applying for invention patents after patent search, and applying for utility model patents after patent search in combination with the structure of the product and the new scheme are applied for protection.
1.5. The shareholding structure is clear and stable, and the core personnel are experienced
The founders of the company have always maintained their shareholding advantages, and the stable equity structure shows confidence in development. Sun Chao, Long Fei and Xie Aoxia, the actual controllers of the company, all serve as directors and important management positions in the company. The predecessor of the company, Jichuang Co., Ltd., was established in 2008 and jointly funded by Sun Chao and Xie Haoxia. In 2015, Jichuang Intelligent held the founding meeting, deliberated and approved the establishment of Guangdong Jichuang Intelligent Technology Co., Ltd., and signed the "Articles of Association", at this time, the total share capital of the company was 31.18 million yuan, and the founder Sun Chao still held half of the shares, stably controlling the company. Since then, until 2020, the company has experienced several capital increases and small-scale equity transfers, and its net capital has increased to 76.85 million yuan. Founder Sun Chao is still the largest shareholder, and his shareholding ratio is significantly ahead. Co-founder Xie Aoxia is the fourth largest shareholder, and Long Fei, the initial investor of the joint stock limited company, is the second largest shareholder. The founders of the company have always maintained their shareholding advantages, and the stable equity structure shows confidence in development.
The core personnel are experienced and keep up with the forefront of technological development. The company has set up a mature R & D team, and the company's management and core personnel have rich industry experience and technology accumulation, which can effectively lead the company's R & D team to keep up with the development direction of cutting-edge technology in the industry. As of June 30, 2022, the company has a total of 182 R&D personnel, accounting for 23.98% of the total number of employees of the company, and the R&D technical team has rich R&D experience and high R&D level. The company's talent team also covers many professional fields, including registered construction engineers, information system project managers, system architects, demand analysts, software development engineers, software testing engineers, database engineers, hardware integration engineers and other professional and technical personnel.
1.6. The company's revenue grew rapidly and the expense ratio remained stable
The company's revenue scale and performance have shown rapid growth in recent years. The company's revenue increased from 422 million yuan in 2018 to 940 million yuan in 2021, with a CAGR of about 30.6%. The net profit attributable to the parent increased from 45 million yuan in 2018 to 105 million yuan in 2021, with a CAGR of 32.64%, and the net profit attributable to the parent was slightly faster than the growth rate of revenue and was in a period of rapid development. In the first half of 2022, the company achieved an operating income of 402 million yuan, an overall increase of 33.42% over the same period of the previous year. At the same time, driven by the growth of revenue, the net profit attributable to the parent was 38 million yuan, an increase of 33.11% over the same period of the previous year, and the improvement in performance in the first half of 2022 compared with the same period mainly benefited: 1) In recent years, the company has continued to strengthen market expansion, deepen market management reform, targeted marketing and improve the company's popularity, and its business development is good; 2) The number of projects completed and accepted in the current period has increased greatly compared with the previous period, and the company's operating income and net profit have maintained growth. In the first half of 2022, the company achieved a net operating cash flow of 99.7448 million yuan, an increase of 28.47% over the same period of the previous year, mainly due to the company's strengthening of receivables collection management and the acceleration of payment collection.
The company's gross margin is slightly higher than the industry average, but there is some volatility. The company's gross profit margin from 2018 to 2021 was 28.46%, 21.09%, 33.98% and 27.85%, respectively, and the gross profit margin in the first three quarters of 2022 was 26.95%, with certain fluctuations, which was mainly affected by changes in business structure. In 2019, the proportion of revenue from product sales with higher gross margins declined, resulting in a decline in the company's overall gross profit; In 2020, the proportion of product sales business revenue increased, driving the company's overall gross profit to increase; In 2021, the gross profit margin of the main items of the system integration business was low, resulting in a decrease in the comprehensive gross profit margin for the current period. The high gross profit of the product sales business will effectively hedge the impact of the decline in the gross profit of system integration. The gross profit margin of product sales was high, and the gross profit margin in 2019, 2020, 2021 and the first half of 2022 was 69.99%, 75.42%, 83.76% and 74.44%, respectively. With the continuous increase in the proportion of revenue from product sales business in recent years, the gross profit contribution to the company's overall business has increased, which can partially hedge the impact of the decline in gross profit of the system integration business and maintain the stability of the company's overall gross profit margin.
2. Digitalization and intelligence forge new momentum for smart city and safe development
2.1. Riding the east wind of the "Belt and Road", the top-level design of smart cities blooms
Smart city and smart security are key areas of cooperation under the "Belt and Road", and overseas demand is strong. Since the official proposal to build the "Digital Silk Road" in 2017, China has continued to strengthen cooperation with countries along the "Belt and Road" in frontier fields such as digital economy, artificial intelligence, and quantum computers, and promoted the construction of big data, cloud computing, smart cities and other fields. The demand for security monitoring markets in emerging economies such as Eastern Europe, Central Asia, the Middle East, and Latin America is also expanding, and the demand in overseas markets is strong. Under the guidance of the "Belt and Road", the mainland is also attaching importance to and promoting international cooperation and overseas promotion of smart cities, strengthening the construction of smart city alliances and innovation centers, and promoting smart cities to promote sustainable economic and social development.
Starting from the security product market in the Middle East, overseas markets along the "Belt and Road" continue to expand. In 2018, the company began to expand overseas markets in countries along the "Belt and Road", and in 2018, it debuted at the Doha International Military and Police Defense Exhibition in Qatar, exhibited a series of high-tech independent research and development products, and launched solutions in the field of police security, among which the UAV reconnaissance and positioning control system was widely praised, paving the way for the company's products to enter the Doha market. The company continues to improve the applicability and breadth of products, and is expected to usher in greater opportunities in overseas markets in the field of smart city and smart security.
The construction of smart cities is inseparable from the government's planning guidance, and top-level design is the core of smart city consulting and planning. Relying on different planning and design institutions, local governments have actively promoted the top-level design of smart cities, and various concepts such as digital intelligent Hangzhou, Shanghai urban digital transformation, Jinan digital pioneer city, new smart city, and smart city have emerged. In recent years, the relevant state departments have also promulgated policies and regulations in the field of smart cities, and have basically formed a multi-level and multi-category legal and regulatory system, including industry qualification management, industry business standards, industry technology certification, and industry quality management. Multi-level policy planning is also encouraging and supporting the development of the smart city industry. Under the guidance of policies such as the "14th Five-Year Plan for the Implementation of New-type Urbanization", the "14th Five-Year Plan for the Development of Housing and Urban-Rural Construction Science and Technology" and the "14th Five-Year Plan for the Development of the Digital Economy", we will enrich the application scenarios of digital technology, promote the digital transformation, intelligent upgrading and integrated innovation of urban public infrastructure, so as to accelerate the construction of new smart cities and improve the scientific, refined and intelligent level of urban governance.
Smart cities are affected by the urbanization process, and the market potential at the district and county levels needs to be tapped. China's urbanization process is continuing, and the 14th Five-Year Plan is expected to further increase the urbanization rate of the permanent population from 60% in 2020 to 65%, and the deepening of urban construction will bring continuous demand for intelligent application scenarios. From the provincial level, economically developed provinces have a good industrial foundation for smart cities, strong digital awareness, and top design concepts leading the country. Zhejiang, Shanghai, Guangdong and other places have successively introduced policies related to digital development, and digital transformation is becoming a new consensus in advanced regions in China.
From the municipal level, each city combines its own urban construction needs and the strength of local smart city enterprises, and other factors, smart city construction has its own characteristics, such as Hangzhou Municipal Government and Alibaba Cloud to build a city data brain, which greatly alleviates the city's traffic congestion problem: Shenzhen relies on the advantages of high-tech enterprises and Internet enterprises to build Pengcheng intelligent twins to promote the construction of "data"-driven smart cities. From the county-level perspective, the National Development and Reform Commission has formulated and promulgated the "Notice of the General Office of the National Development and Reform Commission on Accelerating the Implementation of New-type Urbanization Construction to Make Up for the Shortcomings and Weaknesses, and Orderly Promoting the Intelligent Transformation of County Towns." In 2022, the General Office of the CPC Central Committee and the General Office of the State Council issued the "Opinions on Promoting Urbanization with County Towns as Important Carriers", and various places have successively proposed corresponding implementation plans, and it is expected that the smart city market will further sink to districts and counties, and the potential of relevant markets needs to be further tapped by technology providers.
2.2. Driven by multiple factors, the scale of smart city investment is rising rapidly
The scale of smart city investment in mainland China is increasing rapidly year by year. According to IDC analysis, in 2022, the investment scale of the smart city ICT market led by the Chinese government will be US$21.4 billion, of which the investment in hardware products will reach US$8.1 billion, accounting for 37.9% of the total investment; $5.1 billion in software, or 23.8% of total investment; Services investment was $8.2 billion, or 38.3% of total investment. IDC expects investment in the smart city ICT market led by the Chinese government to reach RMB38.9 billion by 2026, with a compound annual growth rate of 17.1% from 2022 to 2026. With the continuous increase of investment in smart cities, it provides a broad market foundation for the sustainable development of the company's urban management business.
Affected by favorable factors such as policy dividends, social needs, and technological upgrading, smart cities are typical of the government's "spending small money and doing big things", and the government's demand is stable and sustainable. Taking 2021 as an example, the mainland's general public budget expenditure reached 25.01 trillion yuan, and industry investment accounted for about 1% of the government budget. On the other hand, smart cities can bring huge governance efficiency to the government, improve its ruling ability and management level, and meet the requirements of the Party Central Committee for building an information-based service-oriented government, and the priority is extremely high. Therefore, the government's investment in smart cities will maintain a rapid growth trend, the company's demand side security margin is high, and the possibility of a sudden policy shift is extremely low.
2.3. Highly integrated informatization and cross-domain integration and application
Smart city construction is a cross-industry and cross-technology system engineering, with many application fields. Smart cities are knowledge-intensive industries, with the characteristics of high integration of information technology, deep integration of information applications, large system scale, and strong system integration, and new technologies and standards are constantly updated, and have high technical barriers. The construction of smart cities continues to deepen, and the application fields continue to expand, covering the fields of security, medical care, transportation, logistics, finance, communications, education, energy, environmental protection, etc., and continue to expand to more and more fields. Smart cities cover a number of high-growth application areas such as smart people's livelihood, IDC, and urban services and management. Among them, ensuring and improving people's livelihood is the focus of the mainland's economic and social construction, and promoting the development of wisdom and people's livelihood. In recent years, the scale of mainland fiscal expenditure in the field of people's livelihood has continued to expand. According to the fiscal revenue and expenditure data released by the Ministry of Finance, in 2021, the scale of the mainland's fiscal expenditure in the field of people's livelihood (education, cultural and sports media, social security employment, medical and health care, housing security) reached 11,148.15 billion yuan, an increase of 12.05% year-on-year.
The role of IDC is becoming more and more prominent, and the application of smart cities in the field of information technology and intelligence in the field of IDC has great prospects. Data centers take data as the basic management object and provide digital transformation infrastructure for new infrastructure operations. In recent years, the scale of the mainland data center market has expanded year by year, and the domestic Internet data center market will reach 318.7 billion yuan in 2022. Data center users include cloud computing enterprises, Internet companies, financial enterprises, and government agencies. Governments in developed regions are actively promoting the integration and transformation of local data centers; Regional governments, which are in the period of economic restructuring and adjustment, are urgently seeking new economic growth points, and have established big data and cloud computing as key transformation directions to accelerate the construction of data center infrastructure. Therefore, the overall demand for domestic data centers is showing a rapid growth trend.
Smart government services are the core of smart city construction, and the market scale has great potential. Smart cities include building a new urban ecosystem of citizens, businesses, and governments supported by a variety of new technologies. The government plays a role in organizing, leading, guiding and standardizing smart city construction and urban management services. Therefore, smart government affairs that improve government efficiency have become the core of smart city construction and urban management services. Since 2013, the state has continued to promote "decentralization, management and service" in the field of public services, and implemented government affairs such as "running at most once", "one network for all", "only one door to enter" and "cross-province universal service", and smart government affairs have become an important starting point. According to data from the Academy of Information and Communications Technology, the scale of the smart government market is constantly growing. In 2021, the scale of the mainland e-government market reached 390 billion yuan, a year-on-year increase of 5.92%.
2.4. Security provides an important guarantee for smart cities
The scale of the mainland's public security industry continues to expand. Since the General Office of the State Council issued the "Opinions on Accelerating the Development of the Emergency Response Industry" in 2014, the public security industry has provided strong support for the prevention and handling of emergencies on the mainland, vigorously promoted the economic and social development of the mainland, and become an important part of safeguarding national public security. At the same time, the scale of the domestic network security market has also continued to rise. According to IDC, China's cybersecurity-related spending reached $10.26 billion in 2021. China's cybersecurity spending is expected to reach $21.46 billion by 2025. During the five-year forecast period from 2021 to 2025, China's cybersecurity-related spending will grow at a CAGR of 20.5%, ranking first in the world.
Digitalization and intelligence have changed the face of public safety services. With the access of new technologies such as sensors, the Internet of Things, big data and artificial intelligence, public safety is progressing from more human-dependent systems, time-based and sub-regional prevention and control, to the use of accurate perception by machines to achieve all-weather monitoring without dead ends. Intelligent data applications can simulate the patterns and characteristics of public safety incidents and realize insight into the possibility of security incidents. All relevant departments of public security are also gradually applying various emerging technologies, and many new technologies support new needs for public security management such as digital policing and prison affairs, and have an irreplaceable position. For example, intelligent data applications can provide strong support for public security organs to carry out police intelligence handling and crack down on illegal crimes, and provide new assistance for administering and managing according to law and serving the people.
Increased data traffic, communication standards and protocol framework upgrades have led to increased security requirements. As network traffic grows, so does the complexity of data. The development of various applications and the popularity of ultra-high-definition video have increased the complexity of data traffic content than ever before, and the demand for communication security management products has also increased. In addition to the growth of data traffic, mobile communication standards are also constantly changing and upgrading, bringing massive replacement needs. Due to the introduction of a large number of new technologies and the great changes in the network technology architecture, the existing 2/3/4G network communication security management products and solutions will not meet the needs of 5G scenarios. Therefore, the changes in communication protocols and standards brought about by 5G will stimulate the upgrading of communication security management products, and the market will usher in new opportunities for upgrading and demand explosion.
Under the requirements of the situation of strengthening supervision, public security departments at all levels, as the main body in purchasing communications security management products, have huge demand. There are 32 provinces, municipalities and autonomous regions directly under the central government, 334 prefecture-level cities and 2,851 county-level administrative regions on the mainland, and the market demand is huge based on the procurement needs of dozens to hundreds of sets of equipment by public security departments at each level. In recent years, the budget of mainland public security departments has remained stable and large-scale, and their equipment procurement has brought definite demand for communication security management products.
2.5. Driven by security threats and complex scenarios, artificial intelligence and public safety are deeply coupled
Artificial intelligence continues to provide new ideas and solutions to increasingly complex cybersecurity problems. Network security threats are emerging one after another, showing the characteristics of intelligence, concealment, and scale, and network security defense is facing great challenges. AI-driven cyber defense plays an important role in responding to various security threats by significantly shortening the interval between threat discovery and response, and enabling automated and rapid identification, detection, and handling of security threats. In particular, AI has great advantages in detecting unknown threats and advanced threats such as APTs. At present, artificial intelligence has been applied to malware/traffic detection, malicious domain name/URL detection, phishing email detection, network attack detection, software vulnerability mining, threat intelligence collection, etc.
AI technology has also brought new means of perception, cognition, prediction and early warning to crime prevention. AI+ crime prediction is different from traditional crime prediction, and the most significant feature is that it focuses on analyzing the correlation behind the prediction information data rather than simple causal derivation. Artificial intelligence technology can transform the laws of phenomena into higher-dimensional data information, and through models and algorithms, all the elements collected are correctly matched, derived, predicted and extended with the actual fact determination, and a scientific and complete association network with input targets as the core is established, and then comprehensive measures are made according to local conditions for the results of crime prediction according to the information goals that people want to obtain. In the era of big data, massive personal information containing electronic traces such as entertainment, catering, travel, tourism, shopping and business allows everyone to gradually have a unique "network fingerprint" on the network.
Combined with the collation and analysis of big data by artificial intelligence, artificial intelligence technology has achieved good results in preventing cybercrime and financial crime, and is suitable for social and public security fields such as anti-fraud, inconsistency verification, and group fraud, and builds a crime prevention system with higher real-time, stronger personalization and wider coverage of the population.
Artificial intelligence has significant advantages in the fields of security monitoring, intelligent security inspection and social security prevention and control. Face recognition in complex environments, such as blurred light, semi-occluded faces, motion states, and other scenarios, all pose challenges to face recognition. At the same time, constrained by factors such as computing power, algorithms and technical standards, the rapid processing and in-depth utilization of security surveillance video still require a lot of manual analysis. Under the framework of artificial intelligence, based on video structuring technology, the integration of cutting-edge AI technologies such as machine vision, image processing, pattern recognition and deep learning can ensure public safety through the use of two aspects.
On the one hand, through the monitoring cameras installed in public places, the image or video stream containing the face is systematically collected, the specific target object in the picture is modeled, and through a large number of samples for training, the face can be automatically detected and tracked in the image, and then the artificial intelligence technology is used to analyze and process the portrait situation data, so as to predict and judge people's activities and behaviors, realize the overall information analysis of the target person, and improve the state description, so as to facilitate the police and relevant departments to carry out key investigation and arrest; On the other hand, computer vision situation awareness and event recognition technology are used to extract and detect the targets of video surveillance, and distinguish different events through different rules, so as to achieve different judgments and generate corresponding alarm linkages.
2.6. Cloud, network, edge, and intelligence are integrated into five-in-one, and digital infrastructure consolidates the foundation of smart cities
Smart cities have become the main battlefield of emerging technologies, and technology integration has given birth to innovative scenarios. At present, emerging technologies such as artificial intelligence, spatial information technology, digital twin, automatic driving, 5G, and the Internet of Things are accelerating the application of smart cities, such as urban governance, people's livelihood services, and economic development, such as the construction of autonomous driving demonstration areas, which has improved the construction of infrastructure such as urban digital intersections. The convergence of emerging technologies has created new applications, such as the fusion of knowledge graph and remote sensing image interpretation to improve the accuracy of spatial recognition, and the integration of spatial geographic information and data twin to provide a basis for urban decision-making and planning. Multi-vendor ecological collaboration, AI and large computing power contribute to the new momentum of urban intelligent transformation. As the mainland vigorously promotes the construction of "new infrastructure", as the cornerstone of supporting the sustainable development of smart cities, new infrastructure drives the wider application of high and new technologies in various economic and social fields.
For example, HUAWEI CLOUD launched the "5G+X" joint venture program to help Internet enterprises better enter the new 5G infrastructure through all-round empowerment and joint innovation of 5G, AI, cloud computing and other technologies, and help partners build differentiated advantages based on new markets. In addition, the giants have made efforts to seize the industry computing power market, and advanced computing with computing power, algorithms, and calculations as the core has become a new driving force for enterprise development. For example, Baidu launched eight AI-native cloud products, including Taihang Elastic Bare Metal Server 3.0, Canghai Parallel File Storage PFS, fifth-generation cloud server instances, and Zhisense Ultra-Clear All-in-One Machine, as well as two new brands, the "Canghai" storage product system and the "Hundred" AI heterogeneous computing platform, in an attempt to build AI-native cloud computing and help enterprises achieve intelligent transformation on the cloud.
3. Focus on artificial intelligence technology to create an all-round development pattern
3.1. Focus on smart security business development and improve comprehensive service capabilities
The company takes the smart city business as the cornerstone and increases the expansion of security business. On the basis of consolidating the existing smart city construction related businesses, Jichuang Intelligent will also vigorously develop smart security business and provide customers with smart city solutions that integrate smart people's livelihood, urban management, data center construction and operation, platform operation and maintenance and services. At the same time, for public safety management, it will also accelerate the integration of smart security solutions such as big data, artificial intelligence, and the application of cutting-edge technologies such as new generation mobile communication (5G). In addition, according to the company's prospectus, the company will also pay attention to the development direction of smart safety equipment and smart city at home and abroad, continue to improve the product supply capacity integrating chip modules, smart safety equipment, smart city application platform, and smart city service operation, and strive to provide customers with more complete comprehensive solutions and services for smart city and smart security construction.
Increase investment in security and strive to establish technical advantages. The company will increase the research and development of new directions and new products for social security management and communication security management, and strengthen the research and development of data collection technology, encrypted data transmission technology, intelligent computing technology, and data intelligent analysis technology. At present, the company's technology accumulation based on 2/3G mobile communication standard has been relatively mature, and is increasing investment to actively promote the research and development of situation awareness and data acquisition technology under the 4/5G communication protocol standard, and strive to establish technical advantages.
3.2. Increase investment in artificial intelligence to accelerate the transformation of technological achievements
Focus on artificial intelligence and increase innovation and research and development. The company will continue to carry out in-depth research and industrialization of intelligent computing technology, artificial intelligence technology, signal and protocol analysis technology and other related technologies. Relying on the strong assistance of Guangdong Province Internet of Things Identification Chip Design and Packaging Testing Engineering Technology Research Center, Guangdong Province Biometric Identification Chip and Application System Engineering Technology Research Center, Guangzhou Key Laboratory of Internet of Things Identification and Sensing Chip, Guangdong Province Doctoral Workstation and other professional laboratories, the company's enterprise research institute is expected to land rapidly, and the development capacity of new products and new technologies has broad space.
3.3. Strengthen the construction of marketing system and create an all-round development pattern
Actively expand business undertaking capabilities and strengthen internal control measures. The company is actively expanding its business undertaking capacity, and has set up 31 branches in Shenzhen, Beijing, Haikou, Nanjing, Xi'an and other regions, and its sales scope has basically covered all regions of the country, and is increasing its expansion. At the same time, in order to prevent commercial bribery and improve the internal control mechanism, Jichuang Intelligent has also implemented the project responsibility system for bidding work, and standardized the sales behavior of its sales department personnel. Expand overseas markets and create a high-level management system. The company will take the two headquarters bases of Guangzhou and Beijing as the center, establish a marketing management system and R & D technology system, gradually establish and improve the sales and service network covering the whole country and overseas key regions, and create a high-level technology R & D platform and scientific research management system. At the same time, the company will also expand the production base in Guangzhou to expand the scale of product production; Improve the level of human resources planning, construction and management.
4. Profit forecast
The company's main products and services are to provide full-cycle integrated solutions covering business consulting, program design, equipment procurement, product research and development, system integration and operation and maintenance, which are mainly divided into two categories: smart city comprehensive solutions and smart security integrated solutions according to the service areas. Benefiting from the catalyst of policies, AI technology, downstream demand and other factors, the company's smart city business is expected to maintain steady growth, smart security is expected to maintain rapid growth, and it is expected that smart city and smart security will achieve growth rates of -20%, 35%, 30%, -20%, 85% and 50% respectively in 2022-2024 (of which delivery will be delayed due to the disruption of economic activities in 2022). It is expected that the company's operating income in 2022-2024 will be 7.52, 11.30 and 1.555 billion yuan, the net profit attributable to the parent will be 0.60, 1.35 and 177 million yuan, and the EPS will be 0.59, 1.32 and 1.73 yuan, respectively.
(This article is for informational purposes only and does not represent any investment advice from us.) For information, please refer to the original report. ）
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