Transwarp Technology (688031.SH): Revenue surged by 46.00%, embracing the wave of information innovation and large models

Recently, Transwarp Technology (688031.SH), a leading big data company in China, released its 2023 annual financial report. According to the report, Transwarp's total revenue in 2023 will reach 490 million yuan, a year-on-year increase of 31.7%, and in the first quarter of 2024, the company's revenue will reach 63 million yuan, a year-on-year growth rate of 46.00%.

With the growth of the company's revenue, the scale effect has gradually emerged, coupled with the continuous improvement of the level of product standardization, Transwarp's gross profit margin has also shown a steady upward trend. In 2023, the company's gross profit margin increased to 59.6%, an increase of 3.1 percentage points from the same period last year. In particular, in the first quarter of 2024, the gross profit margin increased significantly to 69.3%, a significant increase of 17.7 percentage points year-on-year.

In absolute terms, these numbers are undoubtedly impressive. But to fully assess and analyze the significance of these data, we need to conduct more in-depth quantitative analysis and comparison.

Back on the track of high growth

The quality of the data often needs to be compared to be more clearly reflected. In financial analysis, the comparison can be vertical or horizontal.

From the perspective of horizontal comparison, the company will achieve a revenue growth rate of 31.7% in 2023, which is a new high in the past three years. In addition, this growth rate has reached the company's high historical growth level. From 2018 to 2022, the company's revenue increased from $113 million to $373 million, with a four-year compound annual growth rate (CAGR) of 34.8%. Therefore, GF Securities Research Institute commented that the company's revenue has returned to the track of high growth.

In addition, Transwarp's achievements are not only good in the company's own historical development, but also remarkable even in the entire computer sector.

As of the morning of April 29, 2024, 329 companies in the A-share Shenwan computer sector have released their annual reports. According to the author's statistics, the median year-on-year revenue growth rate of these companies is only 3.39%, while Transwarp's growth rate is nearly ten times that of this median. It is worth noting that the growth rate of the third quartile is 17.26%, and the growth rate of 26.68% is enough to make the company among the top 10% of the industry, and Transwarp's growth rate of 31.7% is undoubtedly at the leading level.

Further analysis of the first quarter financial report data. Transwarp's revenue growth rate was 46.0%. Taking the 301 Shenwan computer sector companies that have released their annual reports as the data pool, the revenue growth rate of the third quartile is 17.26%, which means that Transwarp's growth rate is more than double that of three-quarters of the companies, and the growth rate of 37.40% is enough to exceed 90% of the companies, which means that Transwarp's performance in the first quarter report is also in the forefront of the sector. In the A-share market, there is a general view that companies that are willing to voluntarily publish quarterly reports tend to perform better, as this usually represents confidence in their performance. If this statement is true, then Transwarp can be called the best among the "good students" who take the initiative to publish a quarterly report.

Major brokerages are also quite optimistic about future performance expectations, believing that this growth trend is expected to continue. In addition, Transwarp has also launched the 2023 restricted stock incentive plan, which not only has a positive effect on the company's internal promotion, but also provides an important reference for external investors to evaluate the company's future performance. According to the stock incentive plan released by the company, the revenue growth targets from 2024 to 2026 are set at no less than 125%, 200% and 260% respectively, and the corresponding revenue targets are 740 million, 990 million and 1.19 billion yuan respectively. These targets demonstrate the company's strong confidence in revenue growth in the coming years.

Whether it is the performance potential that has been realized, the future forecast given by brokerage analysts, or the target incentive of Transwarp, these dazzling data references are just "tables". If we look at the report from the table and the inside, behind the return to the high growth track of revenue is Transwarp's continuous R&D investment and innovative achievements in the fields of big data and cloud infrastructure platform, distributed relational database, data development and intelligent analysis tools. The company also closely grasps the development trend of the industry, actively embraces the new opportunities brought by artificial intelligence technology represented by ChatGPT, continuously launches new products, strengthens technology and product innovation, and enhances the influence of the industry.

Actively embrace the opportunities of AI and large models

The company is one of the earliest companies in China to focus on the research and development of big data basic software, and its self-developed big data basic platform and distributed analytical database have reached the advanced level in the industry. The company's profound technology accumulation provides a solid foundation for it to further expand its AI products and services.

During the reporting period, Transwarp actively embraced industry changes, responded to the three major trends of AI development, and launched a number of innovative products to meet market demand, providing a solid scientific and technological foundation for new technologies in the industry.

In response to the trend of large models becoming the basic capabilities of enterprises, the company has launched the Sophon LLMOps toolchain, which aims to help enterprises build and manage their own large models, so as to quickly build business applications and assist in marketing, business decision-making and other links. Second, in order to meet the need to "shorten the link from data to decision-making" and make AI analysis more democratic, the company developed Hippo, a vector database. This product can efficiently store, index, and manage vector datasets, expanding the temporal and spatial dimensions of large models, so that more people can enjoy the convenience brought by AI. In addition, in response to the development trend of multimodal large models, the company has launched innovative products such as the enterprise-level vertical domain Q&A model "Wuyan" and its derived data analysis model "Quest".

Both "Wuya" and "Quest" have been filed with the deep synthesis service algorithm of the Cyberspace Administration of China, and "Wuya" has been filed with the generative artificial intelligence service of the Cyberspace Administration of China. According to the financial report, Wuya can provide digital assistance to the financial industry, legal industry and other fields, and is constantly expanding its specialization to cover more diversified industry needs, while the big data field model "Quest" allows non-professional users to freely query data on demand through natural language without learning and mastering database programming languages. These two large models will help more industry customers achieve digital and intelligent transformation and upgrading in the future.

Transwarp's rich AI Infra basic software product matrix, as well as more convenient and efficient AI solutions, are being recognized by the market. While many products have been launched for less than three quarters by the end of 2023, they are already beginning to realize their performance potential. According to the annual report, as of the end of the reporting period, the company's AI Infra-related products have achieved successful commercial implementation in various industries such as finance, government, energy, telecommunications, construction and real estate, and manufacturing, with positive market feedback and related orders exceeding 54 million yuan. GF Securities Research Institute said in the research report that it is optimistic that the landing of Al large model-related products will bring upward growth to the company's revenue in 2024.

Continue to consolidate core competitiveness

In addition to making significant progress in the field of artificial intelligence, the company also continued to consolidate its advantages in big data and cloud infrastructure platforms, distributed relational databases, data development and intelligent analysis tools during the reporting period. Through a series of technological breakthroughs and product upgrades, the company continues to lead the technological development of the industry.

The company released TDH9.3, a new version of the big data infrastructure platform TDH, and introduced a new generation of integrated storage formats of data lake, data warehouse and data mart. TDH9.3 is iteratively upgraded on the multi-model unified architecture and supports unified data storage and management of 11 models, which not only improves data processing efficiency, but also provides users with more flexible data management methods. At the same time, TDC has also launched a new version of the data cloud platform, which implements resource pooling, improves the flexibility and utilization of resource scheduling, and meets the needs of multi-tenant. It is worth mentioning that in December 2023, the company's big data infrastructure platform TDHV9.1 also passed the official audit of the TPCx-BBSF3,000 benchmark, ranking first in the world in terms of performance.

In the field of distributed relational databases, Transwarp has also made breakthroughs. The new version of ArgoDB, a distributed analytical database, strengthens the real-time analysis capabilities and enables ArgoDB to replace similar foreign products such as Oracle, DB2, Teradata, and SAPHANA in batch processing, OLAP, and ad hoc analysis. Another distributed transactional database, KunDB, has also been upgraded to improve the high availability of the Paxos consensus algorithm, cross-data center disaster recovery, and enhance its compatibility with Oracle, making it more competitive in the market.

The innovation of data development and intelligent analysis tools is another highlight of Transwarp. In 2023, the company launched and iterated a number of products, including Navier, a data element circulation product, and Defensor, a data security protection tool.

In addition to "cultivating internal strength" and enhancing core competitiveness, Transwarp also actively strengthens market development and ecological construction. The company has formulated a detailed partner architecture system, and formulated differentiated cooperation strategies and methods for different types of partners (such as industry ISVs, CPU manufacturers, complete machine hardware manufacturers, operating system/cloud and general software vendors, regional distributors, etc.). Through this strategy, the company has successfully developed dozens of ISVs and regional distributors in industries such as finance, education, transportation, healthcare, energy, and government. At the same time, Transwarp has carried out in-depth adaptation at the product level with major software and hardware manufacturers such as Huawei Kunpeng, Feiteng, Loongson, UnionTech, Kirin, Sugon, Montage, etc., further strengthening the ecological construction and establishing better external conditions and ecosystems for the company's development.

Better products and better ecology naturally attract more and better incremental customers, as well as more sticky existing customers. According to the annual report, the number of customers who recognized revenue in 2023 will be 578, an increase of 12.5% year-on-year, the revenue generated by the repurchase of the company's old customers will account for about 71.12% of the company's main business income, and the proportion will be 68.1% in 2022, and the number of high-value customers with a revenue amount greater than 1 million yuan will increase by 32.67% year-on-year. This fully proves that Transwarp's products and services have been more widely recognized and trusted in the market.

epilogue

Looking forward to the future, Zhongtai Securities Research Institute believes that Xinchuang needs to be launched urgently, and Transwarp Technology is expected to benefit from the big track of databases.

From a top-down perspective, the Digital China Development Report (2022), the 14th Five-Year Plan for the Development of Big Data Industry, the 14th Five-Year Plan for the Development of Software and Information Technology Service Industry, and the Interim Provisions on the Accounting Treatment of Enterprise Data Resources...... From top-level design to implementation rules, a series of policies have been introduced to encourage and support the development of the digital economy, the data element market, and domestic software and hardware.

From the bottom up, with the increasing attention of domestic governments and enterprises to data and information security, domestic software products are being replaced in key areas. Among them, the database is a key link in the field of basic software, which is expected to usher in a golden period of development.

The company is one of the scarce domestic big data representative enterprises, with a high degree of technical self-research capabilities, in line with the current needs of "domestic independent and controllable" in the mainland. Taking the core product big data infrastructure platform TDH as an example, core technologies such as distributed SQL compiler, computing engine, storage engine, distributed data management system, and resource scheduler have been independently developed. Transwarp's big data infrastructure platform has developed core components from the bottom up, gradually breaking away from the shackles of foreign open source big data frameworks.

This advantage allows the company to fully benefit from the policy. For example, in March 2021, Transwarp passed the high-level assessment criteria for a high-level project in the field of government procurement, and KunDB and ArgoDB were selected as transactional and analytical database management system vendors, respectively. In addition, the company's distributed transactional database KunDB has become the only domestic database product that has passed the special evaluation of the first batch of "software self-developed innovation capabilities" of the China Academy of Information and Communications Technology.

At the beginning of the IPO, if the company were to be compared to China's Oracle, it might be seen as blindly advocating and holding on to its biggest. Today, however, according to the company's public information, this metaphor is not entirely empty. In short, the company is expected to usher in new development opportunities in the wave of information and innovation industry by virtue of its self-developed core technologies and products, as well as its advantages in meeting the requirements of domestic independent controllability. In the future, companies like Transwarp will continue to shine in the data industry and make greater contributions to the development of China's information and innovation industry.