Are software and IT services still a good business in 2024?
It has to be. What the state supports is the most conducive to development.
In recent years, the first department has promulgated policies to support the information technology and software industry, such as "Several Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry", "Several Policies to Promote the High-quality Development of the Integrated Circuit Industry and the Software Industry in the New Era" and "The 14th Five-Year Plan for the Development of the Software and Information Technology Service Industry", etc., all of which are supported and guaranteed in various aspects such as finance and taxation, investment and financing, R&D and development.
This business is indispensable for the development of the high-tech industry.
Whether it is AI, big data, cloud computing, or the emerging AIGC track, it is inseparable from this strongest assistance. New technologies have taken turns to "come to power", and the "fire" of software and information services has always been burning brighter and stronger.
From the perspective of GDP contribution rate, from 2013 to 2020, the proportion of software industry revenue in national GDP increased by nearly 3%, 803% is enough to see its position in the national economy.
From the perspective of market size, from 2017 to 2022, 55 trillion yuan increased to 10With 8 trillion yuan, the growth rate of China's software and information technology services ranks in the forefront of various industries in the national economy. In 2022 alone, 112% year-on-year growth.
Of course, speed of development and strength are two different things.
First, compared with the market size of hundreds of billions and trillions of foreign countries, as well as well-known software companies such as IBM, Microsoft, and Oracle, domestic software and information technology service companies have not yet been able to "wrestle their hands";
Second, if you look at the top 100 software companies in China, you will find that in addition to Huawei, Xiaomi, and other comprehensive enterprises, companies specializing in software are not outstanding, and their R&D capabilities and commercialization capabilities are very poor, and they are far inferior to Internet companies in individual combat.
In addition, these companies focus on "not picky eaters", and can do R&D, integration, and outsourcing services, but the difference can still be seen in the main business.
For example, the national head of the enterprise, mainly engaged in national projects, is glamorous, and the profit and net profit should be very touching, but the actual difference between R&D and system integration and outsourcing is worlds apart.
For another example, everyone eats this bowl of rice, no matter what the benefits of the project are, they will receive it in full, and at the same time, the interests of shareholders and the direction of the company cannot be ignored, so is it a lot of money, or barely living?
To this end, we have selected several pure software and information technology service vendors, such as Chinasoft International, Aerospace Information, iSoftStone, Neusoft Group, and Donghua Software.
Focus on the following core points.
GrowthFor mature industries, long-term historical data can provide important clues such as revenue, cost, gross margin, free cash, etc., which can not only take us to understand the past business performance of the enterprise, but also allow us to judge the trend of the entire industry for reference.
SecurityAfter all, the debt structure, working capital and capital circulation capacity of an enterprise all represent the real operation status of the enterprise from a certain perspective, and also provide deeper feedback on the problems within the enterprise. Whether an enterprise can develop safely and sustainably depends on the data and estimates the potential risks within the enterprise.
DevelopmentalUnlike growth, development focuses on the future possibilities of the enterprise. It can be viewed here in two parts, market barriers and innovation. In the same track, specific analysis of specific enterprises, many enterprises with the adjustment of policies and their own strategies, there are still various differences between them, from the customer audience, capital, the control of human efficiency and their business innovation points, these are worthy of our attention.
Note: All data is from official financial reports. Data analysis is a personal opinion only and does not constitute investment advice. At the same time, it is assumed that all financial report data is true and reliable.
1. Revenue is declining
Combined with the cost, the overall revenue growth slowed down, especially in 2021, aerospace information has declined significantly. It is not difficult to guess that the state issues UKEY for free and no longer uses tax control disks, which is the reason for the decline in the revenue of aerospace information, which mainly focuses on tax control software. The barriers of "science and technology Moutai" no longer seem to be stable, and the transformation of aerospace information is imperative.
On the whole, the revenue trend of several major enterprises is not optimistic, blindly complacent with the status quo has long been unworkable, and the active transformation and comprehensive stability of software enterprises are indispensable in the future development.
2. Too much negative profit
After the market climax in 2021, all companies have been affected by the economic downturn, and iSoftStone and Donghua have been less affected. The reduction of profits is the general trend, and even under the addition of "state support" and "policy subsidies", corporate profit data is still difficult to hide the decline.
Among them, Neusoft was particularly affected, and the project delivery and acceptance, project payment collection and other aspects suffered a great impact, resulting in the annual performance not reaching the plan at the beginning of the year. Can Neusoft, with its "new high" revenue and "new low" profitability, achieve new growth in 2024 with popular tracks such as smart car interconnection, medical health and social security, smart city, and enterprise Internet?
3. The gap between human efficiency and efficiency is too large
In order to ensure the uniformity of the enterprise level, the follow-up categories will no longer be added to the data of Chinasoft International (the strength gap is too large, which is not conducive to the overall judgment).
In terms of the number of people, several companies are performing similarly, and they are all constantly adjusting and shrinking. But on the whole, iSoftTone is "far ahead" in terms of numbers. Generally speaking, the number of manpower and business volume are closely related, but under similar business revenue data, iSoftStone's number of people is 4-5 times higher than that of Aerospace Information, which is obvious, iSoftStone's human efficiency is too low, and even if the number of people is deleted, the overall rate of return is still anxious. It can only be said that it is useless to shout loudly, and iSoftStone's internal structure, personnel process and division of labor are effective.
4. R&D efforts are too weak
R&D capability is the key to measure the innovation ability and core competitiveness of an enterprise.
From the data, it can be seen that the overall R&D investment of several enterprises is relatively flat, and the increase or decrease is not large, but flat does not mean that it is qualified. In the face of the transformation policy, Donghua Software has taken its own means, but in the 2022 data, it has not yet reached the 10% qualified line, which leads people to speculate that it is really backed by "big trees are good to enjoy the shade", research and development is only one of the necessary projects for enterprise development, but someone pays is the key?
As for iSoftStone, in the face of the lower cost ratio than the other three, iSoftStone also has its own set of logic, R&D expenses are split into part of the cost, part of the long-term investment, therefore, iSoftStone's R&D capabilities cannot simply be considered too weak, as Huawei's "front and backstage" capability partner, iSoftStone's strength may be more inclined to another low-key performance.
5. The sales ability is insufficient, and the customer is obviously single
Inventory and inventory turnover days can help us judge the characteristics of the company's products from a certain perspective. Aerospace information and iSoftStone have a fast turnover, and products (services) are more customized, and they are delivered immediately. On the contrary, the timeline of Neusoft and Donghua is too long, indicating that the products are more inclined to hardware (integration) and have a lot of inventory.
As far as making money is concerned, a 30% net profit margin on sales should be the qualified line for the company's ability to make money. The only thing that can make money every year is aerospace information, and under the same low turnover days, iSoftStone's products and services have achieved "small profits and quick sales". As for Huawei's Donghua Software, it is busy all year round, and it can only be exchanged for three melons and two dates. As for Neusoft, the delivery of goods in Q4 of 2022 cannot be guaranteed, which is miserable.
6. Upstream and downstream influence
The accounts payable of Aerospace Information, Neusoft and Donghua are far more than iSoftStone, and it is reasonable to speculate that iSoftStone has a low voice in the game with the best businessmen. When the company's products or services are very popular, downstream partners are all paid first to obtain the products or services, from the perspective of accounts receivable, Neusoft obviously has a greater voice and a higher popularity.
On the whole, Aerospace Information and Neusoft Group have a very strong voice and influence in the same industry, whether it is the upstream business or the downstream partner, which also shows that its own technology and competitiveness are too strong.
7. Financial risk
The most critical measure of a company's profitability is the return on equity. It can be seen that the performance of aerospace information is quite stable, and Donghua will carry out small profits and quick sales to the end.
However, Neusoft's value in 2022 is "planted" heavily. From 1315% sharply**-362%, Liu Jiren, who has been pursuing to make quick money and easy money, probably didn't expect that the consequences of playing capital and making investment would be so embarrassing.
8. Cash flow
The overall stability of aerospace information and the increase in cash raised are mainly due to the trend of business transformation and optimizationDonghua Software does not have much money on its books, but its cash from operating activities is mainly spent on research and development, indicating that the company is optimistic about the future trend.
Neusoft Group, which focuses on investment, has too poor profitability in its own main business, so it is more inclined to investment activities. In the same way for fundraising, a large part of the reason why enterprises that focus on investment is that the profits of their main business are too small. Therefore, the center is tilted, such as Donghua, and the small profits and quick turnover cause the company to have to tilt the business center to other parts.
Summary
Aerospace information
Is a mediocre company a good company?Aerospace information tries to give an answer.
For a long time, in China's tax control market, Aerospace Information has been in a leading position in terms of technological innovation, product quality and service quality. However, the era of tax control has long ended, judging from the current data performance, the overall performance of aerospace information is unsatisfactory, profits have declined significantly, and the overall fluctuation range is small, butThe price of security is a small benefit
After more than two years of innovation and transformation, it seems that there are many flickering elements. The R&D part of the enterprise has increased, but there are still problems such as insufficient innovation and customer singleness.
Combined with its latest development status and business actions, some people are optimistic that "network information business" and "smart business" can support the overall revenue of aerospace information. From the data of the first year of the year, we can see that a grain of sand in the era of tax control still falls on the head of aerospace information without deviation, and aerospace information, which can no longer rely on monopoly methods, is still facing the pain of its transformation. The risks of industrial structure are still prominent, the capital advantage has not been fully utilized, the scientific and technological research and development capabilities are weak, the market-oriented operation ability is too weak, and the lack of core talents all need to be solved by aerospace information at an accelerated pace.
iSoftStone
iSoftStone really shows that "it is difficult to live up to the fame".
On the surface, it is close to the five major customers of Huawei, Alibaba, Tencent, and Bank of China, but in fact, it only relies on the five major customers to maintain the basic decency of their net profits.
Declining revenue, high costs, and low human efficiency are already well-known facts. iSoftStone's main business is:Software outsourcing R&DThis business model relies on custom software development projects. Nowadays, cloud computing is deeply changing and influencing the business model of the entire software industry, and the proportion of customized projects is decreasing, and more standardized cloud services are appearing. With the development of cloud computing, especially PaaS and SaaS, the market space of the entire software outsourcing industry will be greatly impacted.
At the same time, iSoftStone's per capita revenue and profit are low, and R&D investment is insufficient. The per capita profit is 10,000+. With such per capita revenue and profit, it is difficult to form a competitive salary system and attract top R&D and technical talents. This has further exacerbated iSoftStone's dependence on the five major customers.
In the future, iSoftStone will not only need to improve its innovation capabilities and profitability, but also increase its efforts to develop new customers, increase the courage to turn inward, adjust its personnel structure, and gradually realize its own transformation and upgrading.
Neusoft Group
In a word, it's a real loss.
Liu Jiren once said that today's Neusoft is the best Neusoft, even if there were countless possibilities. But in fact, the feedback from the market is that today's Neusoft is the most rubbish Neusoft, even if there were countless possibilities.
Revenue is stretched, human efficiency is low, downstream demand is less than expected, technology iteration is accelerating, and market competition is intensifying. NeusoftSoft and softIs it worth investing and paying attention to?
Judging from the 2023 corporate revenue data report, it seems to bring us another glimmer of hope. By promoting innovative technologies such as big data and artificial intelligence, Neusoft Group has a wide range of applications and practices in medical IT, smart cars, smart car interconnection, smart cities, and enterprise digitalization, and is expected to fully benefit from digital transformation. It can be seen that no matter how much shareholders hate iron and steel, on the basis of optimistic capital, strong technology and popular track, it may only be a matter of time before Neusoft becomes "hard".
Donghua Software
As the first enterprise in China to have the qualifications of system integration level 1, secret-related class A, CMMI level 5 and so on, the harder it works, the more "mediocre" it is.
Compared with the other three, Donghua Software's advantages are not obvious enough, and the relatively low proportion of software revenue is indeed obviously hard. The harder you work, the more marginalized the company becomesSmall profits but quick turnoverhas become a major selling point. Even with the support of the state and multiple bindings with Huawei, Tencent and other enterprises, Donghua's business has maintained a stable state of development, but problems such as intensified industry competition, rapid technology iteration, and inefficient business innovation are still in front of Donghua.
In the face of such Donghua software, what else is worth looking forward to?First of all, the general environment of information and innovation is favorable;Secondly, the rise of new businesses in AI computing centers;Furthermore, Neusoft is actively forming a scale advantage in the field of smart citiesFinally, AI has also played an important role in the transformation of business through the connection and innovation of software with the Internet of Things, big data, and artificial intelligence.
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China's software industry is still the same old problem: big but not strong.
Obviously, in order to compete with the international market, there is still a lot of room for growth in domestic software and information technology services. In recent years, the state has given wave after wave of support, but it is difficult for most software companies to take the innovation step
First, overseas giants are preemptive, in terms of technology and strength, it is impossible for domestic "little arms" to twist their thighs, but they are only followed in technology, and there is no core innovation point. At the same time, major domestic Internet companies are eyeing each other
Second, R&D and innovation mean burning money, and money should come from the best placeRelying on insufficient state subsidies and relying on market inflows is a drop in the bucket, there is naturally a vicious circle of poor innovation, low market share, and no money for R&D and innovation.
There are many domestic enterprises, which seem to be monopolies, but in fact, the market concentration is not obvious, and the operating data of the head enterprises also illustrate these problems. The demand for digitalization in various industries is in full bloom, but the revenue of the software and information technology service industry is declining year after year. This is not only due to the influence of the market, but also because many enterprises are limited by their own business architecture traditions, and the pace of innovation is too slow.
Generally speaking, China's pure software and information technology service providers have too many constraints, and they need to break through little by little and have more opportunities.
So then again, are software and IT services still a good business?It has to be.
At the same time, the national "14th Five-Year Plan" emphasizes that China should accelerate digital development, and the future of digitalization will be in full bloom in various industries such as smart cities, manufacturing, finance, and energy, which further increases the demand for domestic software and information technology services.
Therefore, under the current situation of both favorable policies and capital, we may only need a little time to wait and see what happens in this industry.
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