On Nov 21, 2023, Guangdong Province issued the Three-Year Action Plan for the Construction of the Digital Greater Bay Area, proposing to build a unified market for data elements, promote the establishment of unified data asset registration rules in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), explore the authorized operation of public data, and support the Guangzhou and Shenzhen data exchanges to create national-level data bourses. With the gradual application of early concepts such as data assets and data transactions, the market around digital infrastructure is poised to drive a new round of investment opportunities.
As one of the core participants in Guangzhou’s digital infrastructure, GRG Banking Equipment has built an extensive presence across data, computing power, algorithms, and scenarios, and is well-positioned to capture market opportunities by leveraging its first-mover advantage and ecosystem construction. We suggest watching the progress of data trading and the Company’s continued development in this field.
Guangdong issued the Plan to support the establishment of national-level data exchange hubs in Guangzhou and Shenzhen.
The Three-Year Action Plan for the Construction of the Digital Greater Bay Area (hereinafter referred to as “the Plan”) proposed to build a unified market for data elements, promote the establishment of unified data asset registration rules in the GBA, explore the authorized operation of public data, and realize the integrated application of public data and social data. The Plan proposed to support commercial banks that meet the relevant qualifications to carry out pilot projects for internal cross-border data flows, and rely on platforms such as the National Supercomputer Center in Guangzhou to help enterprises and research institutions in the GBA to improve the efficiency of computing power utilization and original algorithm iterations. The Plan supports the Guangzhou and Shenzhen data exchanges to establish national-level data bourses, and to build a data element trading market in the GBA with unified market systems, trading rules and platforms. We believe that the Plan has set clear goals and development schedules, and the relevant layout is likely to drive the first flow of regional data elements and gradually expand nationwide. According to the announcement of GRG Banking Equipment, the Company holds a 10.5% stake in the Guangzhou Data Exchange and is likely to benefit from the development of the data trading market in the future.
GRG Banking Equipment actively builds presence in the data element market, covering data, computing power, algorithms and scenarios.
On Nov 21, 2023, according to the Company’s announcement, GRG Banking Equipment became the first candidate for the “Guangzhou Data Group Artificial Intelligence Public Computing Center construction project equipment and supporting services procurement project”, with a maximum bidding price of Rmb485mn. Guangzhou Artificial Intelligence Public Computing Center is one of the important digital infrastructures in the field of artificial intelligence (AI) in Guangzhou, which focuses on one center and five platforms, namely Guangzhou Artificial Intelligence Public Computing Center, Public Computing Service Platform, Application Innovation Incubation Platform, Industrial Integration and Empowerment Platform, Science and Technology Collaborative Innovation Platform and Talent Training Platform, to support Guangzhou’s AI ecosystem buildup and accelerate the development of the digital economy. GRG Banking Equipment actively positions itself in the data element market, providing solutions in areas such as data, computing power, algorithms and scenarios. The Company successfully became the first candidate for the procurement project of Guangzhou Data Group, contributing to the development of the digital economy.
Potential risks: Reduced demand due to macroeconomic pressure; less-than-expected demand and slower-than-expected progress in financial information technology application innovation; lower-than-expected overseas revenue due to geopolitical factors; disappointing promotion of e-CNY; less-than-expected development in data exchanges.
Investment strategy: The Plan sets clear goals at the industry level, and we believe that the relevant layout will likely drive the regional data elements to flow and gradually expand nationwide. In terms of the Company, it actively builds presence in the data element market and is well-poised to benefit from the development of digital economy, leveraging its cutting edges of technological strength, early-mover advantage and ecosystem development. We are optimistic about the long-term presence buildup of GRG Banking Equipment in the fields of computing power and data trading, and suggest paying attention to the pace of data exchange applications and its business orders. We maintain our 2023E-25E EPS forecast of Rmb0.40/0.45/0.49 on 31x/28x/26x 2023E/24E/25E PE at the current price. We selected Sunline Tech (300348.SZ) and Yusys Technologies (300674.SZ) as comparable companies, which are trading at 47x 2023E PE on average (both based on our forecast). Taking into account the non-controlling interest, we assign 40x 2023E PE, and reiterate the “BUY” rating and target price of Rmb16.
