Subsidiaries face short-term pressure, Digital China's 'Big Data + AI' moves forward steadily
Recently, Digital China Holdings issued a profit warning announcement. It is estimated that the company's profit for the first half of 2024 may be between 9 to 12 million RMB, a significant decrease compared to 40 million RMB in the same period last year. The announcement disclosed that this was mainly due to the impact of its non-wholly owned subsidiary Digital China Information Service (stock code: $Digital China Information(000555.CN)). Affected by fierce industry competition, Digital China Information Service's gross profit margin has declined, while the company has also increased investment in new product lines, leading to higher costs and resulting in an overall net profit attributable to the parent company turning into a loss.
According to recent announcements from Digital China Information Service, the net profit attributable to the parent company for the first half of 2024 is expected to incur a loss of 65-92.5 million RMB (compared to 80.8698 million RMB in the same period last year). Currently, Digital China Holdings holds approximately 40% of the shares in Digital China Information Service. Therefore, it can be estimated that the difference in consolidated profits contributed by Digital China Information Service to Digital China Holdings between the first half of this year and the same period last year amounts to around 60-80 million RMB, leading to a year-on-year decline in Digital China Holdings' current profits.
Despite the negative impact from the consolidated non-wholly owned subsidiary, Digital China Holdings itself still achieved solid performance in the first half of 2024 based on fundamentals. According to publicly disclosed information for the first half of the year, Digital China Holdings accelerated its big data + AI initiatives, securing multiple large-scale orders, including a 460 million RMB contract for the AI new infrastructure (intelligent computing center) project in Changchun New District, Jilin Province, a 10 million+ RMB order for the AI + industry model software and services for the second phase of Changchun City's computing power center, and a nearly 30 million RMB order for Jilin Province's smart water conservancy project. At the same time, the company has deep expertise and a stable customer base in end-to-end supply chain operations, continuously serving major clients such as the three major telecom operators, Huawei, Honor, BYD, and Procter & Gamble, ensuring a stable business foundation. Additionally, the company is actively expanding into overseas markets, not only winning supply chain projects for BYD in Thailand and Vietnam but also leveraging its "high-end network" to further enhance its international influence and explore local markets. In July this year, the company's senior executives held in-depth discussions with Thailand's largest manufacturer and service provider, Saha Group, with potential collaborations in e-commerce platform operations, supply chain optimization and upgrades, enterprise digital transformation, and smart industrial parks and buildings.
In terms of core technological capabilities, Digital China Holdings also leads in multiple fields. It ranked first in the "2024 Top 50 Big Data Solutions" list jointly selected by the Chinese Academy of Social Sciences' Information Research Center, Internet Weekly, and Deben Consulting, second in the "2024 AI + Top 100 Excellent Service Providers" data elements category, and third in the "2024 Top 50 Data Middle Platforms," fully demonstrating its leading position in data middle platform construction and data governance.
Overall, Digital China Holdings' current profit warning is mainly due to short-term impacts from its subsidiary, while the company's long-term development strategy and industry-leading position remain optimistic. Digital China Holdings is continuously optimizing its business layout, increasing investment in cutting-edge technologies such as big data and AI, and actively expanding domestic and international markets, steadily building a diversified and robust profit system to lay a solid foundation for long-term development.
$DC HOLDINGS(00861.HK) $Digital China Information(000555.SZ)
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