In 2000, Dameng Database Company was established. It is the leader of centralized databases in China. It is also known as the "old four" of Chinese databases along with Nanda General, Renmin University Jincang, and Shenzhou General. After 23 years of struggle, on December 20, the Shanghai Stock Exchange approved its IPO application. Going public is a key turning point in the development of a company, but there are still many risks in Dameng's future.
The sponsorship letter issued by China Merchants Securities for Dameng’s listing stated that the development of Dameng Database has the following five risks:
1. Market competition risks
2. Risk of declining revenue growth rate
3. Risk of fluctuations in gross profit margin
4. High balance of accounts receivable and risk of bad debts
5. The risk of concentrated channel sales revenue
In my opinion, 1, 3, and 4 are all normal situations and not considered risks, while 2 and 5 are serious risks affecting Dameng's life and death.
Key risk 1: Risk of declining revenue growth rate
From 2019 to June 2023, Dameng’s annual revenue was: 302 million, 450 million, 743 million, 688 million and 287 million respectively. Among them, the revenue growth from 2020 to 2022 compared with the previous year was: 49%, 65% , -7.4% respectively. The revenue in the first half of 2023 increased by 14.8% compared with the same period last year .
Revenue from January to June 2022 is 250 million, and annual revenue is 688 million. Based on this ratio, revenue is expected to reach 790 million in 2023.
According to the prospectus at the end of 2022: from 2019 to 2021, the average annual compound growth rate of net profit attributable to shareholders of the parent company after deducting non-recurring gains and losses was 111.85%. It's a pity that it failed to successfully go public in 2022 when its integrity performance was at its peak; currently, the revenue in the second half of 2022 has dropped significantly, resulting in a decline in the full-year revenue in 2022. Although there was growth in 2023, the growth rate has slowed down compared to 2021. several times.
In the past, in the party and government information innovation, the number of products included in the list was limited, especially emerging technology manufacturers were not included in the party and government lists. Dameng has a first-mover advantage based on the industry foundation built over 20 years.
However, in the current financial market, the main industry of Xinchuang, Dameng's revenue in 2020 is only 6.4 million. In 2021 and 22, the financial Xinchuang pilot projects are concentrated in the OA office system, and Dameng has taken advantage of this to have another wave of growth.
However, in 2024, a new database directory and policy will be released soon, which will inevitably introduce more powerful database companies, and industry innovation will also be pushed into more important business systems. Dameng's main product is a centralized database, which has extremely high requirements for hardware stability. Under the background of many factors that limit the development of domestic chip server technology, it is difficult to compete with distributed databases in core and important business systems. Whether It is difficult to say whether it can maintain its market advantage and continue to grow.
Key risk 2: Direct sales revenue is less than 10%
The 2023 China Merchants Securities Sponsorship Letter stated that during the reporting period, the company's software licensing channel revenue accounted for 92.23%, 93.96%, 92.16% and 92.67% respectively, and direct sales revenue was less than 10%.
So it turns out that establishing a healthy and steadily growing channel ecosystem is crucial to the revenue growth of database companies! So how should channels be established? Please refer to Dameng’s path: large channel operators with absolute resource advantages in key industries.
The letter of sponsorship stated: During each reporting period, the company's channel sales revenue to the top five channel dealers accounted for 55.78%, 50.98%, 47.82% and 46.94% respectively. Among them, the amount of revenue from the sales of software products to the general distributor China Construction Information They were 157.0794 million yuan, 213.9570 million yuan, 198.4244 million yuan and 72.2549 million yuan respectively, accounting for 42.52%, 33.33%, 32.33% and 27.56% of the software product licensing business revenue respectively. The sales revenue share is relatively concentrated.
China Construction Information is a subsidiary of China National Building Materials Group Import and Export Co., Ltd., a central enterprise. It was founded in April 2005. Revenue in 2022 is 18.7 billion yuan, with a gross profit margin of 7.65%; of which, the purchase amount from Huawei is 12.6 billion yuan. Based on the above gross profit calculation, Huawei’s agency revenue accounts for more than 70%; of which enterprise-level ICT software products and services are 795 million yuan, Gross profit margin is 7.44%. The company represents many products, including most of Huawei's products, Dameng database, Kirin operating system, Dongfangtong middleware, as well as overseas Microsoft office, SAP, etc. It properly uses the advantages of central enterprises to become a monopoly agency in the party and government industry. .
We see that the gross profit margin of China Construction Information Software's products and services is only 7.44%. Once the products of some emerging manufacturers are fully verified, their technical strength is strong, and they offer higher profit margins, channel manufacturers will have a huge swing. Although Dameng has a large profit margin, after its listing, it will inevitably pursue continued profit growth, and I am afraid it will not be able to flexibly adjust its channel profit margin. And 90% of its revenue comes from channels, which will pose a huge threat to its survival.
Other risks
In addition to the above direct risks affecting survival and development, Dameng also has the following risks, which also affect the future destiny of the company.
1. Equity is dispersed and the risk of control rights changing hands is high.
According to the prospectus, the actual controller Feng Yucai directly holds 10.1872% of the shares of Dameng Data, and obtains 28.0847% of the voting rights through the eight corporate shareholders he actually controls. In addition, through concerted action with the management team, he actually controls 2.2807% of the voting rights. In summary, Feng Yucai controls 40.5527% of Dameng’s voting rights in total.
As the largest shareholder of Dameng Data, China Software, a secondary unit of CEC China Electronics, a central enterprise, directly holds 25.2105 shares of Dameng Data. Therefore, China Software can realize the transfer of control rights of Dameng through the secondary market or by transferring shares held by other shareholders.
2. The foreign-invested enterprise with the largest shareholder is competing with other companies.
In addition to Dameng, China Software has also invested in another emerging database startup, Yijingjie. Founded in 2015, Yijingjie is currently one of the few domestic database manufacturers with independent core technology. Its product QianBase has achieved substantial breakthroughs in core financial business scenarios. China Software’s investment in Yijingjie Database is precisely to make up for Dameng’s lack of capabilities in core business scenarios. As the largest shareholder, making the same judgment and decision as before shows that the technological development of Dameng Database is indeed not optimistic.
3. Frequent equity holdings, and even equity dispute litigation
In July 2022, Dameng Data received the "Notice of Response from the People's Court of Wuhan East Lake New Technology Development Zone" ((2022) E 0192 Minchu No. 8218) and other relevant materials served by the People's Court of Wuhan East Lake New Technology Development Zone. The dispute over shareholder qualification confirmation between Gong Haiyan and Dameng Data has been accepted by the People's Court of Wuhan East Lake New Technology Development Zone. In addition, nearly a quarter of Dameng's invention patents in 2022 come from Huake teachers, and there may be 72 historical holders, and equity disputes similar to Gong Haiyan may involve more than a dozen people. As of now, it is not known whether the above disputes have been resolved.
4. If the director’s part-time job is hidden and unannounced, does it hide other risks?
According to the prospectus, Li Ping currently serves as an independent director of Dameng Data. Apart from serving as a professor at Beijing University of Aeronautics and Astronautics, he has no part-time jobs in other companies. However, according to public information, Li Ping also serves as a director of many companies including China Aviation, China Coast Defense, and Silicon Power. Therefore, the above three companies should also be Dameng related parties. Therefore, Dameng data may be suspected of omitting three related parties. Whether such behavior hides risks for future operations or whether there are other "omitted" risks that have not been reported has also become a factor of uncertainty.
I’m afraid this is Dameng’s last chance to go public.
According to statistics from the IDC-2022 China RDBMS Market Tracking Report, Data Warehouse Market Scale and other reports: the deployment of local non-data warehouses (i.e. transactional databases) in 2022 will be approximately 7.05 billion.
Transactional databases are divided into two categories:
General business systems. For example, party building systems, office OA, email systems and other internal management processes of enterprises;
Critical business systems. For example, financial core systems, payment systems, mobile banking, remote banking, credit, financial management and other business systems that provide direct external services.
According to the quantity, the number of the two types of systems is basically the same, but the proportion of enterprise investment in key business system databases is much higher than that of general business systems, so the market size of key business system databases is much larger than that of general business systems . For example, the Postal Savings Bank of China spent RMB 145 million to purchase Oracle database services alone, the Export-Import Bank of China purchased Oracle products from a single source of RMB 27.57 million, and the Central Clearing Company purchased Oracle database software from a single source of RMB 16.6 million. These are all databases used in important systems. project.
In the past two years, Xinchuang was in the trial stage, so it was basically concentrated in general business systems. The market size of centralized databases even accounted for more than 70%, leading some people to think that "the market size of centralized databases is higher than that of distributed ones." illusion.
Even if we conservatively estimate that the market size of general business and key business systems is 50/50, each will have a market size of approximately 3.5 billion in 2022. Dameng’s revenue of 688 million yuan accounts for nearly 20% of the general business system . In addition, domestic centralized database products include Renda Jincang, Youxuan, Nanda General, Henkel, Massive Data and other products that are already in the catalog; there are also many centralized databases derived from Huawei Opengauss, especially those of the three major operators Basically, some have independently developed their own stand-alone databases, and large integrators and application vendors have also launched their own stand-alone databases. Therefore, Dameng’s general business market share of nearly 20% is already very high.
In 2022, the focus of the pilot project will be on OA office, email, party building, etc. These systems are very homogeneous in various industries. The party and government mailbox systems can be transplanted to the financial industry with a few modifications, or they are themselves compatible. Interoperable, which allows Dameng’s case advantages accumulated in the party building industry to spread to other industries. However, after 2024, as these general-purpose systems complete their credit creation tasks, Dameng products will gradually lose their advantages in other systems with strong industry attributes.
Moreover, although Dameng Database claims to be highly compatible with Oracle, it also results in the closed nature of its ecosystem. Compared with other products that are fully compatible with PostgreSQL, MySQL, etc., it is not quickly replaceable, making it easy for customers to form bundles once they apply, which may happen again in the future. The dilemma of "it's difficult to get rid of O". Therefore, after experiencing the pain of batch "O" removal, a large number of customers prefer to choose products from the two compatible ecosystems of Pg and MySQL when selecting products, so as to retain the right to choose and negotiate future products in the hands of the users themselves. . As a large number of databases compatible with MySQL and Pg are popularized and verified in the market, especially the promotion of distributed databases in key business systems, in order to reduce operation and maintenance and development costs, enterprises are bound to be more capable and efficient in database selection for general business scenarios. Products compatible with critical system database usage.
In addition, domestic distributed databases are evolving towards a single-machine distributed integrated architecture. Even in 2-3 years, users will no longer purchase purely centralized databases. Therefore, Dameng will gradually lose its advantage in terms of technology and ecological development.
To sum up, Dameng’s centralized database may have reached its peak of development, accounting for about 20% of general business systems. Because the existing office systems are still being replaced, Dameng's revenue may be able to grow in line with the expansion of market size in 2023 and 24, but the scale proportion may not increase. After 25 years, if Dameng's database technology architecture does not make significant progress to support its core business, its market share may fall off a cliff.
Dameng raised 2.3 billion yuan in this prospectus. The focus of the plan is distributed databases and cloud databases, also because it is fully aware that the market bottleneck of its centralized database has been difficult to break through. However, it may be too late to start the layout now, but it may not be too late to make amends.
In any case, Dameng represents the first listing of a purely domestic database company, which makes those of us in the database circle still feel excited. Let us wish it a smooth listing, and let us witness its market value...