FIRST SHANGHAI has issued a research report assigning INSPUR DIGI ENT (00596) a "Buy" rating with a target price of HK$14.8. The firm combines the company's natural advantages from its state-owned enterprise background, the profit release potential of cloud services driven by domestic information technology innovation initiatives, and the valuation uplift expectations from potential inclusion in Stock Connect in the future. The firm forecasts the company's net profit attributable to shareholders for 2025-2027 to be 520 million yuan, 680 million yuan, and 870 million yuan respectively.

The report states that the company achieved revenue of 43.4 billion yuan in the first half of 2025, representing a year-on-year increase of 4.9%. The gross profit margin was 23.4%, up 1.4 percentage points year-on-year. Net profit attributable to shareholders was 183 million yuan, up 73.3% year-on-year, primarily due to the cloud services business turning from loss to profit and the software business segment's operating profit growing 6.2% compared to the same period last year.

In the first half of 2025, the cloud services business showed significant growth momentum, achieving revenue of 12.7 billion yuan with a year-on-year growth of 30%. The proportion of cloud business in operating revenue has increased for four consecutive years, breaking through 50% for the first time in the interim period this year, reaching 52%, and its growth rate has consistently remained above 30%. Looking ahead to the next 3-5 years, this business is expected to maintain a growth trend of over 20%.

The company's business focuses on serving large clients such as central and state-owned enterprises, with such clients contributing over 80% of revenue, while small and medium-sized enterprise clients account for only about 5%, representing a weak link in the business structure. In response, the company has jointly developed end-to-end integrated solutions with overseas industrial software manufacturers, specifically addressing the pain points of data disconnection in software across "R&D design, business management, and asset control" segments for manufacturing SMEs. In the second half of the year, the company will actively promote market expansion in this field, and the firm is confident about the development opportunities in this market.

Meanwhile, the company is also actively expanding into overseas markets, with overseas revenue reaching 380 million yuan in the first half of this year. Future efforts will focus on developing the Southeast Asian market, on one hand following the overseas expansion steps of central and state-owned enterprises for collaborative development, and on the other hand planning to launch localized products for Southeast Asian SMEs by the end of this year or early next year, further improving the overseas business layout.