The Shanghai Stock Exchange (SSE) Star Market Listing Committee finally approved the IPO application of software and information technology services provider Eazytec (卓易科技, A19090:SH) on September 27.
Founded in 2008, the company concentrates on two submarkets, namely firmware and cloud computing. While it has a number of advantages over the competition in the first segment, a tiny scale doesn’t allow Eazytec to effectively combat cloud giants in China and abroad. Like most of the other small-sized enterprises, it is doomed to be zeroing in on certain subindustries such as system integration and data center services, where the ‘differentiation focus’ strategy might work well.
Although being a minor player in most of the industry verticals, the firm is the only provider of the core firmware, or BIOS, used in x86 architecture in China’s mainland. Besides, it is among a few local companies that deal with reduced instruction set computing architecture such as ARM (Advanced RISC Machine) and MIPS (Microprocessor without Interlocked Pipelined Stages).
Growing demand for servers and localization trends along with the state’s attempts to cultivate local semiconductor and computer chip industry made it possible for the company to expand into new territories.
At the moment, Eazytec’s cloud computing business is extremely localized: ‘Jiangsu region’ (Jiangsu province and the adjacent areas) accounts for over 70% of its client base. The focus is shifting to other regions of eastern China: the share of clients from other provinces grew from 14.4% in 2017 to 25.3% last year.
The firm saw both the revenue and net profit steadily increasing between 2016 and 2018. At the same time, the net profit margin hit 23.9%, 21.7% and 29.4% in 2016, 2017 and 2018 respectively. R&D expenses have been also growing proportionally over this period, the indicator has climbed from CNY 12.39 million (USD 1.58 million) in 2016 to CNY 20.39 million (USD 2.6 million) in 2018. Nevertheless, it is a tough question whether this speed is enough to grapple with the stiff competition in China’s cloud computing market.
According to the China Academy of Information and Communications Technology, the country’s cloud computing market size was over CNY 96 billion (USD 13.48 billion) in 2018. The organization expects that spurred by constantly upgrading technology, the segment will grow rapidly in the short term, reaching CNY 173 billion (USD 24.29 billion) by 2022.
Read more about the new Shanghai sci-tech venue in the recent EqualOcean report (download).