Good News on Listing | Frost & Sullivan Assists YunGongchang Technology Holdings Limited to Successfully List in Hong Kong (2512.HK)

YunGongchang Technology Holdings Limited (referred to as 'YunGongchang Technology') successfully went public on June 14, 2024. The company plans to issue a total of 115 million shares, of which 103.5 million are for international offerings, accounting for 90% of the total shares; 10% are for Hong Kong public offerings. The issue price per share is HK$4.6, raising approximately HK$530 million.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the issuer accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the issuer's competitive advantages, assisting the issuer, investment banks, and other intermediaries in completing relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), assisting the issuer in communicating with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and providing feedback on various industry-related issues from the Hong Kong Stock Exchange.

The company is one of the earliest data service providers in China;

The company is a leading enterprise in the field of edge computing;

The company has partnerships with well-known domestic research institutes, telecom operators, and top universities;

The company has professional R&D capabilities in cutting-edge core technologies;

The company is a pragmatist in the edge cloud field and has successively received numerous honors.

The development of smart devices and the internet has promoted an increase in the number of internet users in China. The number of internet users rose from 8.825 million in 2018 to 10.67 million in 2022, with a compound annual growth rate of 6.5%. Along with the growth in internet users, continuous innovation in smart devices and internet technology has led to a sustained increase in the number of internet users in China. In addition to urban residents, rural areas have also begun to gradually connect to the internet, continuously improving the overall internet penetration rate. China's internet penetration rate increased from 59.6% in 2018 to 75.6% in 2022. With the accelerated development of the internet and support from relevant government policies, the number of internet users is expected to reach 12.633 million by 2027, with a growth rate rising to 90.0%. The compound annual growth rate from 2023 to 2027 is expected to be 3.4%.

Among internet users, there are some who are enterprise users, and enterprises use cloud service technologies more frequently. With the development of cloud technology, the market scale of cloud services in Mainland China has grown from 6.93 million yuan in 2017 to 3.229 billion yuan in 2021, with a compound annual growth rate of 46.9%. According to the development of cloud services in China and the national promotion of the digital economy, the market scale of cloud services in Mainland China will continue to maintain a high-speed growth trend in the coming years. Public cloud services and private cloud services, as two main forms, will be more widely applied while meeting different needs. With the advent of the digital economy era, more traditional industries will accelerate their transition to the cloud. It is estimated that by 2026, the market scale of cloud services will grow to 17.035 billion yuan, with public cloud services and private cloud services increasing from 2.66 billion yuan and 4.27 billion yuan in 2017 to 14.23 billion yuan and 2.805 billion yuan, respectively.

An Internet Data Center (IDC) refers to facilities designated for housing servers and related network equipment, used for organizing, processing, storing, and transmitting large amounts of data. Internet data centers can be divided into two categories based on the type of operator access: one is dedicated to operators, where the IDC only provides access to the center by an operator with control facilities; the other is a neutral operator-neutral IDC, which can be accessed by multiple network line service operators and can manage data centers of various service providers uniformly.

The Chinese IDC market started later than in Europe and America. In response to this situation, China has introduced a number of relevant policies such as the big data strategy and digital economic transformation. The development of technologies such as cloud computing and 5G networks has made the Chinese IDC market an important construction base for global Internet data centers. According to a report by Frost & Sullivan, the capacity-based market in China's Internet data center market grew at a rate of 13.3% from 2019 to 2023, reaching 10,010.9 megawatts. The compound annual growth rate was 13.3%. With the continuous growth of the market, it is expected that the IDC market will reach 18,721.9 megawatts in 2028, with a compound annual growth rate of 13.6% from 2024 to 2028. Among them, the neutral IDCs of operators are expected to grow significantly from 2,988.0 megawatts in 2019 to 13,832.1 megawatts.

In terms of revenue, the market scale of data centers grew at a compound annual average growth rate of 28.7% from 2019 to 2023, reaching 240.7 billion yuan in 2023. Market analysis data shows that the data center industry exhibited strong growth from 2019 to 2023. It is expected that in the coming years, with the continuous development of areas such as cloud computing and big data, the market scale of data centers will continue to maintain steady growth. It is estimated that by 2028, it will develop to 426.8 billion yuan, growing at a compound annual average growth rate of 12.8%. The demand for secure and reliable cloud services and large-scale data storage solutions by enterprises is also increasing, which will promote their continuous and healthy development.

With the continuous growth of the internet data center market, more and more enterprises and institutions have realized the importance of data center solution services. For small enterprises lacking funds to invest in building their own data centers, using non-self-built data centers can save costs, improve flexibility, and focus more on the development of core businesses. At the same time, with government support, the market scale of internet data center solution services has been growing year by year. In 2019, the market size was 691.6 million yuan, and by 2023 it has grown to 241,012 million yuan, with a compound annual growth rate of 36.6%. It is expected that starting from 2024, the market will further grow to 282,580 million yuan and gradually rise to 530,321 million yuan within the next four years. In the next five years, the market size is expected to continue expanding at a compound annual growth rate of 17%.

The competition in China's internet data center industry is fierce. According to reports, in 2022, the total revenue of China's internet data center business market reached 190,100 million yuan, of which the top twenty service providers accounted for 111,799.7 million yuan, accounting for 58.8%, while YunGongchang accounted for 0.3%, ranking 14th. In the same year, the market share of neutral service providers among the top twenty operators accounted for 34.5% of the total market, specifically 33,357.4 million yuan, while YunGongchang's share was 0.6%, ranking 11th. Since 2019, the development of industries such as short videos and e-commerce has seen a surge in demand for internet data centers, which has also brought competition from state-owned operators, independent IDC service providers, other internet companies, and cloud computing companies.

• Growth in demand

• Government policy support

• Increased facility investment

• Outsourcing trend