US Stock IPO Outlook | Strong Performance Yet Hard to Achieve High Valuation, How Can Giant Dragon Online Tell a New Story for Contractors?

Against the backdrop of the global AI wave, various industries are advancing towards a new stage of intelligent development at an unprecedented speed. This trend not only reshapes the industrial landscape but also gives rise to numerous new market opportunities. In this wave, a number of traditional enterprises have keenly captured the pulse of the times and actively engaged in the wave of intelligent transformation, successfully achieving a shift in growth momentum, among which is the online giant, Giant Dragon Online, which has initiated its journey to go public in the United States.

According to the Zhitong Finance APP, the intelligent integrated solutions provider Giant Dragon Online submitted its initial public offering (IPO) application to the SEC on March 28, 2025. The company plans to list on NASDAQ under the code "JLHL" and aims to raise up to $6 million, although the number of shares to be issued and the price range have not yet been disclosed. Notably, in February of this year, Giant Dragon Online had already obtained IPO filing from the China Securities Regulatory Commission.

In terms of performance, Giant Dragon Online has shown impressive results. According to the prospectus, the revenue for the fiscal year 2024 (ending September 30) was approximately 174 million RMB, a year-on-year increase of 45.8%, with a net profit of 17.076 million RMB, up 52.1% year-on-year.

Based on this, investors cannot help but wonder whether Giant Dragon Online, seizing the trend of intelligent development with its outstanding performance, can achieve a high valuation on NASDAQ.

Intelligent Project Engineering Solutions Drive Rapid Revenue Growth

The development history of Giant Dragon Online can be traced back to 1997. Initially, the company operated primarily as an engineering service provider, completing corresponding projects for clients. It wasn't until May 2012 that Giant Dragon Online began its strategic transformation, continuously moving towards the goal of becoming an intelligent integrated solutions provider.

Today, Giant Dragon Online can provide intelligent integrated solutions for public utilities, commercial real estate, and multi-residential properties operating on a large scale in China. This includes security systems, fire protection systems, parking systems, charging systems, broadcasting systems, identification systems, data center systems, emergency command systems, and urban management systems.

According to the prospectus, Giant Dragon Online has completed intelligent integrated services and solutions for numerous iconic infrastructure projects. For example, it is responsible for the design, procurement, installation, integration, and maintenance of security systems, access control systems, and parking systems for a certain international airport in Beijing; it also handles the installation, integration, and maintenance of parking systems and visitor management systems for a well-known public university in Beijing. Additionally, Giant Dragon Online is responsible for the operation and maintenance of intelligent integrated systems for over 460 branches of a well-known commercial bank in Southwest China.

From a business perspective, Giant Dragon Online's services mainly include three aspects: intelligent project engineering solutions, intelligent project operation and maintenance, and sales of intelligent system equipment and materials. In the fiscal year 2024, the revenue proportions of these three businesses were 93%, 5.9%, and 1.1%, respectively. Clearly, intelligent project engineering solutions are the absolute majority of Giant Dragon Online's revenue, while the revenue proportions of the other two business segments remain relatively low.

The 45.8% revenue growth to 174 million RMB in fiscal year 2024 for Giant Dragon Online is attributed to the significant increase in intelligent project engineering solutions. During the reporting period, although the average revenue from ongoing engineering solutions contracts decreased from 1.406 million in fiscal year 2023 to 550,000, the number of contracts surged from 75 to 293, driving a 53.1% increase in revenue from intelligent project engineering solutions to 161 million RMB

Clearly, Giant Dragon Online is no longer limited to high-value project engineering; the company is increasing its efforts in undertaking medium and small-value projects, driving revenue growth through an increase in the number of executed projects. As a result, the gross profit margin of Giant Dragon Online slightly decreased from 15.8% to 15.3% in the fiscal year 2024.

However, the company managed to control its operating expenses relatively well during the reporting period. Its research and development investment was zero, and sales and general administrative expenses only grew by 16.3%, far below the total revenue growth rate. This has further released profits to some extent, leading to a net profit growth rate of 52.1% in fiscal year 2024, which is higher than the revenue growth rate, with the net profit margin rising by 0.4 percentage points to 9.8%.

Coexistence of Industrial Opportunities and Potential Challenges

The rapid growth of Giant Dragon Online's performance may be directly related to the continuous growth of the industry it operates in. In recent years, supported by national strategic policies and driven by emerging technological innovations, the scale of China's smart integrated solutions market has been continuously expanding, from 12.7 trillion yuan in 2019 to 18.3 trillion yuan in 2023, with a compound annual growth rate of 9.5%.

According to data from Frost & Sullivan, as emerging technologies continue to be applied and the demand for smart integrated solutions from downstream end customers increases, the market size of China's smart integrated solutions industry is expected to further expand. It is projected that by 2028, the market size of China's smart integrated solutions industry will reach 37.6 trillion yuan, with a compound annual growth rate of 15.6%.

It can be seen that the development of China's smart integrated solutions industry will further accelerate in the next two years, and Giant Dragon Online will benefit from this. However, even so, Giant Dragon Online faces numerous potential challenges.

Firstly, China's smart integrated solutions market is highly fragmented and fiercely competitive. As of December 31, 2023, there were over 10,000 suppliers in China's smart integrated solutions market. The industry is still in a double-digit growth phase, and the market increment makes companies feel less competitive. However, once market growth slows down, competition may intensify, and there is even a possibility of price wars. Establishing competitive barriers is a question that every player needs to consider.

Secondly, from a business model perspective, it is difficult for Giant Dragon Online to achieve a high valuation. Although it holds the title of a smart integrated solutions provider, the services provided to customers have not qualitatively changed from when the company operated as an engineering service provider. Its one-stop services, including consulting, design, procurement of materials, equipment, and software, installation, integration, testing, maintenance, and after-sales, remain the essence of a contractor. After all, most of the required equipment and software products are purchased from third parties, and the revenue from the smart system equipment and materials sold by the company accounted for only 1.1% in fiscal year 2024 The business development has not yet achieved significant results, so the company's valuation is also difficult to drag down the contractor's track.

Thirdly, Giant Dragon Online has high liabilities. A common issue with project contractors' balance sheets is high debt, and Giant Dragon Online is no exception. The logic behind this is that contractors have relatively low bargaining power, often leading to longer accounts receivable cycles. Therefore, to accelerate cash flow and expand quickly, companies can only increase their debt. In such a business model, the company's liabilities tend to remain high over the long term.

According to the prospectus, as of September 30, 2024, Giant Dragon Online's total assets were 173 million RMB, with total liabilities of approximately 156 million RMB, resulting in a debt-to-asset ratio as high as 90%. Notably, of the 173 million RMB in total assets, contract assets accounted for 123 million RMB, a year-on-year increase of over 20%, which may lay a certain foundation for Giant Dragon Online's performance in the fiscal year 2025. Of course, the final performance will also be directly related to the new projects added by the company this year, but in the current unpredictable international situation, uncertainty has also increased.

In summary, thanks to the continuous growth of the industry, Giant Dragon Online has achieved impressive results through the accelerated expansion of project numbers and is expected to continue benefiting from industry growth in the future. However, Giant Dragon Online also faces numerous potential challenges, including fierce market competition and high liabilities, which are issues it must confront, and the contractor's business model may also make it difficult for it to achieve a high valuation