Incidents:
The company released its 2022 annual report and the first quarter report of 2023: in 2022, the company achieved revenue of 2,026 million yuan, +36.55% year on year, and achieved net profit of 15 million yuan to the mother. 2023Q1 achieved revenue of 258 million yuan, or -26.85% year-on-year, and achieved net profit of -20 million yuan.
Comment:
The 23Q1 performance came under pressure, and gross margin declined slightly. 2023Q1's performance is under pressure, mainly due to the fact that the construction progress of the company's IDC and charging pile projects fell short of expectations, that repayments in the first quarter were not ideal, and there were many accounts receivable bad accounts. On the gross margin side, the gross profit margin in 2022 was 8.29% (-2.53 pct), and the 2023Q1 gross profit margin was 10.31% (-1.27pct). On the profit side, the net interest rate to the mother in 2022 was 0.75% (+16.31pct), and the 2023Q1 net interest rate to the mother was -7.73% (-8.89pct). On the cost side, the sales/management/R&D/finance expense ratio in 2022 was 1.71/4.06/3.30/ 1.57%, respectively, compared to -0.84/-1.11/-1.19/-0.43pct; the 2023Q1 sales/management/R&D/finance expense ratio was 1.98/6.88/5.77/ 3.04%, respectively, and -0.14/+2.79/+0.67/+0.67/+0.91pct.
Transforming IDC's integrated service provider. In 2022, on the basis of maintaining steady growth in the communication technology service business and IoT business, the company clearly defined the strategic goal of transforming into an IDC integrated service provider. In 2022, the company participated deeply in the construction of the country's “Eastern Digital and Western Computing” project and reached a strategic partnership with the owners of the Lanzhou New Area Big Data Industrial Park (Phase III). The two parties will carry out project cooperation around the development and construction of the Lanzhou New Area Big Data Industrial Park (Phase III) and operation and maintenance services of the Industrial Park (Phase I, II, and III); at the same time, it successfully developed IDC business cooperation with China Wuzhi Group, Shanghai Telecom and Aofei Data. Furthermore, the company invested in the construction of the “Ninghuai Green Digital Economy Computing Power Center” project. After completion, it is expected to achieve 3,960 IDC cabinets to accelerate the company's industrial layout in the data center business field.
Equity incentives bind core interests to help the company develop in the long term. In October 2022, the company released a stock option incentive plan. It plans to award a total of 49 directors, executives and core managers with 11 million stock options, accounting for 6.87% of the company's total share capital. The performance assessment targets are as follows: revenue of no less than 2.1 billion yuan or net profit of not less than 0.5 billion yuan in 2022, revenue of no less than 2.5 billion yuan or net profit of not less than 100 million yuan in 2023, revenue of not less than 3.5 billion yuan or net profit of not less than 200 million yuan in 2024.
Investment suggestions: The company's revenue for 2023-2025 is estimated to be 2,648/35.06/4.186 billion yuan, and the net profit of the mother is 0.85/ 156/195 million yuan. This was covered for the first time, giving it an “increase in holdings” rating.
Risk warning: Project progress falls short of expectations, competition intensifies, and performance and valuation judgments fall short of expectations.