Incident: On August 25, the company signed an agreement with Wuxi Kaigo and Kaili Wuzhi to jointly promote the “Alter AI Innovation and Empowerment Center” project; on the same day, the company announced a fixed increase plan, with a total capital of no more than 1,599 billion yuan to invest in various projects such as the Super Intelligent Computing Center and a next-generation AI digital platform construction project for applications in automotive R&D; in addition, the company announced the second phase of the employee shareholding plan (draft) to anchor rapid growth over the next three years.

With the support of Nvidia Computing Power, we will build an AI innovation and empowerment center to build a computing power base for the smart car industry. The agreement clearly states that as the first partner in the global automotive industry, the company can obtain NVIDIA's current and future computing power products and software and hardware products for the automotive industry to the greatest extent possible, ensure the provision of NVIDIA DGX, NVIDIA Tesla GPUs and other products and technical support for cooperative projects, provide NVIDIA GPU Cloud (NGC) technical resources and technical support, and provide NVIDIA GPU Cloud (NGC) technical resources and technical support required by the “Industry+AI” Innovation Empowerment Center Technical resources and technical support from Metropolis, NVIDIA Clara, NVIDIA Isaac, etc., and did our best to enable the company to join the Nvidia AI ecosystem of partners. We believe that as Tier 0.5, the company has developed nearly 400 models for 80 customers and has accumulated a high order of magnitude and high quality digital assets. This time, with the support of Nvidia Computing Power to build a super intelligent computing center, it is expected to benefit from the huge demand for computing power for intelligent driving.

Projects such as building a super intelligent computing center will definitely be added, and the next opportunity may be at AIGC and AUTO. This fixed increase will raise no more than 1,599 million yuan in shares to specific targets, of which 539 million yuan will be invested in super intelligent computing centers and next-generation AI digital platform construction projects for applications in automotive R&D. Using a “high-performance AI server+IB network switch+storage system” as the core architecture, this project plans to build an intelligent computing center with 200 pFlops computing power, build an intelligent computing power hub, and build a smart car computing power base with leading scale and efficiency in the country. After the construction of the computing power base is completed, it can provide basic computing power supply service support to the needs of the domestic general smart vehicle market, and can also be deeply integrated with the company's business needs to provide computing power clusters, performance acceleration tools and AI big data platforms for automotive R&D and design, greatly improving model training performance, GPU resource utilization, and algorithm development efficiency; at the same time, it supports digital construction and implementation of artificial intelligence applications through all aspects of data management, high-speed networks, unified storage, high-performance computing, and model and service management. In addition, the Intelligent Computing Center will also accelerate the connection with other AI models and industries, drive the rise of specialized big data applications, and accelerate innovation and growth.

Looking forward to the future, the company's intelligent computing center is expected to drive AI models to further process data with powerful computing power, data, and algorithms, making the three basic elements of computing power, data, and algorithms an organic whole and integrated platform.

An employee stock ownership plan was introduced to anchor net profit CAGR of 70% for the next three years. The company launched an employee shareholding plan, with a shareholding scale of no more than 4.1 million shares (accounting for 0.82% of the current total share capital). The assessment year is 2023-2025. The targets for the third phase were net profit of not less than 150 million yuan for 2023, 250 million yuan for 2024, or cumulative net profit of not less than 400 million yuan for the two years 2023-2024, and net profit of not less than 400 million yuan for 2025, or no less than 800 million yuan for the three-year period from 2023 to 2025. Based on Gimo's net profit in '22, the net profit growth targets for 23-25 were 85%/67%/60%, respectively, and the CAGR was as high as 70% in 22-25.

The development of advanced intelligent driving is inseparable from the support of massive intelligent computing power. Tesla Dojo Supercomputing has announced that it will reach 100 eFlops of supercomputing power in October 2024 to improve autonomous driving capabilities. We are optimistic about the company's position at Tier 0.5. Through this strategic cooperation and fixed increase plan, we expect to benefit from the smart car industry's huge computing power demand with the support of Nvidia's computing power. We expect the company's revenue from 2023-2025 to be 16.78 billion, 24.53 billion yuan, and 3.461 billion yuan, respectively, and net profit of 175 million, 354 million yuan, and 597 million yuan respectively, maintaining the “buy” rating.

Risk warning: risk of market competition, risk of technology leakage, risk of equity diversification, risk of overseas mergers and acquisitions, construction of an intelligent computing center falls short of expectations