Event: On August 25, the company issued the “2023 Plan for Issuance of A-Shares to Specific Targets”, an announcement on the signing of the “Tripartite Cooperation Agreement for the Alter AI Innovation and Empowerment Center”, and an announcement on the “Second Phase Employee Stock Ownership Plan”.
In-depth layout of super intelligent computing centers and intelligent automobiles, and increase the construction of advanced production lines for vehicle manufacturing and core components. According to the company's issuance plan announcement, the total amount of capital raised in this release will not exceed 1,599 billion yuan, and it will be invested in four projects. 1) Super intelligent computing center and next-generation AI digital platform construction project for applications in automotive R&D: It is proposed to use “high-performance AI server+IB network switch+storage system” as the core architecture to build an intelligent computing center with 200 pFlops computing power, build an intelligent computing hub, and become an intelligent computing power base for the automotive industry with leading scale and efficiency in the national scale. 2) Alter Smart Digital Technology R&D project: It will be iteratively upgraded on the basis of existing R&D technology. Research and development will be carried out in the five directions of intelligent digital chassis central integrated control system development, commercial vehicle electrification intelligent platform, cross-domain heterogeneous vehicle operating system development, region-integrated cross-system component development and vehicle application, and UERC product experience technology and platform. 3) Tianjin Alte Intelligent Innovation Center Dual Construction Project: It is proposed to build a modern vehicle manufacturing center for intelligent vehicle customization, modification, small-batch manufacturing, etc., and at the same time add new soft mold equipment to enhance mold manufacturing production capacity. 4) New energy powertrain production base construction project: The company will build its own production base in Ningbo and lay out advanced production lines to meet the growing needs of the company's NEV parts business. In the future, with the implementation of the company's AI technology in various business aspects such as automobile styling design, engineering design, performance development, and testing, it can greatly improve the company's business efficiency and overall competitiveness.
The joint construction of the “Alter AI Innovation and Empowerment Center” will be supported by Nvidia Computing. On August 25, 2023, Alter (Party B), Wuxi Kaigu (Party A), and Kai Li Wuzhi (Party C) signed a cooperation agreement to jointly promote the “Alter AI Innovation and Empowerment Center” project. The cooperation includes: the launch of the Alter AI Innovation and Empowerment Center, AI empowerment of industries and enterprises, AI industry talent training, introduction of ecological enterprises, and joint construction of OVX projects.
The cooperation also agreed that Party A and Party C will ensure that NVIDIA DGX, NVIDIA Tesla GPU and other products and technical support, NVIDIA GPU Cloud technical resources and technical support, NVIDIA GPU Cloud technical resources and technical support, NVIDIA Metropolis, NVIDIA Clara, and NVIDIA Isaac are provided for the cooperation project, and that they will do their best to facilitate Party B to join the ranks of NV AI ecosystem partners. This cooperation will help the company get support from Nvidia's computing power. In the future, the company will have a first-mover advantage when it continues to obtain more cutting-edge, efficient, and high-end computing power equipment, and is expected to benefit from the huge demand for computing power for intelligent driving.
Implement the second phase of the employee stock ownership plan to enhance employee cohesion and motivate employees to be motivated and creative. The total number of shares transferred to this employee shareholding plan does not exceed 4.1 million shares, accounting for 0.82% of the company's current total share capital. The assessment year is 2023-2025. The assessment targets are: net profit for 2023 is not less than 150 million yuan; net profit for 2024 is not less than 250 million yuan; cumulative net profit for the two years 2023 to 2024 is not less than 400 million yuan; net profit for 2025 is not less than 400 million yuan; net profit for the three years from 2023 to 2025 is not less than 800 million yuan. Based on Gimo's net profit in 2022, the net profit growth target for 2023-2025 was 85.5%/66.7%/60.0%, respectively, and the CAGR was as high as 70.4% in 22-25.
Profit forecasts and investment recommendations. It is estimated that the company's EPS for 23-25 will be 0.35/ 0.52/ 0.82 yuan respectively, the corresponding PE will be 51/35/ 22 times, respectively, and the three-year gross profit CAGR will be 71.2%. Considering that the company uses AI to empower automobile design, parts manufacturing orders are expected to reverse in a V-shape, giving the company 42 times PE in 2024, corresponding to a target price of 21.84 yuan, maintaining a “buy” rating.
Risk warning: Market competition risk, risk of parts sales falling short of expectations, construction of intelligent computing centers falling short of expectations, etc.