Incidents:
The actual controller terminated the reduction in holdings early. Nanxing Co., Ltd. issued an announcement on July 1, 2023. Mr. Lin Wangnan, the actual controller of the company, plans to reduce the company's total share capital by no more than 3.19%, and the company's shareholder, Ms. Lin Jinshao, plans to reduce her holdings of the company's total share capital by no more than 0.60%. The company announced on November 18, 2023, that the two had decided to terminate the holdings reduction plan early. Lin Wangnan and Lin Jinshao reduced their total share capital by about 2.76% in total.
A wave of domestic substitution is coming, and the volume and price of panel furniture equipment is rising. (1) Nanxing Co., Ltd. started with panel furniture equipment. 2023H1 Nanxing Furniture Equipment achieved revenue of 1.05 billion yuan, +34.87% over the same period last year, maintaining rapid growth. (2) As the technological maturity of domestic equipment in China continues to improve, product competitiveness continues to increase. From a global perspective, according to Statista data, the global furniture market will reach US$650.70 billion in 2027, an increase of US$140.9 billion compared to 2020, an increase of 27.64%. (3) Foreign equipment is gradually being replaced by domestic equipment with higher performance and price ratio, and import substitution is already the general trend. According to data from the International Woodworking Exhibition, the compound growth rate of China's woodworking machinery market in 2020-2027 is about 43%, with a global average of 1.7%. China's high-end woodworking machinery equipment is expected to continue to grow.
Data center services create the second curve. (1) The company acquired the only network in April 2018.
The only network provides customers with standardized, modular, and customized data center server and cabinet rental, hosting, and high-speed internet bandwidth products and services through self-built or leased professional computer rooms.
At the same time, it also provides customers with full life cycle services including data center planning consulting, process design, integrated turnkey, and business operations. (2) The company has two self-built data centers, and has about 4,700 self-built cabinets. The listing rate of Zhixiang Data Center is about 80%. Customers include many well-known enterprises such as leading Internet companies. The customer structure is healthy, and the listing rate is relatively stable. (3) The company has deep cooperation with the three major operators, and its business stickiness continues to increase. It operates more than 80 edge data center nodes nationwide, covering more than 30 cities in nearly 20 provinces in China. In the future, the only network will integrate the product ecosystem around “cloud-network-edge” and strive for the digital transformation of enterprises in the service industry.
Profit forecast: Computing services open up the company's second growth curve. It is estimated that the company's operating income for 2023-2025 will be 35.5/42.6/5.12 billion yuan, respectively, and net profit for 2023-2025 will be 3.4/4.1/ 5.1 billion yuan respectively, and the corresponding PE will be 14/12/ 9 times, respectively. 2024E was given a profit of 13 times PE valuation, corresponding to the target price of 18.1 yuan, coverage for the first time, and a “buy” rating.
Risk warning: Computing power progress falls short of expectations; profit forecasts and valuation models fall short of expectations