Incidents:
Recently, the three major operators jointly released the “Telecom Operator Liquid Cooling Technology White Paper”, which aims to advance liquid cooling technology in high-power computing power infrastructure.
Increased penetration rate of immersion liquid cooling drives increased demand for coolant. In the context of increasing server power consumption, liquid cooling is gradually replacing air cooling. Plate liquid cooling is currently the main technical solution for liquid cooling, but it is difficult and expensive. In particular, with the explosive growth of server applications such as AI inference, the penetration rate of full immersion cooling is expected to increase. The coolants for full immersion liquid cooling mainly include hydrocarbon (hydrocarbon), silicone, and fluorocarbons.
Fluorocarbon coolants may gradually withdraw from the European market, and the penetration rate of silicone oil coolants is expected to increase.
Previously, 3M's mainstream products relied on the addition of PFAS to achieve the most stable performance and highest efficiency in the industry, thus monopolizing the market. However, the European Union did not allow PFAS to be added due to advanced environmental awareness, and 3M's Belgian factory was closed indefinitely due to violation of Belgian environmental regulations. On December 20, 2022, 3M announced that it will completely withdraw from the fluoride liquid market by the end of 2025. Dow introduced Dow Hee? ICL-1000 immersion coolant, specially designed for single-phase immersion cooling servers, has been modified by Dow to raise the flash point to 240℃ to ensure the safety of the liquid cooling system. It has significant high thermal conductivity, specific heat capacity, and extremely low ODP and GMP values. The penetration rate of silicone oil single-phase coolant is expected to improve.
Silicone oil coolant is expected to become another growth point for Runhe materials. Runhe Materials has been deeply involved in the deep processing of silicone for many years. Currently, the company relies on its superior product, textile silicone oil, as the basic performance market. New silicone material sectors such as daily chemical silicone oil, mold release agents, and heat management materials have blossomed. Projects under construction have been put into production and volume one after another, and new application fields such as silicone oil coolants are expected to contribute new growth points.
Profit forecast valuation and investment rating: We expect the company's revenue from 2023 to 2025 to be 12/16.2.1 billion yuan, yoy +3%/+33%/+27%, respectively, net profit of 0.84/1.27/172 million yuan, yoy -7%/+52%/+35%, and the current stock price corresponding to PE is 44/29/21 times, respectively. Combining relative valuation and absolute valuation, we chose the FCFF valuation model to measure the company's target price of 31.67 yuan, covering it for the first time, and giving it an “increase in holdings” rating.
Risk warning: the risk that earnings forecasts fall short of expectations; the risk that the penetration rate of silicone coolant introduction will not increase as expected; and the risk that the continued decline in DMC will drag down the company's overall price and spread.