Net profit due to mother is expected to increase by 93.26% to 121.45% year-on-year in 2023
The company released its 2023 performance forecast. It is expected to achieve net profit of 48-550 million yuan, an increase of 93.26%-121.45% over the previous year; net profit after deducting non-return to mother is 44-51 million yuan, an increase of 78.35%-106.72% over the previous year. Among them, 4Q23 net profit to mother was 0.35 to 105 million yuan, a year-on-year decrease of 15%-72% (compared to 4Q22 loss of 0.40 million yuan), a decrease of 15%-72% month-on-month; 4Q23 deducted non-return net profit of 0.19-0.89 billion yuan, which turned a year-on-year loss into profit (compared to 4Q22's loss of 0.22 million yuan), a decrease of 26%-84% month-on-month. The performance fell short of our expectations due to asset impairment losses.
Key points of interest
The new energy business is expanding rapidly, and we are optimistic that energy storage will continue to drive performance growth. Benefiting from high demand in the optical storage industry, we expect the company's new energy business to achieve revenue of about 4 billion yuan in 2023, an increase of more than 120%, with energy storage products contributing the main increase. Under the intensification of competition in the industry, the company grasped its strategic advantages, made joint efforts at home and abroad, and further stabilized its position in the industry. Looking ahead to 2024, we are optimistic that overseas reserves will maintain a high demand growth rate, the company will accelerate the layout of overseas business, and we are optimistic that the increase in overseas orders will contribute to its profit growth.
Smart power is growing steadily, and demand is expected to accelerate the development of data centers. We expect the company's smart power business revenue to be about 1.1 billion yuan in 2023, and the total revenue of the data center and IDC will be about 2.7 billion yuan. Among them, demand in the downstream rail transit and other industries of the smart power business is booming, and the growth rate is steady, and the company has stabilized its leading position in the industry; IDC service revenue declined year-on-year in 4Q23, mainly due to a decrease in downstream demand, affecting product unit prices, and the listing rate has basically remained stable. The company has a strong first-mover advantage in data centers. We believe that demand for computing power in 2024 is still expected to stimulate new opportunities for data center product development.
Impairment losses affect profits, and there is still room for cost reduction and efficiency in the future due to scale effects. The company's calculation of asset impairment losses for data centers and year-end bonus payments in 2023 will have an impact on net profit. We expect that with the rapid expansion of the company's new energy business in the future, the scale effect will effectively dilute the cost ratio and drive room for the company's profit increase.
Profit forecasting and valuation
In view of impairment losses and increased competition in the industry, we lowered our 2023/2024 net profit by 26%/11% to $52/80 million, and introduced a profit forecast of $1.03 billion for 2025. The current stock price corresponds to 2024/2025 about 12.2/9.5 times the price-earnings ratio. Maintain outperforming industry ratings. Due to the downward shift in the industry's valuation center, we lowered our target price by 19% to 27.4 yuan, corresponding to 15.9/12.3 times the 2024/2025 price-earnings ratio. Currently, the stock price still has room to rise by 30.4%.
risks
Demand in the energy storage industry fell short of expectations; profitability of the energy storage business declined; demand for data centers was weak.