Incidents:
The company released a quick performance report. Operating revenue increased 10.4% to 14.35 billion yuan, net profit attributable to the parent company was 1.84 billion yuan, an increase of 19%, and net profit after deducting non-net profit increased 10.4% to 1.27 billion yuan. According to this estimate, the company's revenue for the fourth quarter grew 17.3% year on year, net profit to mother increased 22.1% year on year, and the year-on-year growth rate after deducting non-net profit was 10.7%.
Comment:
The company's revenue accelerated in the fourth quarter: over the past three years, due to the transformation and adjustment of the company's business structure, the revenue growth rate was relatively stable, while profit grew significantly higher than revenue, supported by increased gross margin and better cost control. In 2023, the company's downstream demand was weak, the business structure stabilized, and R&D expenses and sales expenses grew rapidly, leading to a basic match between the company's profit and revenue growth rate. However, we also noticed that the company's revenue growth accelerated in the fourth quarter, and business sentiment improved.
We are optimistic about the increase in demand and business structure in 2024: We expect that compared with 2023, demand for general-purpose servers will improve, demand for Xinchuang will pick up from a lower base, while demand for intelligent computing such as training and inference due to the booming development of generative big models will grow rapidly, and the industry will face a more optimistic demand situation.
In addition, the proportion of products developed by the company and its ability to develop core components are constantly increasing. Technologies such as high-end computers, IO chips and IO modules based on domestic processors, and underlying control firmware are becoming more mature, and it is expected that mass production will gradually be achieved, which will help the company further increase the share and profitability of core key technologies.
Computing power operations and services are expected to become a new direction for business development: At the end of 2023, five departments including the Development and Reform Commission jointly issued the “Implementation Opinions on Further Implementing the “East Digital and Western Computing” Project to accelerate the construction of a national integrated computing power network, which is networked and easy to use, and green and secure. Zhongke Shuguang is actively building a “national integrated computing power service platform” and is committed to linking various computing power centers all over the world to provide “advanced, green, lossless computing power” and “services integrating computing power, data, application, operation, operation and maintenance” for thousands of industries. We believe that the revenue contribution of related businesses may be limited in the short term, but there is good room for development in the long term.
Due to the company's revenue growth rate and gross margin level falling below previous expectations, we adjusted the company's 2023-2025 EPS to 1.26, 1.64, and 2.04 yuan (the original forecast was 1.43, 1.87, 2.27 yuan). Referring to comparable companies, we believe that a reasonable valuation level is 40 times the price-earnings ratio of 2024, and the corresponding target price is 65.6 yuan, maintaining the purchase rating.
Risk warning
Downstream industry demand fluctuation risk; risk of the company's product and technology development falling short of expectations;