Incident: The company released its 2023 annual report, achieving operating income of 4.658 billion yuan, a year-on-year increase of 47.95%, and realized net profit of 287 million yuan, an increase of 119.46% year-on-year, and realized deducted non-net profit of 275 million yuan, an increase of 134.21% over the previous year.

Revenue and profit for the fourth quarter increased rapidly year on year while maintaining month-on-month growth: the company's Q4 revenue in 2023 was 1,430 billion yuan, up 51.63% year on year, up about 3.0% month on month; net profit to mother was 91 million yuan, up 505.45% year on year, up about 9.6% month on month. We believe that in the macro context of 2023, the company achieved rapid growth through initiatives such as new categories, new customers, and overseas exhibitions. In particular, it continued to grow month-on-month in the fourth quarter, and the performance momentum is strong.

The storage business launched a new enterprise-grade SSD product, and the IoT business cloud+ health strategy continues to advance:

The company's original data storage devices are mainly aimed at the consumer market. In 2023, it achieved revenue of 2,876 billion yuan, an increase of 69.75% over the previous year. A new enterprise-grade SSD was launched, and there is plenty of room for growth. The AIoT business achieved revenue of 1,405 billion yuan, an increase of 19.05% over the previous year. The company continues to promote AIoT cloud platform services and provide intelligent security solutions based on visual interaction; there is strong demand for smart cloud IoT and coffee machine products in the health sector.

Strong demand+high barriers, server remanufacturing is starting a new growth curve: according to IDC forecasts, global server shipments will be about 13.654 million units in 2024. Meanwhile, due to the impact of data security and environmental security policies, demand for server recycling is strong. Marketsandmarkets predicts that the IT asset disposal market will reach US$26.6 billion in 2029. Furthermore, due to strict requirements for environmental protection and data cleaning capabilities, the server remanufacturing industry has high technical barriers. We believe that with its deep manufacturing capabilities, the company is expected to seize the dividends of the global server remanufacturing market, and there is plenty of room for performance growth.

Investment advice: The company's original business has been fully upgraded, and demand in the server remanufacturing market is strong. It is expected to usher in a double hit between performance+valuation Davis. We expect the company's revenue for 2024-2026 to be 6.448 billion yuan, 8.754 billion yuan and 11.618 billion yuan, net profit to mother of 505 million yuan, 685 million yuan and 904 million yuan, and PE 29 times, 21 times, and 16 times. Maintain a “buy” rating.

Risk warning: Cloud business development falls short of expectations, server business falls short of expectations, macroeconomic fluctuations.