Performance performance

On March 27, 2024, the company released its 2023 annual report

[Overall performance]

(1) Revenue of $5.264 billion (+16.09%) for 23 years, net profit attributable to mother of $193 million (+6.70%), net profit not attributable to mother of $122 million (+146.92%).

(2) 23Q4 revenue of $1,558 million (up 8.38% year on year), net profit of 37 million yuan (up 31.11% year on year), net profit of non-return to mother of $0.23 billion (year-on-year decrease of 4.40%).

[View by business]

In '23, cloud computing big data revenue was $2,543 million (-1.19%), industry solutions revenue was $2.04 billion (+51.92%), and smart product revenue was $624 million (+12.11%).

[Gross profit margin, cash flow]

Gross profit margin of 17.99% (-1.75pct) in 23Q4 (year-on-year decrease of 5.97pct); net cash flow from operating activities in '23 was 462 million (+116.26%), and net cash flow from operating activities in 23Q4 was $870 million (up 79.50% year over year).

[Fee rate]

The 23-year sales/management/R&D expense ratio was 4.97%/5.24%/7.08%, the sales cost rate increased by 0.04 pct, the management cost rate decreased by 1.2 pct, and the R&D cost rate decreased by 0.88 pct.

23Q4 sales/management/R&D expense ratio 4.15%/5.53%/7.57%, sales expense ratio decreased by 0.43 pct year on year, management cost ratio decreased by 1.86 pct year on year, R&D cost ratio increased by 0.19 pct year on year.

Investment views

The high-quality development of computing power infrastructure has evolved into an intelligent computing center, and 11 departments including the Shanghai Communications Administration jointly issued the “Shanghai Intelligent Computing Action Implementation Plan for High-Quality Development of Intelligent Computing Power Infrastructure (2024-2025)”, which indicates that in 2025, the scale of intelligent computing power in Shanghai will exceed 30 eFlops, the advanced storage capacity within the intelligent computing center will account for more than 50%, and the evolution of existing and existing data centers to intelligent computing centers will continue to be guided through interest-rate loans and special subsidies.

Data center construction is an important cornerstone of Yunsai Zhilian's implementation of the “Improve IDC” strategy. The company is positioned as a neutral third-party high-end data center operator to provide customers with high-availability intelligent computing centers and high-performance computing power services. In 2023, Yunsai Zhilian Songjiang Big Data Computing Center Phase II obtained energy consumption indicators for data center construction. The project serves the construction of municipal intelligent computing power clusters and provides infrastructure services for intelligent computing power platforms in Shanghai, including computing power server hosting services, computing power server hardware operation, maintenance and inspection services, etc. We believe that through the investment and construction of this project, Yunsai Zhilian will further expand the resource scale of the data center, enhance its core competitiveness, and promote its sustainable and high-quality development in the future. At the same time, Yunsai Zhilian and other shareholders such as Yidian Group jointly funded the establishment of Shanghai Intelligent Computing Power Technology Co., Ltd. to actively lay out the intelligent computing power business and further promote the implementation of the “Improve IDC” strategy.

Data elements cover the entire industry chain, promote the widespread use of data elements On October 25, 2023, the National Data Administration was officially unveiled. It is responsible for coordinating and promoting the construction of data infrastructure, coordinating the integration, sharing, development and utilization of data resources, and promoting the planning and construction of digital China, digital economy, and digital society in an integrated manner. It is managed by the National Development and Reform Commission. In the same year, the National Data Bureau publicly issued the “Data Element X” 3-Year Action Plan (2024-2026)” to implement the “Data Element X” three-year action plan. The document has clear quantitative goals, clear support direction, and clear development direction, and promotes the widespread use of data elements in related fields.

“Making Shenzhen Big Data” is a strategic path for Yunsai Smart Connect to serve smart city solutions to strengthen the data center. The company has always been committed to exploring the practice and accumulation of government big data and industry big data. Relying on projects, the company continuously cultivates and enhances the team's consulting and planning capabilities, program design capabilities, implementation and delivery capabilities, data operation capabilities, ecological integration capabilities, and industry standard capabilities in big data resource platform construction and big data operation practices, forming a typical example of a “full-chain service” business model and replicable digital transformation. Yunsai Zhilian is the general integrator and operator of the Shanghai Big Data Center resource platform, and the general operator of the data operation platform. In 2023, the company won the bid for the Shanghai Big Data Center data operation service project for the fifth year in a row. Yunsai Zhilian is one of the few companies that can provide products covering almost the entire industry chain of data elements. Relying on a state-owned background and combined with the combined advantages of the three major business links, the company is expected to continue to maintain market competitiveness and seize opportunities in the future market.

The “Microsoft+OpenAI” model continues to be built, and related businesses gradually expanded Microsoft's investment in OpenAI in 2019, and products led the development of the industry. AI product development is based on large amounts of data and computing power, and then the establishment of an analytical model. Microsoft's entry not only solved OpenAI's cost problem, but its Microsoft Azure cloud platform also provided strong support for OpenAI's massive data storage and computing power. From the perspective of market competition, the cooperation between Microsoft and OpenAI has shaped Microsoft's leading edge in GPT technology. Microsoft products incorporating AI technology are more in line with current market needs, and future sales are expected to increase further.

“Strengthening cloud services” is the implementation direction of the Yunsai Smart Link strategic path. The company continues to deepen MSP cloud service capabilities and build a cloud service ecosystem. In 2023, Yunsai Zhilian successively signed strategic cooperation agreements with Alibaba Cloud and Tencent Cloud. It is the core MSP service provider for mainstream international and domestic cloud service providers such as Microsoft, Ali, Huawei, Tencent, and China Telecom Tianyi Cloud.

We believe that as Microsoft's gold partner, Nanyang Wanbang, and Cigna Times have all obtained the country's highest level cloud hosting service provider certification AEMSP, AI capability certification AIASP, etc., and their technical strength has been deeply trusted by Microsoft, and they will have the opportunity to benefit from the gradual expansion of Microsoft's business, and this will also directly form the momentum for the parent company Yunsai Zhilian's future revenue growth.

Deepening the digital transformation of cities, smart city construction has achieved remarkable results. On October 25, 2023, the National Data Administration was officially unveiled. The initial organizational structure of the National Data Administration was divided into five groups according to tasks such as integration, data elements, digital economy, infrastructure, and public data. Currently, there are dozens of people working, and the team will continue to expand in the future as it is officially listed and operated. The National Data Administration was established to coordinate the planning and construction of digital China, digital economy, and digital society at the national level.

Over the years, the company has been committed to creating overall solutions integrating next-generation information technology to form digital transformation solution capabilities with full-chain service capabilities. The Yangtze River anti-fishing intelligent control platform project and the Xujiahui Sports Park intelligent project constructed by the company in 2023 passed the inspection and won multiple new digital benchmark projects. At the same time, the company was on the “Yangtze River Delta Top 100 Security Enterprises” list, and IT won the “Digital Smart City Industry Solution Excellent Supplier Award”. As China comprehensively deepens the digital transformation of cities and the development of next-generation innovative technology, Yunsai Zhilian relies on its ability to integrate government affairs and enterprise data construction and operation over the years. The future will be based on the intelligent computing power infrastructure, artificial intelligence vertical model application, and big data operation capabilities that have been gradually accumulated so far to better empower industry applications and serve the digital economy.

Profit forecasting and valuation

The company's cloud services, big data, industry solutions, and intelligent product business product systems are mature. It is based in Shanghai, spanning the Yangtze River Delta, Pearl River Delta and Beijing-Tianjin-Hebei regions to provide full-process scenario and business re-engineering for the digital transformation of cities. Driven by policy support, industry trends, and the company's use of its advantages, we predict that the company will achieve revenue of 60.53/71.43/8.572 billion yuan in 2024-2026, with year-on-year growth rates of 15.00%/18.00%/20.00% respectively, corresponding net profit to mother of 2.4/3.2/4.0 yuan, with year-on-year growth rates of 25.31% /32.03%/24.20%, corresponding EPS of 0.18/0.23/0.29 yuan, corresponding PE 72.98/ 55.28/44.51 times Maintain a “buy” rating.

Risk warning

Macroenvironmental risks, risks where policy progress falls short of expectations, and risks of technological changes falling short of expectations.