Incident: On March 22, the company released its 2023 annual report. In 2023, the company achieved revenue of 635 million yuan, +1.71% year-on-year, and realized net profit of 35 million yuan, or -3.11% year-on-year.
Revenue resumed growth, and competition put pressure on performance: In 2023, the company's gross margin was 25.41%, -1.24pct year on year, mainly due to adjustments in the company's product structure and an increase in the revenue share of integrated products with relatively low gross profit. Specifically, in 2023, the gross margin of the company's precision air conditioning/maintenance service/computer room environment integration products was 29.49%/52.25%/16.68%, respectively, +3.17/-24.56/-4.10pct. The market competition for integrated computer room environment products is becoming increasingly intense. The corresponding share of costs has increased. On the cost side, in 2023, the company's expenditure ratio was 20.74%, +0.27pct year on year. Among them, sales/management/ financial/ R&D expenses were 10.31%/5.41%/-2.51%/7.54%, respectively, +1.61/+1.04/-3.17/+0.79pct, respectively.
Expanding the expansion of new products and new customers, there has been an increase in on-hand orders: In 2023, the company promoted product restructuring. On the basis of sales and new product development in the precision air conditioning business, the company focused on developing the integrated data center energy-saving transformation and integrated computer room environment product markets, customizing the product needs of customers with integrated products, and enhancing the company's sales channels for multiple products and industries. Looking at specific business, in 2023, the company achieved revenue of 268 million yuan, +19.47%, accounting for 42.10% of revenue, +6.26pct; maintenance services achieved revenue of 31 million yuan, +21%, accounting for 4.82% of revenue, +0.77pct year on year; precision air conditioning achieved revenue of 318 million yuan, -12.12% year on year, accounting for 50.01% of revenue, -7.87 pct year on year. In addition, the company is actively expanding new products, new businesses, and new markets, achieving an increase in orders in 2023 compared to previous years. As of December 31, 2023, the company's on-hand orders were 764 million yuan.
The self-built data center project is about to be implemented, and the customers of the center project are actively expanding: According to the company's 2023 annual report, the “Nanjing Kaide Youyun Data Center Project” is expected to reach the scheduled state of use on March 31, 2024, and the second and third phases will reach the scheduled state of use on March 31, 2025. The design PUE value of the project is 1.25. After completion, the project will become a demonstration project in Jialitu's green energy saving data. At the same time, as the company's R&D platform, it can promote the upgrading of the company's product technology, which will positively promote the development of the company's industry. We believe that as national policies place requirements on data center energy consumption and the demand for computing power from emerging technologies such as AI continues to rise, China's data center infrastructure construction and transformation requirements and demand for temperature control products are expected to continue to rise. The company has many years of experience in product development and manufacturing in the field of precision environmental control such as data centers, information computer room environmental protection experience, data center infrastructure maintenance experience, project engineering implementation and after-sales service experience, and has accumulated good brand advantages and is expected to benefit from industry development and growth.
Continuously enhance R&D strength and enhance core competitiveness: The company adheres to technology drive, continuously strengthens technology R&D team building, relies on the existing R&D system, gives full play to its technical advantages in energy saving control, comprehensively enhances the company's ability to innovate in integrated computer room environment control solutions, and serves customers better and more comprehensively. According to the company's 2023 annual report, as of December 31, 2023, the company has 43 core technologies, including a communication module with a closed and efficient cooling cycle, a centralized control system for data center refrigeration stations, a VRF system for computer room air conditioning, CPU liquid cooling technology, and the application of VRF technology in the field of computer room air conditioning. In addition, according to the company's investor questions and answers on March 25, 2024, the company's liquid cooling products have already been applied, such as the computer room of the National Defense University of Science and Technology, using a cold plate liquid cooling system. The cooling source uses 3 325kW closed cooling towers, and the end is equipped with 2 280kw and 2 350kw cabinet CDUs to cool 37 20kw cabinets, and the end uses stainless steel prefabricated pipes. We believe that the company has deep technical accumulation and service experience in computer room temperature control. The products are widely used in large and medium-sized data centers and edge computer rooms of communication IDC service providers and third-party IDC service providers. The company is expected to continue to grow as demand for energy-saving cooling increases.
Profit forecast and investment rating: The company's net profit for 2024-2026 is estimated to be 0.69/0.84 billion yuan, respectively. The current stock price corresponds to PE 65/53/44 times, respectively, to maintain a “buy” rating.
Risk warning: Customer growth falls short of expectations, downstream demand falls short of expectations, risk of fluctuations in raw material prices, risk of macroeconomic fluctuations.