Incident: Yunsai Smart Link released its 2023 Annual Report. In 2023, the company achieved operating income of 5.264 billion yuan, +16.09% year-on-year, and realized net profit of 193 million yuan to mother, +6.70% year-on-year.

Full-year results were in line with expectations, and industry solutions revenue grew rapidly. By product, in 2023, the company's cloud service big data, industry solutions, and smart products achieved revenue of 25.43/22.04 billion yuan, respectively, of -1.19%/+51.92%/+12.11% compared with the same period last year. The company's net operating cash flow for the year was 462 million yuan, +116.26% year-on-year.

The construction of the data center is progressing smoothly, and favorable policies are frequent. In 2023, the first phase of the company's Songjiang Big Data Computing Center project was officially put into operation, and the second phase of the project successfully passed the review and obtained energy consumption indicators. At the same time, the company also co-funded the establishment of Shanghai Intelligent Computing Technology Co., Ltd., with Shanghai Electronic Electronics Group and Step Star holding 10% of the shares. At the policy level, the Shanghai Municipal Development and Reform Commission recently issued the “Guiding Opinions on Interest Rate Management for New Infrastructure Construction Projects in Shanghai (2024 Edition)”, which advocates key support for five major areas, including new networks, new computing power, new data, new facilities, and new terminals. We believe that with the development of artificial intelligence surges in demand for data centers and computing power services and benefits at the policy level, the development of the company's data center and computing power business is expected to enter the “fast track”.

Continue to deepen MSP's cloud service capabilities, and gradually deepen cooperation with Microsoft. The company is one of Microsoft's core MSP service providers. Wholly-owned subsidiaries Cigna Era and Nanyang Wanbang are Microsoft's gold partner. In January 2024, EasyPoint Cloud announced that EasyPoint Cloud has formed a comprehensive strategic cooperation on the market expansion of the Microsoft AzureOpenAI product matrix and solutions authorized by Cigna Era, including but not limited to GPT related products and AI products and services to be released on Microsoft Azure Cloud in the future.

Investment advice: The company's 24-26 revenue is expected to be 59.99, 68.59 billion yuan, and 7.989 billion yuan, respectively, and net profit to mother is 2.26, 2.98, and 377 million yuan, respectively. We are optimistic about the company's data elements and intelligent calculation layout, and maintain a “buy” rating.

Risk warning: AI technology breakthroughs fall short of expectations, computing power demand falls short of expectations, data element policies fall short of expectations, cloud service big data business development falls short of expectations.