Event: On March 29, Shenzhou Digital released its 2023 annual report. In 2023, the company achieved revenue of 11.624 billion yuan, up 3.23% year on year; net profit to mother was 1,172 billion yuan, up 16.66% year on year; net profit after deducting non-return to mother was 1,263 billion yuan, up 37.22% year on year. In the fourth quarter of a single year, the company achieved revenue of 35.469 billion yuan, a year-on-year increase of 13.03%; net profit to mother of 321 million yuan, a year-on-year decrease of 0.71%; net profit after deducting non-return to mother was 421 million yuan, an increase of 60.94% year-on-year.
The Cloud+ private brand strategic business is growing rapidly. In 2023, the total revenue of the two major strategic businesses broke through 10 billion yuan for the first time, with a year-on-year increase of 42%, and achieved double-digit growth for three consecutive years: 1) In terms of cloud business, the company implemented the “digital cloud integration” strategy and continued to enrich its product line. The cloud computing and digital transformation business achieved revenue of 6.931 billion yuan, an increase of 37.98% over the previous year. Among them, the high-margin digital cloud integration business (MSP and ISV) revenue was 1,116 billion yuan, an increase of 68.25% year-on-year, achieving a gross profit margin of 42.23%, and cloud resale business (AGG) revenue of 5.815 billion yuan. 33.38%, gross margin of 5.87%; 2) In terms of independent brand business, the company grasped the development opportunities of Xinchuang and continued to develop the Xinchuang industry layout. Annual revenue was 38.29 billion yuan, an increase of 48.95% over the previous year. Among them, the revenue scale of the Xinchuang business exceeded 3.4 billion yuan, an increase of 71% over the previous year.
Embrace generative AI, and “localized computing+intelligent computing” help it take off. The company fully embraces the disruptive transformation of generative AI and accelerates breakthroughs in products and supply chains through continuous investment in R&D. Under the industrial changes brought about by AI, the company launched a new layout of “localized computing power+intelligent computing”:
1) The company established Shenzhou Kuntai product production bases in Xiamen and Hefei, and became an important practitioner of Kunpeng's industrial ecology, and the Hefei production base was completed and put into operation; 2) The company completed R&D, production and delivery of a variety of next-generation AI servers, launched new products such as the Shenzhou Kuntai all-in-one computer, and obtained Huawei's “Kunpeng + Shengteng” double leading certification for the first time; 3) Shenzhou Kuntai was shortlisted for China Telecom's procurement project. It has successively won bids for all-electric invoicing projects in four provinces and cities, and continues to cultivate deeply in the fields of finance, digital government, education, and energy.
The foundation of the distribution business is stable. The distribution business achieved revenue of 108.853 billion yuan for the full year of 2023, an increase of 0.53% over the previous year, and a relatively stable gross margin. The company continues to improve quality and efficiency, and actively focuses on high-value, high-margin businesses. The products represented by the company, such as Intel, Seagate, Epson, Zebra, Sony, Omron, and Fortinet, continue to maintain absolute market share leadership.
Investment advice: We expect the company's revenue for 2024-2026 to be 1281.04, 137.291, and 149.823 billion yuan, respectively; net profit to mother will be 1,426, 16.42, and 1,987 billion yuan, respectively; EPS will be 2.13, 2.45, and 2.97 yuan respectively. Maintain a “buy” rating.
Risk warning: Risks that market competition will intensify, Xinchuang's progress will fall short of expectations, and strategic business development will fall short of expectations.