The 2023 performance remained steady; the end customer listing rate increased steadily; the company's revenue in 2023 was 1,542 billion yuan, up 5.96% year on year; EBITDA was 1,051 million yuan, up 2.83% year on year; net profit to mother was 123 million yuan, up 4.65% year on year, mainly due to the gradual increase in end customer business demand. The data center cabinets that the company has put into operation are gradually being electrified, driving a steady increase in revenue and profit. In the long run, we believe that the promotion of the “digital China” policy and the development of AI applications will continue to drive demand in the IDC industry. Considering the impact of impairment loss accruals, we expect the company's EBITDA for 24-26 to be 1,066/11.48/1,269 billion yuan (previous value: 12.73/14.86 billion yuan), respectively. Considering the impact of the delivery schedule of the new project, the company was given 11 times EV/EBITDA for 24 years (comparable company average: 11.97), corresponding to a target price of 22.18 yuan, maintaining a “buy” rating.
The operating scale of the business has reached 371 MW; AI applications are expected to drive long-term industry demand growth. As a leading large-scale customized data center operator in China, the company has completed the construction of 35 data centers at the core hub nodes of the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area. By the end of 2023, the company's IT load reached 371 MW, converted to about 74,200 5KW standard cabinets, which can support the computing power of 20 billion operations per second for major customers, and can support the development of a wide range of fields such as artificial intelligence and AIGC. We have observed that since the release of ChatGPT, major domestic technology giants have continued to increase their investment in computing power in the AIGC field. Since 2024, the domestic model represented by KIMI has progressed smoothly, and the country is expected to form a positive cycle from computing power investment to application return. IDC, as an important component of AI's underlying computing power infrastructure, is expected to boost demand.
Gross margin has increased steadily; net profit is affected to a certain extent by asset impairment losses. As the company's data center cabinets that have already been put into operation are gradually powered up to generate operating income, the company's overall gross margin increased by 0.14 pct to 28.98% year on year in 2023. In the future, as the listing rate of major customers gradually increases, the company's gross margin level is expected to continue to improve. In terms of cost ratios, benefiting from scale effects and good cost control capabilities, the company's sales/management/R&D/finance expense ratio changed year-on-year to -0.01/-0.17/0.12/-2.19pct to 0.17%/4.46%/4.78%/8.56% in 2023. As the balance ratio and debt size gradually declined, the company's financial expense ratio declined clearly. In addition, the company accrued asset impairment losses of RMB 34.96 million in 2023, mainly due to increased impairment of fixed assets and goodwill accrued by the company.
Optimistic about long-term growth space and maintain the “buy” rating
We are optimistic about the continuation of the company's EBITDA and profit growth momentum under the trend of increasing demand for new applications such as Digital China and AIGC. Considering the impact of impairment loss accruals, we expect the company's EBITDA for 24-26 to be 10.66/11.48/1,269 billion yuan, respectively (previous value: 12.73/14.86 billion yuan). Considering the impact of the delivery schedule of the new project, the company was given 11 times EV/EBITDA for 24 years (comparable company average: 11.97), corresponding to a target price of 22.18 yuan, maintaining a “buy” rating.
Risk warning: Customer power delivery progress falls short of expectations; project construction and delivery progress falls short of expectations.