Introduction to this report:
The company's 2023 performance is in line with expectations. Computer room temperature control is growing steadily, cabinet temperature control maintains a high growth rate, data center and energy storage temperature control business continues to advance, and liquid cooling is expected to accelerate penetration.
Key points of investment:
Maintain an increase in holdings rating. Considering that temperature control in data centers is expected to increase significantly, the liquid cooling penetration rate will increase at an accelerated rate. EPS in 2024-25 will be increased to 0.89/1.17 yuan (originally 0.87/1.10 yuan), and the 2026 EPS will be added to 1.51 yuan. Referring to the 2024 industry valuation, the company will be given 42 times PE in 2024, and the target price will be lowered to 37.38 yuan to increase the holding rating.
The performance was in line with expectations: The company announced its 2023 annual report, achieving net profit of 3,529 million yuan (YoY +20.72%) and net profit of 344 million yuan (YoY +22.74%) in 2023, which is in line with expectations; achieved revenue of 1,457 million yuan (+1.31% YoY) in the fourth quarter, and net profit to mother of 134 million yuan (-18.14% YoY).
The temperature control of the computer room grew steadily, and the temperature control of the cabinet maintained a high growth rate. In 2023, the company's computer room temperature control achieved revenue of 1,640 billion yuan (+13.83%), maintaining steady growth; cabinet temperature control achieved revenue of 1,465 billion yuan (+33.00% year over year), mainly due to continued growth in energy storage-related business; bus air conditioning achieved revenue of 92 million yuan (+35.53% year over year), and demand in the company's dominant regional market rebounded; rail transit train air conditioning achieved revenue of 106 million yuan (-24.97% YoY), which is expected to gradually pick up in 2024.
The data center and energy storage temperature control business continues to advance, and the entire chain of liquid cooling technology is laid out. The company has launched the BattCool full-chain liquid cooling solution for computing power equipment and data center Coolinside and energy storage systems. Driven by high thermal density trends and energy-efficient cooling requirements for energy storage power plants, computing power equipment, and data center computer rooms, liquid cooling technology is expected to accelerate introduction.
Risk warning: downstream demand falls short of expectations; liquid cooling technology research and development falls short of expectations.