The company released its 2023 annual report. In 2023, the company achieved operating income of 3,529 billion yuan, a year-on-year increase of 20.72%, achieved net profit of 344 million yuan, an increase of 22.74% over the previous year, and achieved net profit of 316 million yuan after deduction, an increase of 24.25% over the previous year. As an industry-leading manufacturer of temperature control equipment, the company is expected to fully benefit from the demand for data center construction brought about by increased computing power and the boom in the energy storage industry in the future, and maintain its purchase rating.
Key points to support ratings
Demand for temperature control of computer rooms and energy storage increased, helping the company's performance reach a record high. In 2023, the company grasped downstream demand, gave full play to its multi-field layout and platform synergy, and achieved a record high of performance, achieving annual revenue of 3,529 billion yuan, an increase of 20.72% over the previous year. By product, the computer room temperature control/cabinet temperature control/rail transit/bus air conditioning business achieved revenue of 16.40/14.65/1.06/0.92 billion yuan respectively, +13.83%/+33.00%/-24.97%/+35.53%. The main performance contribution still comes from computer room and cabinet temperature control products. Among them, the revenue growth of computer room temperature control products was mainly due to the continuous delivery of major projects that the company won bids in the early stages. The main reason for the rapid increase in revenue for cabinet temperature control products was the continuous growth of energy storage-related business throughout the year. Revenue was approximately $1.22 billion, an increase of about 44% over the previous year.
Profitability has increased steadily, and the growth rate of profit to mother after excluding share payment fees is even more impressive. Due to the company's series of cost reduction and efficiency measures, favorable changes in product revenue mix, and favorable factors such as relatively stable raw material costs, the company's profitability increased steadily. In 2023, the company's overall gross margin was 32.35%, up 2.54 pcts year on year. In terms of cost rates, the 2023 sales/management/ R&D/ finance expenses ratio was 7.54%/4.36%/7.45%/0.18%, respectively, +0.27pct/+0.43pct/+0.76pct/+0.10pct. In terms of net profit, the overall net interest rate in 2023 was 9.88%, up 0.40pct year-on-year. Among them, the company incurred share payment expenses of 66 million yuan, which had an impact of 56 million yuan on net profit due to mother (the impact of relevant income tax expenses has been taken into account). If the impact of share payment expenses is excluded, the company's net profit growth rate reached 42.73%. In addition, in 2023, the company calculated a goodwill impairment of Shanghai Ketai by 75 million yuan, which also had a certain impact on the company's net profit.
Having the advantages of a “full chain” platform for liquid cooling may fully benefit from the growing demand for liquid cooling. After years of continuous investment, the company has basically built a technical platform for the entire equipment cooling chain from heat source to cooling source. On the one hand, the introduction of liquid cooling technology is expected to accelerate in the future, driven by the high thermal density trend of computing power equipment and data center computer rooms; on the other hand, the company is the first domestic manufacturer involved in temperature control of electrochemical energy storage systems. It has been in a leading position in the domestic energy storage temperature control industry for many years, and is also the main supplier of temperature control products for many domestic energy storage system providers. In the context of the release of downstream demand for liquid cooling and energy storage in data centers, the company may fully benefit as an industry-leading manufacturer of temperature control equipment.
valuations
According to the company's various business conditions, we have slightly lowered the company's profit forecast. We expect to achieve operating income of 47.78/60.04/7.485 billion yuan in 2024-2026, achieve net profit of 4.94/6.45/818 billion yuan, EPS is 0.87/1.13/1.44 yuan, and the current stock price corresponds to PE 31.9/24.4/19.2 times. Considering the company's position as a leading temperature control equipment company, it is expected to fully benefit from data brought about by increased computing power Demand for center construction and the boom in the energy storage industry continue to maintain the purchase rating.
The main risks faced by ratings
Downstream demand falls short of expectations; customer expansion of new products falls short of expectations; risk of fluctuations in raw material prices; risk of increased competition in the industry.