Performance grew steadily and rapidly, and the gross margin of the IT equipment business further increased by 2.22pct. to 21.88%.
In 2023, the company's revenue of 14.353 billion yuan increased 10.34% year on year; net profit to mother of 1,836 billion yuan increased 18.88% year on year; net profit after deducting non-return to mother was 1,278 billion yuan, up 10.98% year on year. Among them, IT equipment business revenue of 12.780 billion yuan increased 11.63% year over year, gross margin increased 2.22pct to 21.88%, software development, system integration and technical service business revenue of 1,567 billion yuan increased 0.75% year over year, and gross margin decreased by 12.94 pct to 61.79%. According to customers, utility business revenue of 8.363 billion yuan increased 17.64% year over year, and enterprise business revenue of 5.984 billion yuan increased 1.52% year over year.
The overall cost ratio remained stable, and R&D investment continued to increase, and R&D expenses increased rapidly by 19%. Sales expenses and R&D expenses increased by 0.47 and 0.67 pct, respectively. The absolute value of management expenses has remained stable. In 2023, the company invested 2,444 billion yuan in R&D, with R&D expenses of 1,316 billion yuan, a year-on-year increase of 19.07%. Fundraising projects for high-end computers based on domestic processors, IO modules, and built-in active control firmware were successfully completed. At the same time, it launched smart all-in-one products with industry application scenarios for the financial and other industries and landed in many customers.
There are frequent policies to promote computing power, and the company is continuously improving the comprehensive solution capabilities of the Intelligent Computing Center. According to the “Action Plan for the High-Quality Development of Computing Power Infrastructure” issued by six departments including the Ministry of Industry and Information Technology in 2023, China's computing power scale will exceed 300 EFLOPS in 2025, accounting for 35% of intelligent computing power. On the government side, intelligent computing center development plans have been announced in many places. Shanghai plans to account for more than 50% of total computing power by 2025; on the enterprise side, the State Council's State-owned Assets Administration Commission Artificial Intelligence Special Promotion Conference proposed that central enterprises speed up the layout and development of intelligent industries and accelerate the construction of a number of intelligent computing power centers. The company is deeply involved in digital infrastructure construction, while continuously improving the comprehensive solution capabilities of intelligent computing centers, empowering digital intelligence development in multiple regions and industries with multiple advantages such as distributed all-flash storage, immersive liquid cooling, and computing services.
Distributed training, computing power resource scheduling, etc. are in strong demand, and the company is in a leading position in the country. According to Cidi Consultant's “IT2024 (January issue)”, judging from the scale of computing power demand in 2023, the eastern region accounts for 83.5% of the country. The regional gap in computing power between east and west is still obvious, and there is an urgent need to speed up the layout of computing power scheduling. It is expected that the year-on-year growth rate of China's computing power scheduling market will reach 21.6% by 2026.
In 2023, the subsidiary Shuguang Intelligent Computing passed the “Trusted Computing Power Service - Intelligent Computing Platform” evaluation by the China Academy of Information and Communication Technology and became one of the first 4 manufacturers to pass; in February 2023, Shuguang Intelligent Computing and the Ningxia Hui Autonomous Region built the first integrated computing power transaction scheduling platform.
Profit forecast: We forecast that the net profit growth rates of Zhongke Shuguang in 2024-2026 will be 20.14%, 17.32%, and 15.15%, respectively, giving it a “buy” rating.
Risk warning: Great power game; product iteration falls short of expectations; profit forecasting and valuation model downgraded.