The company's 2023 results are in line with expectations. During the reporting period, the company continued to improve its technological innovation capabilities and R&D level, the core competitive advantage of self-developed products continued to increase, and the performance of the joint venture Haiguang Information maintained a high trend. We expect domestic computing power demand to remain high in 2024, maintaining a “highly recommended” investment rating.
The company released its 2023 annual report. The full year of 2023 achieved operating income of 14.353 billion yuan, YoY +10.34%; realized net profit of 1,836 billion yuan, YoY +18.88%; realized net profit without deduction of 1.278 billion yuan, YoY +10.98%; realized net operating cash flow of 3.51 billion yuan, YoY +212.02%. The gross profit margin for the whole year was 26.26%, the same as the previous year. The company plans to distribute a cash dividend of 1.70 yuan for every 10 shares to all shareholders.
The company's revenue and net profit accelerated in the fourth quarter compared to the previous three quarters. 23Q4 achieved revenue of 6.595 billion yuan in a single quarter, YoY +17.31%; realized net profit of 1,086 million yuan, YoY +21.90%; realized net profit without deduction of 868 million yuan, YoY +11.54%. Single Q4 gross profit margin 26.71%.
The cost rate remained stable during the period, and inventory management was continuously optimized. In 2023, the company achieved sales, management, and R&D expense rates of 5.23%/2.05%/9.17%, respectively, with year-on-year changes of 0.47/ -0.33/0.67 percentage points.
During the reporting period, the company's monetary capital was 7.193 billion yuan, YoY +16.87%; inventory was 3.43 billion yuan, YoY -46.23%. This was mainly due to the fact that the supply chain stabilized, the scale of raw material storage was reduced, and the amount of cash paid for purchasing products decreased year-on-year.
Self-developed products enhance the company's profitability, and the advantages of liquid-cooled servers are highlighted. We believe that the increase in the proportion of the company's self-developed products is the main factor in increasing the company's profitability. In 2023, the company continued to develop high-end computers based on domestic processors, IO modules, and built-in active control firmware. Related fund-raising projects progressed smoothly, continued to improve product performance in terms of component performance management, product stability, high-speed interconnection, etc., and comprehensively upgraded the expandability and manageability of the server. In addition, the company's holding company Shuguang Shuchuang has a leading edge in the domestic field of immersion phase change liquid cooling, and Zhongke Shuguang liquid cooling servers lead the domestic market share.
The performance of the joint venture Haiguang Information is growing rapidly, and demand for domestic computing power is strong. According to the annual report published by Haiguang Information, Haiguang Information's revenue in 2023 was 6.012 billion yuan, up 17.30% year on year; net profit to mother was 1,263 billion yuan, up 57.17% year on year; net profit after deduction was 1,136 billion yuan, up 51.79% year on year. In 2023, the overall operation of Haiguang Information will continue to improve, the industrial ecosystem of high-end processor products will continue to expand, and the related industrial applications and emerging artificial intelligence model industries will gradually increase. The performance and ecology of the CPU industry and DCU industry independently developed by the company are in a leading position in the country. We believe that the high growth rate of Haiguang Information confirms the strong demand for domestic computing power. It is expected that Haiguang will maintain a high growth trend in 2024.
Maintain a “Highly Recommended” investment rating. We expect the company to achieve operating income of 173.09, 210.65 and 25.995 billion yuan respectively from 24 to 26, and net profit to mother of 23.05 billion yuan, 29.57 billion yuan, and 36.44 billion yuan respectively. The corresponding PE is 30.5, 23.8, and 19.3 times, respectively, maintaining a “highly recommended” investment rating.
Risk warning: Supply chain risks and the risk that macroeconomics will affect the growth rate of new infrastructure decline.