Description of the event
On February 1, 2024, China Mobile issued the “2024 Centralized Procurement Tender Notice for PC Server Products”. The estimated procurement scale is approximately 264,500 units. On March 8, 2024, China Mobile announced the winning bid results for part of the “2024 Centralized Procurement Project for PC Server Products”, and Changjiang Computing received part of the bid package 11, 13, and 14.
Incident comments
The operator announced a 24-year capital expenditure plan, focusing on computing power construction. China Mobile will invest 47.5 billion yuan in computing power in 2024, an increase of 21.5% over the previous year, and 16.3 billion yuan in capacity, an increase of 21.6% over the previous year. In terms of computing power planning, the company's 24-year intelligent computing (FP16) computing power will be added at least 7 eFlops to reach 17 eFlops, ensuring industry leadership in scale. China Telecom's Capex structure is further skewed towards industrial digitalization. The related investment was 37 billion yuan, an increase of 3.9% over the previous year, including 18 billion yuan in cloud/ computing power. In terms of computing power planning, China Telecom plans to add at least 10 eFlops of computing power in 2024, and the overall computing power scale will reach 21 EFLOPS or more. It is expected to lead the industry in scale and fully build AIDC for intelligent computing.
China Mobile is increasing tenders for PC servers and AI servers, and the popularity of domestic servers in the operator market is expected to improve.
China Mobile carried out large-scale procurement of 2021-2022 PC servers in two batches in 2021 and 2022. The total procurement scale was about 245,900 units. The current PC server tender scale surpassed the sum of the previous two batches of tenders.
Demand for China Mobile's AI servers is gradually being released, and tenders are expected to continue to be implemented. On January 17, 24, China Mobile issued a tender notice for “China Mobile 2023-2024 New Intelligent Computing Center (Test Network) Procurement (Package 12)”, which plans to purchase 1,250 artificial intelligence servers and supporting products. On January 23, 2014, China Mobile launched an information check on the supplier information of AI server products for the new intelligent computing center from 2024 to 2025. The China Mobile Intelligent Computing Center project plans to purchase about 6,000 AI training servers for specific scenarios. Demand for China Mobile's AI servers has been greatly released, and tenders are expected to continue to be implemented.
Changjiang Computing, a subsidiary of Fiberfire Communications, is an important operator server supplier. In recent years, Changjiang Computing Server's share in the operator market has continued to rise. It has been selected by the three major operators of China Mobile, China Unicom, and China Telecom several times to help users build stable and reliable hardware support platforms, and has become a reliable partner for operators. With the foundation of the computing industry and the strength of the information industry, Changjiang Computing can help operator users achieve technological leadership, service innovation, and market expansion. Computing and storage is a growing business that the company has been focusing on in recent years. Seizing strategic opportunities for the development of computing power is expected to become an important business support for the company. According to Fiberfire Communications's semi-annual report for '23, the company's computing and storage business has grown by more than 50% in recent years. In terms of product technology, the company collaborated with the most advanced suppliers in the industry to take the lead in releasing diverse computing power products and technologies such as X86 and ARM to achieve the systematic layout and commercialization of basic computing power hardware. Launched a series of self-developed server products, completed technological breakthroughs in the entire chain of high-end liquid-cooled servers, commercialized self-developed high-end liquid-cooled servers, and achieved industry-leading cold plate liquid cooling ratio. Product applications covered various industries such as the Internet, operators, government, and finance.
Profit forecast and investment suggestions: The country guides the construction of advanced computing power, and operators are important construction grippers, and it is expected that the server industry will continue to improve its prosperity. Changjiang Computing, a subsidiary of Fiberfire Communications, is an important operator server supplier. With the advantages of the Fenghuo Communications platform, the share of Changjiang Computing Server in the operator market is expected to continue to rise, which may open up room for the company's revenue and profit growth. The company's net profit for 2023-2025 is estimated to be 4.50, 7.01, and 1.00 billion yuan, up 11%, 56%, and 43% year-on-year, corresponding to PE 43x, 28x, and 19x. It is recommended and maintains a “buy” rating.
Risk warning
1. Carrier transmission network Capex falls short of expectations;
2. The competitive landscape of the industry has deteriorated.