Description of the event
On April 15, the company released its 2023 annual report, achieving revenue of 3,529 billion yuan, a year-on-year increase of 20.7%; net profit to mother was 344 million yuan, an increase of 22.7% year-on-year, after deducting non-net profit of 316 million yuan, an increase of 24.3% year-on-year.
Incident comments
Operating performance reached a new high, continuing both revenue and profit growth. In 2023, the company achieved operating income of 3,529 billion yuan, a year-on-year increase of 20.7%, and achieved net profit of 344 million yuan, an increase of 22.7% over the previous year. Operating performance reached a record high, continuing the record for both revenue and profit growth. Looking at Q4 alone, the company achieved revenue of 1,457 billion yuan, up 1.3% year on year, and realized net profit of 134 million yuan, down 18.1% year on year. The reason for the slowdown in Q4 compared to the previous three quarters is:
(1) 22Q4 is a special situation. The IDC project concentrated on Q4, making the 22Q4 revenue share as high as 49% of the whole year; (2) The one-time calculation of Shanghai Ketai's goodwill impairment reserves of 753.59 million yuan had an impact on the profit side.
Computer room temperature control grew moderately, gross margin increased dramatically, and the delivery of ongoing projects laid the foundation for subsequent revenue. Computer room temperature control and energy saving products achieved operating revenue of 1.64 billion yuan, an increase of 13.8% over the previous year, showing moderate overall growth. In terms of gross margin, the gross margin of computer room temperature control and energy saving products in 2023 was 31.53%, a significant increase of 6.03 pct over the previous year. It was mainly affected by positive factors such as changes in product sales mix, company cost reduction and efficiency, and commodity price fluctuations. In 2023, the company successively won bids for various projects collected by the three major operators, on the Internet side, and on the government and enterprise side. These projects will be delivered one after another in the next stages, becoming an important foundation for the operating income of the computer room temperature control business. As can be observed simultaneously on the reporting side, by the end of 2023, the company's inventory had increased by about 230 million yuan, an increase of 53% over the previous year, and contract liabilities had increased by about 80 million yuan, an increase of 84% over the previous year.
Cabinet temperature control is growing rapidly, and gross margin performance is stable against the backdrop of increased competition. Cabinet temperature-controlled energy-saving products achieved operating revenue of 1.47 billion yuan, an increase of 33.0% year on year. Of this, revenue from energy storage applications was about 1.22 billion yuan, up about 44% year on year. The contribution to the company's business continued to increase. Although demand was suppressed by falling battery prices in the short term, the energy storage industry still showed a rapid increase in demand. In terms of gross margin, the gross margin of cabinet temperature control and energy saving products in 2023 was 32.16%, a slight decrease of 0.14 pct from the previous year. Against the backdrop of increased competition, the company's gross margin remained stable, demonstrating strong management capabilities.
The liquid cooling business is progressing rapidly, and the scale of implementation is leading the industry. In 2023, revenue related to liquid cooling technology from data center computer rooms and computing power equipment was about 4 times that of 2022. As of March 2024, the company's cumulative delivery of liquid cooling chains has reached 900 MW, leading the industry in scale. The company's cold plate products were officially included in Intel's EagleStream server design guide file in 2023. Many products in the company's Coolinside liquid cooling full-chain liquid cooling solutions have been recognized by some mainstream computing power chip manufacturers and leading computing power equipment manufacturers and obtained large-scale procurement applications. In particular, liquid-cooled electronic cooling chain products, such as cold plates for computing power equipment, have begun to be shipped in batches, and have begun to contribute significantly to revenue.
Investment advice: The company's operating performance reached a new high in 2023, continuing both revenue and profit growth. Computer room temperature control grew moderately, cabinet temperature control grew rapidly, gross margin increased significantly, demonstrating strong management capabilities. The liquid cooling business is progressing rapidly, and the scale of implementation is leading the industry. In the context of the accelerated implementation of liquid cooling, the company will benefit significantly as a leading liquid cooling manufacturer, and its performance is expected to be the first to be realized on a large scale. The company's net profit for 2024-2026 is estimated to be 507 million yuan, 694 million yuan, and 896 million yuan, corresponding to year-on-year growth rates of 47%, 37%, and 29%, corresponding to PE 33, 24, and 19 times PE. The key recommendation is to maintain the “buy” rating.
Risk warning
1. The pace of liquid cooling landing falls short of expectations;
2. Competition in the energy storage temperature control market has intensified.