Incident: On the evening of April 19, Inspur Information released its 2023 annual report. The full year of 2023 achieved operating income of 65.867 billion yuan, a year-on-year decrease of 5.41%; realized net profit to mother of 1,783 billion yuan, a year-on-year decrease of 14.54%; realized net profit deducted from non-mother was 1,118 billion yuan, a year-on-year decrease of 35.87%.
The 2023Q4 gross profit margin and net margin rebounded significantly, and the profit side grew significantly. 2023Q4 achieved revenue of 17.77 billion yuan, an increase of 6.04% year on year; realized net profit of 996 million yuan, an increase of 86.49% year on year; realized deducted non-net profit of 689 million yuan, an increase of 103.13% year on year. Gross sales margin reached 11.05%, up 2.51 pct year on year; net sales margin reached 5.72%, up 2.55 pct year on year.
Cost control has been maintained well, and stocking has been increased to meet the demand for high computing power. 1) At the cost level, the company's sales/management/R&D expenses in 2023 were 1,46/7.7/3.07 billion yuan respectively, and the sales/management/R&D rates were 2.21%/1.16%/4.66%, respectively. In the context of slight pressure on the revenue side, the company maintained good cost control capabilities; 2) By the end of 2023, the company's inventory reached 19.115 billion yuan, an increase of 27% over the previous year. Downstream customers continued to increase their demand for computing power construction, especially AI computing power. The company increased its raw material preparation efforts, and increased stocking also had an impact The level of the company's cash flow in 2023.
The leading server position is stable, and the outlook for the industry continues to improve. 1) Demand for computing power is expected to remain high:
In 2023, big models and generative AI set off a global artificial intelligence boom, driving the burgeoning development of the computing power market. According to the “2023-2024 China Artificial Intelligence Computing Power Development Assessment Report”, artificial intelligence is accelerating progress from perceptual intelligence to generative intelligence. In 2023, China's artificial intelligence server market will reach 65 billion yuan, an increase of 82.5% over the previous year; the scale of intelligent computing power is expected to reach 414.1 EFLOPS (10 billion floating point operations per second), an increase of 59.3% over the previous year; 2) Wave continues to maintain the leading position of server leaders. According to IDC and the company's annual report data, the company's market share of servers, storage, and liquid-cooled servers all accounted for in 2023 China is number one, and the market share of server and storage products remains at the top of the world.
The Ecological Partnership Conference was held, and Inspur released AI software and hardware products. 1) At the hardware level, the company officially released the Ethernet switch-X400 at the 2024 Inspur Information Partners Conference, the first Ethernet switch built on the NvidiaSpectrum-X platform. The throughput reached 51.2T, the highest throughput in the industry, 4 times higher than the previous generation product, and 1.6 times higher than the traditional RoCE network performance. At the same time, the company released Inspur Information also released an AI general server, which can achieve 100 billion parameter models for standalone operation; 2) At the software level, Inspur Information released a large-scale enterprise model development platform EPAI (Enterprise Platform of AI) “Meta-Brain Enterprise Intelligence” provides an efficient, easy-to-use, and secure end-to-end development platform for enterprise AI model implementation applications. It provides a series of tools such as data preparation, model training, and knowledge retrieval, and supports scheduling multiple computing power and multi-mode algorithms.
Investment advice: The company's net profit for 24-26 is estimated to be 24.19, 28.93, and 3.384 billion yuan, respectively, and the current market value corresponding to 24/25/26 is 22/18/16 times, respectively. Considering that AI computing power investment is expected to remain high, and the company's leading position in the server sector is remarkable, we believe that the current company is significantly undervalued and maintains a “recommended” rating.
Risk warning: supply chain risk; core technology upgrade falls short of expectations; policy progress falls short of expectations