Performance has maintained rapid growth, anchoring development opportunities in the era of intelligent computing
The company released its 2023 annual performance report. Revenue in 2023 increased 60.27% year on year to 4.351 billion yuan, net profit to mother increased 47.03% year on year to 1,762 billion yuan, and revenue profit continued to grow rapidly. We believe that under the AIGC wave, domestic intelligent computing demand will continue to rise. The company takes the lead in intelligent computing-related fields such as IDC, AIDC, and liquid cooling. In the future, as new cabinets continue to be delivered to the shelves and AIDC contributes new growth points, the company's development is expected to reach a new level. We expect its net profit to be 22.6/32.7/3.83 billion yuan in 24-26, respectively. Considering the smooth development of the company's AIDC business, the performance growth rate is higher than the industry average and a good dividend return mechanism has been established, giving it 23 times the 2024 EV/EBITDA ( Comparable average: 14.0), corresponding to a target price of 35.04 yuan/share, maintaining a “buy” rating.
Core resources continue to expand to achieve AIDC's business-leading layout
In terms of IDC's business, with a forward-looking national strategic layout, the company has a total of 61 intelligent computing centers and about 320,000 cabinet resource reserves in six core regions, including Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong, Hong Kong and Macau. By the end of 2023, 76,000 cabinets had been delivered, and the listing rate of mature computing power centers exceeded 90%. Driven by this, the company's IDC business revenue increased 16% year over year to 3.15 billion yuan.
In terms of AIDC business, the company took the initiative to increase capital and R&D investment in the field of intelligent computing, leading the deployment of large-scale computing power modules in the Beijing-Tianjin-Hebei and Yangtze River Delta parks. Furthermore, it successfully delivered the industry's first complete liquid-cooled intelligent computing center in 2023, and accumulated rich experience in the design, R&D, construction, operation and maintenance of liquid-cooled intelligent computing centers. In 2023, the company's AIDC business revenue, including liquid cooling and intelligent computing, reached 1,199 billion yuan.
Improve operating efficiency and establish a good dividend return mechanism
In terms of profitability, the company's comprehensive gross margin in 2023 was 48.57%, down 4.54pct from 2022. Mainly due to the addition of AIDC-related businesses, the revenue structure changed. The gross margin of IDC business/AIDC business in 2023 was 54.5%/33.1%, respectively. In terms of cost ratios, the company's sales/management/R&D/finance expense ratios decreased by 0.08/0.60/1.24/0.21pct, respectively, indicating that the company's operating efficiency has improved, and the scale effect is gradually showing. In addition, the company attached great importance to shareholder returns, established a good dividend mechanism, distributed a total of 888 million yuan in cash dividends in 2023, and requested the shareholders' meeting to authorize the board of directors to formulate a mid-2024 cash dividend plan of no more than 700 million yuan.
Profit is expected to continue to grow and maintain the “buy” rating
We believe that under the AIGC wave, domestic demand for intelligent computing will continue to rise, bringing growth opportunities to the company's IDC and AIDC related businesses, and driving the company's revenue and profit to maintain a rapid growth trend. We expect the company's net profit to mother for 24-26 to be 22.6/32.7/3.83 billion yuan, respectively. Considering the smooth expansion of the company's AIDC business, the performance growth rate is higher than the industry average, and a good dividend return mechanism has been established. It was given 23 times the 2024 EV/EBITDA (comparable average: 14.0), corresponding to a target price of 35.04 yuan/share, maintaining a “buy” rating.
Risk warning: Customer power delivery progress falls short of expectations; project construction and delivery progress falls short of expectations.