Key points of investment
Incident: On April 16, 2024, Invict released its 2023 annual report. In 2023, the company achieved operating income of 3.53 billion yuan, an increase of 20.72% year on year; net profit to mother was 340 million yuan, up 22.74% year on year; after deducting non-net profit, it was 316 million yuan, an increase of 24.25% year on year.
The computer room temperature control business continues to grow, and the effect of reducing costs and increasing efficiency is remarkable. The company is a leading provider of precision temperature control and energy saving solutions and products in the industry, involving data centers and computing power equipment, electrochemical energy storage, communications, subway rail transit and other industries, mainly organic room temperature control energy-saving products, cabinet temperature control energy-saving products, bus air conditioning, and rail transit train air conditioning services. Computer room temperature control, cabinet temperature control, rail transit train air conditioning services, and bus air conditioning achieved main revenue of 1.64 billion yuan, 1,465 billion yuan, 1062 billion yuan, and 92.16 million yuan in 2023, respectively, up 13.8%, 32.94%, -25%, and 35.53% year-on-year. During the reporting period, the company's overall gross margin increased due to a series of cost reduction and efficiency measures, favorable changes in product revenue mix, and favorable factors such as relatively stable raw material costs.
The gross margin of energy-saving products with precise temperature control was 32.35%, an increase of 2.54 points over 2022.
Diverse layouts continue to expand, and liquid cooling technology has been recognized by leading customers. The company has been investing in liquid cooling technology platforms. Its products are directly supplied to data center owners, IDC operators, Internet companies and communication operators, and has provided efficient and energy-efficient refrigeration products and systems for many large data centers. In the data center field, the company provides efficient and energy-efficient refrigeration systems for large data centers such as Tencent and Alibaba; has won the trust of mainstream customers such as Huawei and Eltek in the field of temperature control of communication cabinet equipment; is in a leading position in the field of energy storage temperature control; and in the field of electronic cooling, it is recognized by the communications, computing power equipment and other industries. At the same time, the company also provides overall solutions and integrated turnkey services, such as modular data center systems. Revenue from the computer room temperature control and energy saving business showed a trend of low and high levels, and gross margin also increased significantly. In the field of cabinet temperature control and energy saving, the company mainly provides solutions for outdoor cabinet or container applications, covering wireless communication base stations, energy storage power stations, smart grid equipment cabinets, electric vehicle charging stations, etc. Its products include AC powered compressor air conditioners, DC powered compressor air conditioners, compressor air conditioners and heat pipe integrated machines, heat pipe heat exchangers, water cooling units, etc., to meet different cooling requirements. The company is a leading manufacturer in the field of temperature control of electrochemical energy storage systems in China. Against the backdrop of growing demand for energy storage power plant construction, the company launched innovative products such as water-cooled units, and released a series of products such as the BattCool Energy Storage Full Chain Liquid Cooling Solution 2.0 to continuously improve system performance and operation and maintenance efficiency.
Build an “end-to-end, full-chain” platform, and product competitiveness continues to improve. The company has basically built a technical platform for the entire equipment cooling chain from heat source to cooling source. In 2023, the company successively released new products and solutions such as xFreeCooling pneumatic heat pipes, xRow 4.0 inter-row air conditioning, xSpace micro module liquid cooling, and xStorm3.0 wind walls. Driven by the high thermal density trend and energy-efficient cooling requirements of computing power equipment and data center computer rooms, the introduction of liquid cooling technology has accelerated. The company has invested in liquid cooling technology platforms such as cold plates and immersion for a long time, and launched Coolinside liquid cooling cabinets and full-chain liquid cooling solutions for computing power equipment and data centers. As of March 2024, the company's cumulative delivery in the liquid cooling chain has reached 900 MW. The company is the earliest manufacturer involved in temperature control of electrochemical energy storage systems in China. It has been in a leading position in the domestic energy storage temperature control industry for many years. It has independently developed SolKing liquid cooling 2.0 products for energy storage, launched solutions such as drawer liquid cooling units for industrial and commercial energy storage, 3D-TVC zero-power phase change liquid cooling technology, etc., and upgraded system performance and operation and maintenance efficiency in terms of overall solutions, full range, full scenario, and multiple dimensions, further enriching the product chain and improving product competitive advantage.
Investment advice: With the increase in the operating rate of data centers and the increase in the penetration rate of liquid cooling solutions, the company is expected to maintain good growth. Considering the current rapid growth in the data center liquid cooling business but the impact of weak market expansion in other fields, the company is now fine-tuning the 2024-2026 revenue of 4,983/66.37/8.296 billion yuan (previously predicted 24/25 revenue of 51.09/7.157 billion yuan), an increase of 41.2%/33.2%/25.0%. The company's net profit to mother was 5.34/6.58/8.72, respectively 100 million yuan, a year-on-year increase of 55.1%/23.4%/32.5%, corresponding to EPS 0.94/1.16/1.53 yuan, PE 32.5/26.4/19.9; maintaining the “Increased holdings - B” rating.
Risk warning: Data center orders fall short of expectations; market competition continues to intensify; accounts receivable are not collected in a timely manner.