The IDC market continues to grow. In recent years, China has accelerated the pace of construction of new information infrastructure, and has successively introduced various policies such as the “14th Five-Year Plan” for the Digital Economy Development, the “Three-Year Action Plan for the Development of New Data Centers (2021-2023)”, and the “Action Plan for the High-Quality Development of Computing Power Infrastructure” to encourage the development and innovation of the data center industry. As of August 2023, the total number of data center racks in use nationwide has exceeded 7.6 million standard racks, and China's total computing power has reached 197EFLOPS. According to the “2022 - 2023 IDC Market Research Report for Beijing and Surrounding Regions”, the IDC market in Beijing and surrounding regions reached 41.02 billion yuan in 2022, up 15.5% from 2021, leading the national IDC market. Overall, the scale of the computing power industry in Beijing and surrounding regions is growing rapidly, market competition is fierce, application scenarios are diversified, and innovation capabilities are outstanding.
Digital development is leading data centers into an era of high computing power. The development characteristics of the new data center with high agglomeration, high computing power, high energy efficiency, and high technology will not only drive enterprises to reduce costs and increase efficiency, but will also strongly support the digital transformation of key industries and promote the flourishing development of the digital economy. Since the rapid development of ChatGPT, big models, artificial intelligence, etc. have developed rapidly. Looking at large models alone, the data shows that as of October 2023, there were 254 large model manufacturers and universities with parameters above 1 billion in China, distributed in more than 20 provinces, cities and regions.
In 2023, China's large-scale model market is about 5 billion yuan. It is expected that this figure will reach 12 billion yuan by 2024, which will bring massive demand for intelligent computing; in 2023, China's artificial intelligence computing power market will reach 66.4 billion yuan, an increase of 82.5% over the previous year.
The company's IDC business continues to develop rapidly and expand high-performance intelligent computing services. The company's data center is located in Doudian Zhongguancun Industrial Park, Fangshan District, Beijing. It is the first batch of green data center demonstration projects in Beijing, providing large-scale customers with full life cycle services from customized construction of a single data center building to post-operation and maintenance management. By the end of 2023, the company had invested more than 10,000 data center resources in Yanjiao, Hebei, with a contract rate of 100% and a listing rate of 70%. The third and fourth phase of the Hebei Yanjiao project, which the company began construction in 2019, was built in stages and gradually put into operation. Currently, the operating revenue of the project can meet the construction needs of some subsequent projects. The first phase of the company's Tianjin Baodi Data Center project began construction in December 2021, and all civil construction was completed in January 2024. It can provide highly customized and highly scalable green digital infrastructure comprehensive services and high-performance intelligent computing services to meet the spillover needs of users in Beijing.
Profit forecasting, valuation and ratings: According to the company announcement, the company was affected by a slowdown in macroeconomic growth in 2023 and weak demand from downstream customers, and we expect this impact may continue. We lowered the company's 2024-2025 net profit forecast to be 613/798 million yuan, a decrease of 34%/26% from the previous one, and added the company's 2026 net profit forecast to 927 million yuan, corresponding to PE26/20/17X. We are optimistic about the long-term growth space that IDC and the high-performance intelligent computing business will bring to the company, and maintain a “buy” rating.
Risk warning: Risk of IDC cabinet construction progress and shelf life falling short of expectations, risk of pressure on rent prices.