Incidents:
Inspur Information released its 2023 annual report. In 2023, the company achieved revenue of 65.867 billion yuan, a year-on-year decrease of 5.41%; net profit to mother of 1,783 billion yuan, a year-on-year decrease of 14.54%; net profit without return to mother was 1,118 billion yuan, a year-on-year decrease of 35.87%; and gross margin was 10.04%, a year-on-year decrease of 1.14 pcts. Looking at a single quarter, the company achieved revenue of 17.77 billion yuan in the fourth quarter, up 5.34% year on year; net profit to mother of 996 million yuan, up 84.47% year on year; net profit after deducting non-return to mother of 689 million yuan, up 103.13% year on year; gross margin was 11.05%, up 2.51 pct year on year.
Seize intelligent development opportunities and achieve early layout
In terms of computing power, the company released a new generation G7 computing power platform. The latest generation AI training server NF5688G7 with integrated architecture has improved the measured performance by nearly 7 times, and the next-generation AI server NF5698G7 was released at the same time. At the algorithm level, the company released the “Source 2.0” basic model, which excels in programming, reasoning, logic, etc. At the AI software infrastructure level, the company develops OGAI, a large model intelligent computing software stack, which can help users quickly build and run the big model business they need. In terms of data infrastructure, the company was the first in the industry to release a generative AI storage solution.
The market share of servers, storage, etc. is leading. According to the latest data released by Gartner and IDC, the company's server market share in 2023 is second in the world and number one in China; the storage market share is the top three in the world and number one in China; and the market share of liquid-cooled servers is number one in China.
On the IPF2024, the company released the X400, a super AI Ethernet switch dedicated to generative AI. It is the first Ethernet switch built on the NVIDIA Spectrum-X platform in China, providing leading AI network performance for large-scale computing power.
The development of AI is driving the increase in demand for computing power. The country proposes to build generative artificial intelligence to open the door to cognitive intelligence for humans, lead a new round of global technological revolution and industrial transformation, and demand for AI computing power will increase dramatically. The “2023-2024 China Artificial Intelligence Computing Power Development Assessment Report” indicates that during the period from 2022 to 2027, the compound annual growth rate of China's intelligent computing power reached 33.9%. The “Action Plan for the High-Quality Development of Computing Power Infrastructure” issued by six departments including the Ministry of Industry and Information Technology proposes that by 2025, China's computing power scale will exceed 300 EFLOPS, accounting for 35% of intelligent computing power.
Profit Forecasts, Valuations, and Ratings
Considering the commercialization of AI models and increasing demand for computing power, we expect the company's revenue for 2024-2026 to be 738.36/843.95/95.366 billion yuan respectively, with year-on-year growth rates of 12.10%/14.30%/13.00% respectively, net profit to mother of 19.51/24.99/2,998 billion yuan, respectively, with year-on-year growth rates of 9.42%/28.13%/19.95%, EPS 1.33/1.70/2.04 yuan/share, and 3-year CAGR 18.92% Given the company's stable position as a leader in the domestic server market, it is expected to benefit from increased demand for computing power, so it is recommended to keep an eye on it.
Risk warning: supply chain risk, risk of major customer demand such as downstream Internet falling short of expectations, increased risk of market competition, innovation risk of technological upgrading, etc.