From the perspective of AI server manufacturing, this article tracks the latest developments in the three areas of raw material inventory, production line construction, and AI server product storage from the perspective of AI server manufacturing. We believe that, benefiting from major trends in the global AI industry, the company's AI server related business is expected to usher in a period of accelerated development.
The return on net assets is expected to be stable, moderate and positive. In the 2013.6-2015.5 period, the company's market value rose from 5.2 billion yuan to 42.3 billion yuan, with a cumulative increase of 713%. The increase in the company's market value is mainly related to the improvement in the company's return on net assets and the relaxation of market liquidity. In 2013-2015, the company's average annual return on net assets reached 16.8%, which was the fastest growth period since listing. It mainly benefited from the company seizing huge market opportunities brought by cloud computing and localization, and launched competitive server products in the dual-channel, four-way, and eight-channel markets. From the perspective of A-share market liquidity, domestic A shares ushered in a round of bull market in 2015, which catalyzed the restoration of the company's market value. In 2017-2022, the company's return on net assets gradually increased from a minimum of 7.6%. Among them, ROE achieved 13.5% in 2021, declined slightly in 2021-2022, and remained above 10%. Benefiting from major trends in the global AI industry, the company's return on net assets is expected to stabilize, moderate and improve.
Raw materials are at a high level of inventory. The procurement of components such as CPUs & GPUs mainly comes from overseas companies, so the company accounts payable in US dollars accounts for a high proportion of the overall accounts payable. By the end of 2023, the company's accounts payable in US dollars reached $6.117 billion, up from $5.593 billion in 2022. The dollar accounts payable show that the company is currently at a high point in raw material inventory. The inventory index also shows that the company is currently at a high point in raw material inventory. The raw materials in the company's inventory are mainly chips, memory, hard drives, etc. By the end of 2023, raw material reserves in the company's inventory reached 13.7 billion yuan, close to the highest point in 2021. Looking ahead to the next few years, as demand for AI servers continues to rise, the company will be able to rapidly increase production capacity by preparing goods in advance.
There are plenty of AI server production lines. On the demand side, according to data from CCID Consultants, the Chinese server market shipped about 4.48 million units in 2022. On the supply side, Inspur Information produced 730,000 servers and components in 2016; in 2016-2023, Inspur Information put into operation more than 10 new production sites, and the estimated annual server production capacity increased by more than 700,000 units; by the end of 2023, Inspur Information was operating 14 production plants worldwide, producing more than 1.3 million servers every year. In recent years, wave information production capacity has basically matched order demand. Currently, the country is in the early stages of the AI server industry. Based on Wave information, the 14 production plants are currently in operation. Assuming that the company's production efficiency increases by 50% when demand explodes, its maximum annual output can exceed 2 million units. Compared to the previous round of server demand explosion in 2014-2016, the company currently has abundant production lines and is less limited by production capacity.
Occupies a high position in domestic AI servers. In 2017, the company proposed a long-term overall development strategy with intelligent computing as the core, and actively deployed AI computing. Currently, it has become the manufacturer with the richest AI server product line in the industry. According to IDC data, in 2023, the company was the second largest server supplier in the world and the number one AI server supplier in the world. At the level of product technology innovation, in 2023, the company released a new-generation G7 computing power platform, covering 16 products for application scenarios such as cloud computing, big data, and artificial intelligence. It uses an open and diverse architecture design, supports a wide range of general-purpose processors and accelerators, and sets multiple performance records. Among them, the AI training server NF5688G7 improved the measured performance of the large model of the previous platform by nearly 7 times.
Company profit forecast and investment rating: Benefiting from major trends in the global AI industry, we expect the company's 2024-2026 revenue to be 72,493 billion yuan, 833.77 billion yuan, 95.898 billion yuan, and net profit to mother of 2,068 billion yuan, 2,667 billion yuan, and 3.391 billion yuan respectively. The corresponding PE is 26, 20, and 16 times, respectively, covered for the first time, and given a “recommended” rating.
Risk warning: AI server sales fall short of expectations, high dependence on core device vendors, decline in the domestic real economy, etc.