Core views:
Incident: The company released its 2023 annual report, with annual revenue of 3,529 billion yuan, up 20.72% year on year; net profit to mother was 344 million yuan, up 22.74% year on year.
The temperature-controlled computer room business grew steadily, and abundant orders provided support for subsequent growth. The temperature-controlled computer room's revenue for 23 years was 1.64 billion yuan (YoY +13.83%), and gross margin increased by 6.03pct to 31.53%. The company achieved remarkable results in reducing costs and increasing efficiency. The company continues to strengthen its competitiveness among operators and large data center customers. Since the second half of last year, it has frequently won bids for liquid cooling and air cooling projects such as operators and data centers, which is expected to provide an important guarantee for future computer room temperature control business revenue.
Cabinet temperature control is benefiting from continued high growth in energy storage business. Benefiting from the prosperity of the energy storage industry, the company's brand advantages and customer base, the company's energy storage business revenue in '23 was about 1.22 billion yuan (YOY +44%). The company continues to launch innovative solutions. In January of this year, it was the first to deliver the BattCool energy storage full-chain liquid cooling solution for the 5 MWh high-density high-capacity energy storage system. The annual energy efficiency is over 30% higher than AEER, further enriching products and enhancing its competitive advantage in the energy storage industry.
Liquid cooling technology is being introduced at an accelerated pace, and it is expected that volume breakthroughs will be achieved in the future. The company's revenue related to liquid cooling technology from data center computer rooms and computing power equipment in 23 years was about 4 times that of the previous year, mainly due to the rapid growth in demand for liquid cooling and the company's “full-chain” platform advantages in liquid cooling. As of March '24, the company's cumulative delivery of liquid cooling chains has reached 900 MW. Some electronic cooling products (such as cold plates) have been recognized and purchased in batches by mainstream computing power chip manufacturers, etc., and began to contribute significantly to the company's revenue in '23. We believe that the accelerated penetration of liquid cooling technology in data centers and servers will open up the company's revenue space in the future.
Profit forecasting and investment advice. The estimated operating income for 24-26 is 46.79, 61.40, and 7.862 billion yuan. The company's net profit for 24-26 is estimated to be 483, 6.59, and 883 million yuan. Referring to comparable companies, a 24-year PE 40x, with a reasonable value of 34 yuan per share, a “buy” rating.
Risk warning. Competition in the energy storage industry increases the risk, the risk that the AI development process and data center market demand fall short of expectations, the risk that upstream material prices will rise, and the risk that new business expansion falls short of expectations.