Key points of investment
23 years of steady growth, 24Q1 results exceeded expectations
In '23, the company achieved revenue of 3,529 billion yuan, YOY +20.72%; net profit to mother of 344 million yuan, YOY +22.74%, continuing the record of double revenue and profit growth for more than 10 years. With goodwill impairment of 75 million yuan and equity incentive expenses of 66 million yuan (including relevant income tax), the corresponding net profit after deducting the above effects is approximately 475 million yuan, or +44% of YOY of the same caliber. The gross margin was 32.35%, +2.54 pct year-on-year, mainly affected by changes in product portfolio, cost reduction and efficiency. The sales/management/R&D/finance cost rates were 7.54%/4.36%/7.45%/0.18%, respectively, +0.27pct/+0.42pct/+0.76pct/+0.10pct, respectively. The company continued to increase R&D investment to ensure rapid upgrading and iteration of subsequent new products, which is conducive to enhancing competitiveness and increasing market share.
24Q1 achieved revenue of 746 million yuan, YOY +41.36%, mainly driven by revenue growth in the computer room temperature control business; net profit of 62 million yuan, YOY +146.93%, equity incentive expenses of 12 million yuan (including related income tax), and corresponding net profit of about 72 million yuan after deducting the above effects; sales/management/R&D/finance expense ratios were 7.31%/4.77%/8.75%/0.81%, respectively -2.38pct/-1.30pct/-1.18pct/- 0.66pct, the cost rate level has been significantly improved.
The “AI+ energy storage” dual engine drives the company's growth
Computer room temperature control products: AI-driven data center liquid cooling revenue is about 4 times that of last year. The company's computer room temperature control product revenue was 1.64 billion yuan, YOY +13.8%, and gross profit margin was 31.5%. Compared with the same period last year, the gross margin increased significantly, probably due to the gradual expansion of the revenue share of liquid cooling products with high profit levels. AI is driving rapid growth in demand for liquid cooling. With the advantage of an “end-to-end, full-chain” platform layout, the company's liquid cooling business delivery schedule has accelerated. As of March 2024, the total delivery of the company's liquid cooling chain reached 900 MW. Compared with the additional delivery of 400 MW in March of last year, the revenue related to liquid cooling of data center computer rooms and computing power equipment is about 4 times that of last year. In March '24, the company won the first bid for China Telecom's DC module for 24-25 years, and successive bids for large-scale data center liquid cooling projects in Southeast Asia for 22 and 23 years. Subsequent deliveries have become an important foundation for the company's future revenue. At present, cold-plate liquid-cooled data centers have begun to be deployed on a large scale. AI demand continues to accelerate the construction of high-density data centers and increase the penetration rate of liquid cooling. With the company's technical advantages, customer base and experience accumulation, liquid cooling products are expected to continue to contribute to growth.
Electronic cooling business: AI computing power equipment cold plate products have begun to be shipped in batches. As the performance and power density of electronic equipment continue to improve, heat generation and heat density have increased accordingly, putting higher demands on heat dissipation. The company actively lays out electronic heat dissipation based on technology accumulation and control of industry opportunities. The “electronic cooling” business was described separately for the first time in the “Management Discussion and Analysis” of the 23rd annual report, which is expected to become one of the important development directions. The company's cold plate products were included in the Intel server guidance document in '23, and products such as quick couplings, manifolds, and cold plates in the Coolinside liquid cooling full-chain solution have also been approved and purchased on a large scale by mainstream computing power chip manufacturers and leading computing power equipment manufacturers. Among them, liquid cooling plates for computing power equipment have begun to be shipped in batches, which has begun to have a driving effect on the company's business revenue.
Cabinet temperature control products: The energy storage industry is expected to maintain a good development trend in 24-25 years. In 23, the company's cabinet temperature control product revenue was 1.47 billion yuan, YOY +33.0%, mainly due to the rapid growth of the energy storage business. The company released 3D-TVC zero-power phase change liquid cooling technology in October 23, and was applied to the Pack+PCS fusion liquid cooling unit for energy storage PCS in January 24. The converter can achieve no reduction at 55℃ and increase the antipyretic capacity by 30%. In January '24, it was the first in the industry to deliver the BattCool full-link energy storage liquid cooling solution for a 5MWh high-density high-capacity energy storage system. In 2023, energy storage application revenue was about 1.22 billion yuan, YOY +44%, and business contribution continued to increase. According to CNESA incomplete statistics, China's energy storage bidding market will grow dramatically in 2023. Jibang Consulting expects China's new energy storage installed capacity to reach 29.2 GW/66.3GWh in 24, an increase of about 46%/50% over the previous year. The Zhongguancun Energy Storage Industry Technology Alliance predicts that 24-25 will be the last two years of the “14th Five-Year Plan”, and the scale of new energy storage installations will continue to grow rapidly, and the company's energy storage business may continue to fully benefit.
It is proposed to increase the dividend ratio and increase shareholder returns
The proposed cash dividend for fiscal year 23 is 114 million yuan (tax included), that is, all shareholders will pay 2 yuan (tax included) for every 10 shares, with a dividend ratio of about 33%.
Profit forecasting and valuation
The company is a leader in the domestic thermal management industry. It continues to lead the in-depth layout in the fields of data centers, energy storage, computing power equipment, charging equipment, wireless communication equipment, etc., and its R&D advantages and platform advantages continue to be highlighted.
We expect the company's 24-26 revenue to be 49.4/66.3/8.41 billion yuan, up 40%/34%/27% year on year, and net profit to mother of 5.2/6.9/90 billion yuan, up 51%/33%/31% year on year. Corresponding to PE (closing price on April 23, 2024), the company's growth rate will enter the fast track and maintain the “buy” rating.
Risk warning
Industrial development falls short of expectations; market demand falls short of expectations; gross margin growth falls short of expectations, etc.