Incidents:
The company released its 2023 annual report on April 17, 2024. In 2023, it achieved operating income of 14.353 billion yuan, an increase of 10.34%; net profit attributable to shareholders of listed companies was 1,836 billion yuan, an increase of 18.88% year on year; and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 1,278 billion yuan, an increase of 10.98% year on year.
Opinions:
Maintain investment in core technology research and development, and gradually improve the competitiveness of high-end computers. Since its listing, the company has continued to invest in high-end computing core technology research and development on a large scale. During the reporting period, the company invested 2,444 billion yuan in R&D. Fundraising projects for high-end computers based on domestic processors, IO modules, and built-in active control firmware were successfully completed, and products for the financial and other industries have already been launched by many customers. We believe that the company's high-end computer technology advantages are expected to gradually accumulate, and the brand influence is expected to continue to increase.
The advantages of storage and liquid cooling technology are prominent, and it is expected to benefit from the wave of intelligent computing construction. The wave of artificial intelligence has spawned demand for large-scale intelligent computing, and many places are speeding up the construction of intelligent computing centers and increasing investment in intelligent computing. At the same time, traditional cooling technology has become difficult to solve the cooling problems of high-density data centers, and liquid cooling technology has become an inevitable choice for AI hardware and cluster cooling. The company is deeply involved in digital infrastructure construction to enhance the comprehensive capabilities of intelligent computing center solutions. It is expected to make full use of its advantages such as distributed all-flash storage, immersive liquid cooling, and computing services to further raise revenue levels.
Computing power empowers downstream applications and actively seizes industry opportunities. Relying on its technical advantages in the field of computing, the company actively carries out R&D and business development on the application side. During the reporting period, the company released Shuguang's smart industry strategy and the newly developed smart industry platform. The smart industry solution can also provide low-level technical support such as computing, communication, control, and security, as well as full life cycle support and services, to help thousands of industries achieve the goals of industrial digital transformation. We believe that the company can use computing power to empower industry applications and build a multi-dimensional moat.
Invest in a number of high-quality assets and lay out the entire “core—end—cloud-computing” industry chain. The company has invested in many high-quality assets such as Haiguang Information, Zhongke Star Map, Shuguang Cloud Computing, Zhongke Sanqing, Zhongke Tianji, and Shuguang Digital Innovation. The company and participating holding companies cover everything from upstream chips, server hardware, and IO storage to midstream cloud computing platforms, big data platforms, computing power service platforms, and downstream cloud service providers. In the future, the company is expected to benefit deeply from business synergy, raise technical barriers, form its own and independent business ecosystem, and stabilize its leading position in the industry.
Profit forecast and investment rating: In 2024, the company is expected to benefit deeply from the wave of domestic computing power construction. The company's net profit due to mother in 2024-2026 is estimated to be RMB 21.84/25.01/3 billion, respectively, and the corresponding PE for 2024-2026 will be 29.9/26.1/21.6 times, respectively. Covered for the first time, a “gain” rating was given.
Risk warning: Domestic computing power construction falls short of expectations; risk of errors in quoted data; AI applications are being implemented faster than expected; large-scale domestic models are being iterated less than expected; and policy standards are being introduced less quickly than expected.