Incident: On April 22, the company released its 2024 quarterly report, 2024Q1. The company achieved revenue of 746 million yuan, +41.36% year over year; net profit to mother of 62 million yuan, +146.93% year over year; net profit after deducting non-return to mother of 54 million yuan, +169.65% year over year.
Both revenue and profit increased, and profitability improved markedly. 2024Q1, the company's revenue grew rapidly, mainly due to energy-saving products for computer room temperature control; profitability improved markedly, with gross margin of 29.51%, -3.22pct year on year; net margin was 8.26%, +2.85pct year on year. On the cost side, the 2024Q1 company's cost rate for the period was 21.63%, -5.52pct. Among them, sales/management/finance/R&D expenses were 7.31%/4.77%/0.81%/8.75%, respectively, and -2.38/-1.30/-0.66/-1.18pct, respectively. In the first quarter, the company's share payment fee was 12 million yuan. Under these circumstances, the fee ratio still achieved a significant decline, indicating that the company achieved remarkable results in reducing costs and increasing efficiency. 2024Q1 achieved a net operating cash flow of 56 million yuan, which changed from negative to positive over the previous year, indicating a marked improvement in the company's sales and repayment situation.
The introduction of liquid cooling technology is accelerated, and the competitive advantage of full-chain liquid cooling is remarkable. As demand for computing power accelerates, liquid cooling has become the preferred cooling solution for high-heat density data centers. In the field of computing power equipment and data centers, the company pioneered the release of Coolinside full-chain liquid cooling solution 1. Related products include cooling sources, pipeline connections, CDU distribution, quick couplings, manifolds, cold plates, long-lasting liquid cooling materials, liquid leak detection, etc. As of March 2024, the company's liquid cooling projects have been delivered to a total of 900 MW2; in the field of energy storage, the company released BattCool's full-chain liquid cooling solution for energy storage and continuous product innovation and upgrading. In January 2024, the company was the first in the industry to deliver the BattCool Solution 3 for the 5MWh high-density high-capacity energy storage system. We believe that as demand for digital infrastructure and energy storage power plant construction accelerates, the penetration rate of liquid cooling technology is expected to continue to increase, and the company is expected to continue to benefit from the industry-leading advantages of liquid cooling platforms.
Bind the interests of core employees to help the company develop steadily over the long term. On March 25, 2024, the company completed the 2024 stock option incentive plan registration process, and granted 9.16 million stock options to a total of 305 core managers and core technical (business) personnel at an exercise price of 19.61 yuan/share. The performance assessment target is: Based on the company's net profit due to mother in 2023, the net profit growth rate for 2024-2026 is not less than 15%/32%/52% 4. We believe that this incentive plan will help the company attract and retain core talents, enhance employee motivation, enhance the company's core competitiveness, and promote the company's long-term sustainable development.
Profit forecast and investment rating: The company's net profit for 2024-2026 is estimated to be RMB 5.10/66/ 862 million yuan, respectively. The current stock price corresponds to PE of 34/26/20 times, respectively, maintaining a “buy” rating.
Risk warning: Customer growth falls short of expectations, downstream demand falls short of expectations, risk of fluctuations in raw material prices, risk of macroeconomic fluctuations.