Core views
The company is currently a leading domestic data center overall solution provider, providing large-scale, high-performance data center clusters. The company has earlier mastered scarce basic resources such as land, energy consumption, and electricity around first-tier cities. Currently, it has laid out a total of about 61 intelligent computing centers and 320,000 cabinets across the country, which has achieved a leap forward upgrade from IDC to AIDC. Benefiting from the application of liquid cooling solutions and the explosion of AI artificial intelligence driving rapid growth in demand for intelligent computing, the company's performance is expected to grow rapidly.
occurrences
The company released its 2023 annual report. In 2023, the company achieved revenue of 4.351 billion yuan, a year-on-year increase of 60.27%, and realized net profit to mother of 1,762 billion yuan, an increase of 47.03% over the previous year.
Brief review
1. Performance is growing rapidly, and profitability remains at a high level.
Throughout 2023, the company achieved revenue of 4.351 billion yuan, a year-on-year increase of 60.27%, achieved net profit of 1,762 billion yuan, an increase of 47.03% over the previous year, and realized net profit without deduction of 1.709 billion yuan, an increase of 50.18% over the previous year. In 23Q4, the company achieved revenue of 1,670 billion yuan, an increase of 130.23% over the previous year, and achieved net profit of 642 million yuan to mother, an increase of 69.91% over the previous year. Net profit after deducting non-return to mother was 591 million yuan, a year-on-year increase of 56.82%. By business, AIDC contributed significantly. The company's traditional IDC business achieved revenue of 3.152 billion yuan in the whole of 23, an increase of 16.1% over the previous year. The AIDC business was the company's first expansion, achieving revenue of 1,198 billion yuan. In 2023, the company accelerated the national IDC business delivery process, officially entered a new stage of contributing revenue from one park to multiple parks, successfully expanded the AIDC business, and took the lead in deploying large-scale computing power modules in the Beijing-Tianjin-Hebei Park and Yangtze River Delta Park to create a second growth curve for the company's development, thus achieving continuous and rapid growth in performance.
Rates were significantly reduced during the period, and operational efficiency continued to improve. In 2023, the company's gross margin was 48.57% (-4.54pct), and the net margin was 40.40% (-3.69pcts). The company's expense rate for the 2023 period was 9.12% (-2.13pcts), of which the sales rate was 0.06% (-0.09pct), the management fee rate was 3.86% (-0.60pct), the R&D expenses rate was 2.33% (-1.24pcts), and the financial expenses rate was 2.87% (-0.2pcts). The decline in the rate during this period was mainly due to a rapid increase in the company's revenue scale. It is expected that in the future, as the listing rate of the company's new cabinets rises and the scale of revenue grows steadily, the scale effect will gradually become apparent.
2. Accelerate delivery into a new stage in multiple parks and continue to consolidate the foundation for business development.
In 2023, the company diligently accelerated the national IDC business delivery process and officially entered a new stage of contributing revenue from one park to multiple parks. In 2023, the company delivered 5 new computing power centers, adding about 30,000 cabinets, of which the Beijing-Tianjin-Hebei Park contributed 3 and the Yangtze River Delta and Greater Bay Area parks each contributed 1. By the end of 2023, the company had delivered a total of 13 computing power centers, with a total number of about 76,000 cabinets, an increase of 65.22% over the end of 2022, and the shelf rate of mature computing power center cabinets exceeded 90%.
Incremental projects allocate new resources, and stock projects expand new energy consumption and power supply. In terms of incremental projects, in 2023, the company deployed new resources for the third time and landed in Danzhou, Hainan, with the aim of improving the cross-border layout and planning about 30,000 racks. In terms of stock projects, as the first phase of overseas projects has been completed and delivered, important basic resources such as land and energy consumption have also been added to the second phase of the project in many places. At the end of 2023, the company's energy consumption index reserves increased by 37.65% compared to the end of 2022, effectively guaranteeing the company's long-term steady development. Electricity supply. The Beijing-Tianjin-Hebei Park successfully put into operation a self-built high-grade 220KV substation in January 2024. Its maximum power supply capacity reached 960 MW, which more than tripled the power supply capacity of the Beijing-Tianjin-Hebei Park and provided sufficient space for customers to expand electricity capacity on a large scale. In addition, the Yangtze River Delta Park has completed the construction of its own high-grade 110KV substations, and other overseas parks are actively preparing to build their own high-grade 110KV substations, laying a solid foundation for the company's sustainable and rapid development.
3. Leading IDC companies actively seize AI development opportunities and increase investment in intelligent computing to open up a second growth curve.
As a leading enterprise in the IDC industry, the company has a forward-looking national strategic layout to target scarce resources. Currently, it has planned and completed 7 AIDC intelligent computing power infrastructure clusters in six core regions, including Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area, Gansu, and Hainan Free Trade Port. It has accumulated 61 intelligent computing centers and about 320,000 cabinet resource reserves, and has basically completed the national “integrated computing power center system” framework layout. By the end of the reporting period, the company had delivered 13 computing power centers and about 76,000 cabinets. At the same time, as a leader in the park-level computing power center model, the company has won the deep trust of leading Internet companies, large cloud vendors, and large terminal model customers with its unique model of “self-investment, self-construction, self-maintenance, and self-operation and maintenance”.
In 2023, as the owner of the intelligent computing center chain, the company took the lead in deploying large-scale computing power modules in the Beijing-Tianjin-Hebei Park and Yangtze River Delta Park to win the trust of large terminal model customers with excellent technical strength. At the same time, Langfang Area B is being planned to become a scarce single intelligent computing center project in China that can gather more than 100,000 cards, providing a full range of service support and technical support for trillion-dollar model training and inference with high complexity and high computational requirements. Under the wave of explosive growth in AI demand, domestic AI computing power is scarce. The company strategically lays out the AIDC field, opening a second growth curve, and is expected to continue to contribute additional volume to the company's performance.
4. Profit prediction and investment advice: The company is currently a leading domestic data center overall solution provider, providing large-scale, high-performance data center clusters. The company has earlier mastered scarce basic resources such as land, energy consumption, and electricity around first-tier cities. Currently, the country has deployed a total of about 61 intelligent computing centers and 320,000 racks, which has achieved a leap forward upgrade from IDC to AIDC. Benefiting from the application of liquid cooling solutions and the explosion of AI artificial intelligence driving rapid growth in demand for intelligent computing, the company's performance is expected to grow rapidly. We estimate that the company's net profit for 2024-2026 will be RMB 2,146 billion, RMB 3.279 billion, and RMB 4.259 billion, respectively, corresponding to the current market capitalization PE of 24x, 16x, and 12x, maintaining a “plus” rating.
5. Risk warning:
Risk of changes in the national energy saving policy: In December 2021, the Hebei Provincial Development and Reform Commission issued a relevant policy notice, proposing that by 2025, all large and very large stock data centers with electricity efficiency above 1.3 will be vacated and shut down in accordance with the law and regulations. Up to now, the PUE of the data center design being delivered and under construction by the company has dropped below 1.3, and the actual PUE of some data centers already in operation has also dropped below 1.3. However, the final PUE value still needs to be inspected or certified by the relevant competent authorities at that time. There is still a possibility that the actual operating effect will not meet 1.3 or less, or that the country will introduce a stricter energy saving policy at that time, which will bring corresponding operating risks or financial losses to the company.
The IDC project construction delivery schedule fell short of expectations. If construction of the IDC project falls short of expectations due to various reasons, it will cause delays in project delivery and adversely affect the company's future revenue growth.
Market competition has intensified. IDC cabinet rental prices are determined using a market-based approach. If the overall number of cabinets sold in the market increases in the future, it will lead to a situation where supply exceeds demand, and cabinet rental prices will drop, which will adversely affect the company's revenue and profitability.
Market demand falls short of expectations, etc. The customer pays rent to the company after the cabinet is on the shelf. If the customer's own business development is poor in the future, it will cause the customer's cabinet to be released slowly, which in turn will cause the company's business revenue growth to slow down.