The company continues to increase investment in R&D and strengthen self-developed product development. Its core competitiveness continues to increase, gross margin gradually increases, the performance of the joint venture Haiguang Information continues to increase, and maintains a “highly recommended” investment rating.
The company released its quarterly report for '24, and the results were in line with expectations. 24Q1 achieved revenue of 2,479 million yuan, up 7.86% year on year; net profit to mother of 143 million yuan, up 8.86% year on year; net profit after deduction of 57 million yuan, up 16.00% year on year; and net operating cash - 494 million yuan, down from 226 million yuan in the same period last year. The company's inventory balance during the reporting period was 3.159 billion yuan, providing a guarantee for the company's operations throughout the year.
Gross profit margins continued to rise. The company's overall gross profit margin during the reporting period was 26.85%, up 2.81 percentage points from the same period last year, and 0.59 percentage points higher than last year's full-year level. We believe that the increase in the proportion of products developed by the company is the main reason for the increase in gross margin. During the reporting period, the company continued to develop high-end computers based on domestic processors, IO modules, and built-in active control firmware. The fund-raising project progressed smoothly, continued to improve product performance in terms of component performance management, product stability, high-speed interconnection, etc., and comprehensively upgraded the expandable and manageable capabilities of the server.
Expenses increased during the period. During the reporting period, the company's sales, management, and R&D expense ratios were 6.52%, 2.99%, and 14.66%, respectively, with year-on-year changes of 1.33, 0.16, and 1.84 percentage points, respectively. Affected by changes in the cost ratio during the period, the company's 24Q1 net sales margin was 5.30%, down 1.35 percentage points year-on-year. Since its establishment, the company has continued to increase investment in R&D. In 2023, the company added 360 new technicians, and the total number of technicians reached 3,547, accounting for 65.24% of the total number of technicians. Over the past 5 years, technicians have maintained an increasing trend year by year; the 24Q1 company's R&D expenses were 363 million yuan, an increase of 23.39% over the previous year.
The joint venture Haiguang Information performed well in 24Q1. The company's investment income during the reporting period was 69 million yuan, mainly contributed by the joint venture Haiguang Information. The latter achieved revenue of 1,592 billion yuan in 24Q1, up 37.09% year on year; net profit to mother was 289 million yuan, up 20.53% year on year; net profit after deduction was 272 million yuan, up 42.71% year on year. We believe that the high growth of Haiguang Information confirms the boom in China's Xinchuang industry; in addition, the Haiguang Deep Computing series is a leader in AI chips in China. Currently, new product development is progressing smoothly. Shuguang servers and Haiguang chips have strong synergy effects, which are expected to benefit from them.
Maintain a “Highly Recommended” investment rating. The adjusted company achieved operating income of 165.63 billion, 194.45, and 23.645 billion yuan respectively, and net profit to mother was 21.89, 26.34, and 32.37 billion yuan respectively. The corresponding PE was 31.1, 25.9, and 21.1 times, respectively, maintaining the “Highly Recommended” investment rating.
Risk warning: Supply chain risks and the risk that macroeconomics will affect the growth rate of new infrastructure decline.