Incidents:
Wave Information released its 2023 report and 2024 quarterly report. In 2023, the company achieved operating income of 65.867 billion yuan, -5.41% year-on-year; net profit to mother was 1,783 billion yuan, -14.54% year-on-year. The company achieved operating income of 17.607 billion yuan in 24Q1, +85.32% year-on-year; net profit to mother was 306 million yuan, +64.39% year-on-year.
Comment:
The penetration rate of AI servers increased, and the company's performance improved significantly. The company's revenue for 23Q4/24Q1 was 17.770/17.607 billion yuan respectively, up 6.04%/85.32% year-on-year respectively. Despite the downturn in the server industry cycle in 2023, the company still showed strong resilience. According to the latest 2023 market data released by Gartner and IDC, the company ranked first in the server/liquid cooled server market share in China. At the same time, benefiting from the increase in AI server penetration rate, product ASP increased significantly. In 2023, the company sold 1.256 million units of products (including some spare parts), and ASP reached 52,000 yuan, an increase of 19.0% over the previous year. Looking ahead to this year, the traditional server cycle is bottoming out and AI servers are growing rapidly. The company's 24Q1 revenue and net profit to mother all increased dramatically, and the growth rate can be expected throughout the year.
Fully embrace the AI wave, and there is plenty of room for growth. In 2023, the company released a new generation of G7 computing power platforms to create products such as general computing, AI computing, high-end computing, application optimization, complete cabinets, all-in-one computers, etc., to achieve full computing power business scenario coverage and set a number of performance records. New AI server products are introduced frequently. The NF5688G7 AI training server with the latest generation integrated architecture has improved the measured performance by nearly 7 times compared to the large model of the previous generation platform. At the same time, the NF5698G7, a next-generation AI server for the generative AI field based on the OAM high-speed interconnection of open acceleration modules, was released.
Implement the “All in Liquid Cooling” strategy to achieve batch deployment of products. Compared with traditional IDC, AIDC places higher demands on cooling performance. The company released full-stack liquid cooling products, so that the four major series of general servers, high-density servers, cabinet servers, and AI servers all support cold plate liquid cooling; at the system solution level, the company provides overall solutions for the entire life cycle of liquid cooled data centers. By the end of '23, the company's liquid cooling products and solutions had been deployed in batches in many leading Internet companies, as well as in the fields of finance, science and research.
Profit forecast and investment advice: We expect the company's 2024-2026 revenue to be 753.9/866.6/99.62 billion yuan, respectively, and net profit to mother of 21.0/26.0/3.14 billion yuan, and corresponding PE of 27x/22x/18x, respectively. Covered for the first time, a “gain” rating was given.
Risk warning: demand falls short of expectations; product development falls short of expectations.