Incidents:
On April 27, 2024, the company released its 2024 quarterly report: revenue of 1,425 billion yuan, +28.66% year over year; net profit to mother of 60 million yuan, +44.04% year over year; net profit after deducting non-return to mother was 56 million yuan, +82.83% year over year.
Investment highlights:
The overall profit level of 2024Q1 is stable and is expected to benefit from the promotion of the “digital economy” policy in 2024Q1. The rapid increase in the company's net profit withheld from mother is mainly due to the company's business growth, and the decrease in non-operating profit and loss compared to 2023Q1. 2024Q1, the company's gross margin was 4.57%, +0.89pct year on year; the net profit margin was 0.85%, +0.04pct year on year, and the overall profit level of the company remained stable. 2024Q1, the company's sales/management/ R&D expense rates were 4.07%/4.11%/6.89%, respectively, -1.44/ -1.81/-0.93pct, and the company's cost-side control continued to be strengthened.
On April 29, the Development and Reform Commission and the National Data Administration issued the “Key Work Points for the Digital Economy 2024”, which proposes nine implementation measures, including moderately advancing the layout of digital infrastructure, speeding up the construction of a data infrastructure system, and further promoting the digital transformation of the industry. We believe that policy promotion supports the cultivation of new quality productivity through innovation and development in the digital economy. The company insists on “improving IDC, strengthening cloud services, deepening big data, and laying out industry applications”, which is expected to fully benefit from the continued development of the digital economy.
Improving IDC: Data center+computing power companies go hand in hand. The State Assets Administration Commission promoted the implementation of AI for state-owned enterprises in 2023, and the first phase of the Songjiang Big Data Center project was officially put into operation. The second phase of the project has already begun related construction work after obtaining energy consumption indicators for data center construction, and is expected to be delivered by the end of 2024.
In June 2023, the company established Shanghai Intelligent Computing Technology Co., Ltd. with ITC Group and Step Star. Step Star holds 10% of the shares and Yunsaizhi holds 11% of the shares. We believe that the official operation of the company's Songjiang data center is expected to drive the company's performance to continue to improve, and is also expected to benefit from the computing power company and its shareholders' backgrounds and increase investment returns.
On April 28, 2024, the State Assets Administration Commission held an on-site promotion meeting on the state-owned enterprise reform, deepening and upgrading action, stating that central enterprises and large local state-owned enterprises and leading enterprises in the special industry should speed up the implementation of the “AI+” special action. On April 25, Beijing issued the “Beijing Computing Infrastructure Construction Implementation Plan (2024-2027)”, which requires the city's intelligent computing supply to reach 45 EFLOPS by 2025; on March 22, Shanghai issued a policy related to “Computing Power Pujiang”, which requires the city's intelligent computing power to exceed 30 eFlops by 2025. We believe that the company is a high-end data center operator owned by Shanghai, and is expected to benefit the country in the long term from vigorously promoting the construction of state-owned enterprise AI and local intelligent computing.
The company is the main force in the digital transformation of Shanghai, benefiting from the development of “Data Elements+Cloud Services” 1) Development of Shenzhen Big Data: On October 25, 2023, the National Data Administration was officially unveiled; 2024 is the first year of the “Data Element X” campaign officially launched. As the main force in the digital transformation and construction of Shanghai's cities, the company is expected to take on the heavy responsibility of public data operations in Shanghai. The company is the general integrator, operator and operator of the Shanghai Big Data Center Resource Platform, and the general operator of the data operation platform. In 2023, the company won the bid for the Shanghai Big Data Center data operation service project for the fifth consecutive year.
2) Strengthen cloud services: The company is a core MSP service provider for mainstream international and domestic cloud service providers such as Microsoft, Ali, Huawei, Tencent, and China Telecom Tianyi Cloud. According to the official account of Yunsai Zhilian on March 29, Beijing Cigna Times officially passed the latest AI ASP certification standard review by Microsoft's specialized partners and obtained AI certification. This is the second domestic company to receive this certification after Shanghai Nanyang Wanbang, a subsidiary of Yunsai Zhilian in early 2023, or this certification.
Profit forecast and investment rating: The company is an important platform in the cloud and data field under the Shanghai State-owned Assets Administration Commission. It is expected to benefit from the construction of the Songjiang Big Data Center and the accelerated implementation of data element industry plans. Based on the principle of prudence, the proposed project will not be included in the profit forecast. We expect the company's operating income in 2024-2026 to be 61.59/71.26/8.170 billion yuan, net profit to mother of 2.38/2.91/366 million yuan, EPS 0.17/0.21/0.27 yuan/share, and the PE corresponding to the current stock price is 76.42/62.57/49.72X, maintaining the “gain” rating.
Risk warning: The construction of the Songjiang Big Data Center falls short of expectations, the development of the data element industry falls short of expectations, macroeconomics affects downstream demand, intensifying market competition, and fluctuating computing power rental prices.