Incidents:
Runze Technology released its 2024 quarterly report, achieving revenue of 1,242 billion yuan in the first quarter, an increase of 53.65% over the previous year. Achieved net profit of 474 million yuan to mother, an increase of 43.81% over the previous year. Non-net profit was deducted at 471 million yuan, an increase of 45.48% over the previous year.
Performance continued the rapid growth trend. AIDC continued or continued to contribute to the incremental company's 24Q1, achieving a year-on-year increase of more than 50% in revenue and 45% net of non-profit, continuing the good trend of the company's continued high growth. After the increase in computing power in 23Q4, we expect good performance in 24Q1 or again. At the same time, the company's performance continued to maintain a rapid growth trend. The year-on-year growth rate of deducted non-return to mother reached 40% + in every quarter of 2023, and the net profit growth rate of 24Q1 after deduction of non-return to mother continued, with a year-on-year increase of 45%.
It has maintained a high growth trend since its profit in '19.
High inventory growth, enabling computing power to continue to increase momentum
The company's inventory increased to 770 million yuan in 23 years, mainly due to the smooth expansion of AIDC's business and the fact that high-performance servers had not yet been delivered at the end of the year. Furthermore, the company's inventory increased to 2.4 billion yuan in the first quarter of this year.
The company has a rich reserve of high-performance servers, creating a good foundation for subsequent growth.
Domestic AI continues to advance, and endless applications are expected to bring continued domestic demand for AI applications and large models. Volcano Engine released the large model service platform “Volcano Ark”. “Volcano Ark” integrates Baichuan Intelligence, Fudan MOSS, IDEA Research Institute, Lanzhou Technology, MiniMax, Intellect Spectrum AI, etc., to provide a full range of platform services such as model refinement, evaluation, and inference. Furthermore, in March 2024, Alibaba's Tongyi Qianwen launched a free 10-million-word document processing function, and Dark Side of the Moon announced that Kimi's smart assistant already supports 2 million words of ultra-long lossless context. In the future, as more applications such as KMI and smart spectrum continue to be introduced and the number of customers increases, it is expected that demand for computing power will continue to drive.
Continued forward-looking layout, liquid cooling+AIDC to enable future development
In terms of liquid cooling, the company completed the delivery of a large number of pure liquid cooling intelligent calculation centers to major customers. At the same time, in terms of supporting facilities, the company's Beijing-Tianjin-Hebei Park successfully put into operation a self-built high-grade 220KV substation in January '24. Meanwhile, the Yangtze River Delta Park has completed the construction of its own high-grade 110KV substation, providing room for future power supply. In addition, the company is forward-looking to lay out the Hainan node. The node plans about 30,000 racks to improve the cross-border layout.
Profit forecasts and investment suggestions:
We expect the company's net profit to be 22/33/42 billion yuan in 24-26 years, respectively, with a corresponding valuation of 25/16/13 times, maintaining a “buy” rating
Risk warning: risk of cabinet climbing at a pace that falls short of expectations, risk of AIDC business expansion, risk of declining profit levels due to intense competition, and policy-related risks