Event Overview: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 13.420 billion yuan; net profit attributable to mother - 977 million yuan; net profit after deducting non-return to mother - 1,180 billion yuan.

In the first quarter of 2024, the company achieved operating income of 2,663 billion yuan, an increase of 21.13% over the previous year; net profit attributable to mother - 250 million yuan; net profit deducted from non-mother - 267 million yuan.

Lay out multiple product lines to cultivate core competitiveness and open up room for long-term growth. 1) Server: Accelerate the layout of a main and multiple auxiliary server product line to complete the certification of multi-line products; successfully launched a new generation of high-performance autonomous server products to build the first AI server; restructured the entire architecture of the Great Wall 2U2P server; and decoupling the BMC module and motherboard. 2) Personal terminal products: Products such as the Feiteng D2000 Battle Edition and Mega Core notebooks were introduced, and all were sold on the shelves. 3) Industrial computer: It has formed a typical sales case in the transportation and power industries. 3) Printing equipment: Launched 29 printing products in the “Fenghuo” and “Xiongguan” series, covering markets such as individual households, small and medium-sized studios, large, medium and small enterprises, and party and government. The company is becoming one of the manufacturers with the richest and most complete product line among domestic printer manufacturers. 4) System equipment field: Participate in many important models and key scientific research and production tasks; special energy products form a new pattern of full entry into multiple customer markets.

Actively expand the industry and international markets, and seek new performance growth points as the market sinks. The company established a new international market leading group and financial market leading group to explore cross-enterprise market development and organizational methods; industry terminal products maintained an advantage in STM and other projects, and won the bid for many exemplary projects such as the organization department and financial industry; Great Wall Power achieved mass production in five key R&D projects, including the DIYATX750-1200 full-module gold medal power supply; built a sales system and industry distribution system for the printing business; and accelerated the establishment of overseas offices in North America, the European Union, Africa, Southeast Asia and other regions.

Market fluctuations have put pressure on performance in the short term, and building an autonomous computing industry can be expected in the future. In 2023, there were policy fluctuations in the Xinchuang market. The system equipment business was affected by factors such as price reviews and tax exemption policy changes, and the company's profit margin was severely compressed; participating companies were affected by the economic downturn, and revenue and profit and profit and loss were high; the company's “two funds” were high, and profit and loss increased. The above reasons led to a decline in the company's 2023 performance.

In 2024, the company will focus on “building a solid foundation for intelligent computing”, focusing on strengthening research and development of intelligent computing products, expanding and strengthening the scale of the main business, improving the profitability of the main business, and gradually becoming a leading enterprise in the autonomous computing industry with core competitiveness. The company's revenue increased 21.13% year-on-year in the first quarter of 2024, reflecting to a certain extent the steady development trend of the company's business. Businesses such as Xinchuang are developing at an accelerated pace in 2024. The company also takes “improving the profitability of the main business” as an important goal, and performance is expected to gradually pick up.

Investment advice: The company is the main force in the computing industry under China Electronics. It is guided by serving the country's strategic needs, focuses on the high-quality development of the autonomous intelligent computing industry, and vigorously promotes the “core integration, end network integration, two-wheel drive, organic development” strategy. It is expected to start a new round of growth in the context of localization and replacement of core key technologies.

Net profit due to mother for 2024-2026 is estimated to be 1.85/3.09/459 million yuan, respectively. The corresponding PE is 171X, 102X, and 69X, respectively, maintaining the “recommended” rating.

Risk warning: Localization policies fall short of expectations; development of new technology falls short of expectations; industry competition intensifies.