Incident: The company released the 2023 Annual Report & 2024 First Quarter Report. In 2023, it achieved revenue of 2.45 billion yuan, up 20.7% year on year; net profit to mother was 18.7.88 million yuan, up 23.7% year on year; net profit after deducting non-return to mother was 864,000 yuan, up 100.8% year on year. Among them, Q4 achieved revenue of 1.08 billion yuan in a single quarter, up 32.0% year on year and 91.2% month on month; net profit to mother of 48.997 million yuan, up 175.5% year on year, up 515.8% month on month; net profit after deducting non-return to mother of 42.499 million yuan, up 150.7% year on year and 449.7% month on month. 2024Q1 achieved revenue of 810 million yuan, a year-on-year increase of 215.3%, and achieved net profit of 22.202 million yuan to mother, turning a year-on-year loss into a profit.
The computing power business has become a new growth point, and the performance is in line with expectations. In 2023, the company achieved revenue of 2.45 billion yuan, a year-on-year increase of 20.7%, and net profit to mother of 18.7.88 million yuan, an increase of 23.7% over the previous year, mainly due to a sharp increase in the computing power business. By market, the company's ICT market revenue accounted for 56.1%, and the intelligent computing market reached 43.5%. Among them, the sharp increase in intelligent computing revenue was mainly due to the sharp increase in server sales and IDC business in the intelligent computing business.
In terms of computing power construction and leasing, the company has cooperated with the Ning Huai and Qingyang governments to promote the construction of self-owned computing power projects in the two places, anchor “Mu Xi”, a leading equipment manufacturer in the domestic GPU industry in terms of computing power equipment sales, and become the general agent for its GPU products in specific industries.
Profitability is gradually improving, and cost side control is good. In 2023, the company's comprehensive gross margin was 8%, down 0.3 pp year on year, and the comprehensive net margin was -0.4%, up 2.9 pp year on year, mainly due to the company's intelligent computing business achieving significant growth. The cost side is well controlled. In 2023, the company's sales/management/financial expense ratios were 1.0%/3.5%/1.0%, respectively, down 0.7/0.6/0.5pp year-on-year, respectively. The change in sales expenses was mainly due to the reduction in sales expenses of the subsidiary Sanrui Electronics. 2024Q1's sales/management/finance expenses were 0.5%/2.2%/0.5%, respectively, a year-on-year decrease of 1.4/4.7/2.6pp.
Firmly lay out the computing power business and actively explore AI development opportunities. The company firmly lays out the computing power business. “Next-generation communication equipment production, R&D base and cloud computing center construction” was launched in Baiyun District, Guangzhou, closely following the national “East Digital Western Computing” strategic layout. On the basis of signing the “Strategic Cooperation Framework Agreement” with Lanzhou Science and Culture Tourism, the company also signed a “Strategic Cooperation Agreement” with various parties to provide integrated computing power construction services for China's “East Digital Western Computing” hub node project. In addition, in the context of the era of the rise of generative AI, the company has joined hands with high-quality enterprises in the industry to explore development opportunities and lay out a generative AI circuit to empower the company's business performance and industry status. The subsidiary has launched the app “Lingxi Magic Pen AI”, which integrates AI functions such as Wenshengwen and Wenshengtu, and is actively investing abroad to further enrich the AI ecosystem.
Profit forecasting and investment advice. EPS is expected to be 0.7 yuan, 1.05 yuan, and 1.54 yuan respectively in 2024-2026, corresponding to dynamic PE of 44 times, 30 times, and 20 times, respectively. The company was given 54 times PE in 2024, corresponding to a target price of 37.8 yuan. For the first time, coverage was given a “buy” rating.
Risk warning: risk of customer concentration, risk of profit reduction due to increased market competition, risk of supporting technology development, etc.