Incident: The company released its 2023 annual report, with revenue of 65.867 billion yuan, a year-on-year decrease of 5.41%; net profit to mother was 1,783 billion yuan, a year-on-year decrease of 14.54%.

The company released its 2024 quarterly report, with revenue of 17.607 billion yuan, an increase of 85.32% over the previous year; net profit to mother was 306 million yuan, an increase of 64.39% over the previous year.

AI chip leader Nvidia is making great strides, and the industry chain has benefited. Thanks to the demand for AI computing power chips in the 2024 fiscal year, Nvidia's revenue was US$60.922 billion, up 125.85% year on year; net profit was US$29.760 billion, up 581.32% year on year. In addition to the existing H100 chips, future sales of B100 chips will continue to bring rapid growth to the industry, and the AI industry chain is expected to fully benefit. Domestic demand for computing power is also expected to remain strong.

The company continues to maintain its leading position in the industry. According to the latest data released by Gartner and IDC, in 2023, servers are second in the world and number one in China; in 2023, the storage world's top three, China's first; and in 2023, liquid-cooled servers are number one in China. The company released the latest generation AI training server NF5688G7 with integrated architecture, which improved the measured performance of the large model of the previous generation platform by nearly 7 times.

Demand for computation is still strong, and it has entered the field of big models to create differences. Driven by big models and the recovery of the industry, demand for AI servers and storage will remain strong in the future. The “Source 2.0” basic model released by the company in 2023 includes models with three parameter scales of 102.6 billion, 51.8 billion, and 2.1 billion. It is the first 100 billion parameter model that is fully open source. The company continues to promote technological innovation of the Yuanda model in the fields of Wensheng and multi-modality, and continues to promote industrial implementation and application in the fields of intelligent customer service, smart government, and intelligent culture and creativity.

Investment advice: Demand for AI computing power is expected to remain strong. The company's EPS is expected to be 1.40\ 1.73\ 2.04 yuan in 2024-2026, respectively, maintaining a “buy” rating.

Risk warning: AI servers fall short of expectations; overseas development falls short of expectations; industry competition intensifies.