Key points of investment
Steady growth in 23 years, with short-term pressure on 24Q1 performance. Waiting for orders to be released, the company achieved revenue of 8.141 billion yuan, YOY +44.13%; net profit to mother of 508 million yuan, YOY +104.36%; gross margin was 27.34%, -2.13pct; sales/management/R&D/finance expense ratios were 9.07%/3.21%/5.76%/0.90%, respectively, +0.08/-0.78/ -0.69pct, cost control was continuously optimized, and sales expenses were continuously optimized. The slight increase in the rate was mainly driven by growth in the new energy business.
The 24Q1 company achieved revenue of 1,184 billion yuan, YOY -20.54%, which is mainly due to the pace of delivery and acceptance and a higher base for the same period last year; net profit to mother of 74 million yuan, YOY -48.76%, gross margin of 32.26%, year-on-year, +2.54 pct. The decline in net profit to mother was more obvious than revenue, mainly due to asset impairment losses and cost growth; 24Q1's asset impairment losses were about 0.14 billion yuan, mainly affected by inventory price drops; sales/management/R&D/finance expense ratios were 11.00%/ 5.00%/8.02%/1.51%, +3.03/+1.49/+1.45/+0.42pct, respectively.
The intelligent computing business is being actively promoted, and AI+ liquid cooling opens up a new situation in the data center business. In 2023, the company's data center industry business revenue was 2,763 billion yuan, YOY -1.94%, accounting for 33.93% of total revenue, with a gross profit margin of 31.07%, +0.18 pct. Among them, IDC services and data center products and integrated revenue were 12.89/1,474 billion yuan, YOY was -12.86%/+10.13%, respectively. /+0.38pct, rapid growth in data center products and integration.
Data center technology products and solutions continue to be iterated, and there are many application cases. The company's data center products and solutions mainly include liquid cooling, cloud power supplies, modular data centers, container data centers, power distribution cabinets, cabinets, etc. In terms of liquid cooling, the company can provide cold plate and immersion liquid cooling data center solutions, including drawer liquid cooling CDU, cabinet liquid cooling, liquid cooling micromodule, liquid cooling containers, etc. Among them, the cold plate liquid cooled micromodule data center can achieve a single cabinet power density of up to 50 kW, and the PUE can be less than 1.2. It has been successfully delivered to China Mobile Yangtze River Delta liquid cooling data center and overseas liquid cooling container projects; in addition, the company grasps market trends and provides up to 97.5% efficiency. Micromodule and prefabricated container data center solutions that flexibly integrate power supply and distribution, cabinets, refrigeration, monitoring, fire protection and other systems. The company's product solutions have been widely recognized by domestic customers and have been used in a state-owned bank production data center, Zhangjiakou national data center cluster, Ningxia Zhongwei national data center cluster, China Unicom's Zhongwei data center project, etc.; in addition, it is also actively developing overseas markets. The overseas liquid-cooled container data center was successfully delivered in November 23, and the product solution debuted at the 2024 North American Data Center Exhibition in April 24, and proposed that it will continue to focus on the US market in the future. Data center products and integrated businesses are expected to grow rapidly in the future.
Relying on self-developed products and 10 self-built data centers, we are actively expanding the intelligent computing business under the wave of AI development. The company has more than 10 years of experience in data center construction and operation. Currently, its main customers include three major operators, large Internet companies such as Tencent, major financial institutions, government agencies, etc. Sullivan's “Independent Market Research on China's Data Center Industry” in 2023 shows that the company ranks first among large retail data center companies in China with an average listing rate of 80%. Furthermore, in response to the growing demand for AI high-performance computing power from customers, the company combines its own product technology such as high-power UPS and HVDC to launch services such as AI bare metal leasing, GPU computing power pools, and AI computing power service platforms to meet the needs of different scenarios. The company signed a strategic cooperation agreement with Guoquan Foods in February '24 to help it digitally upgrade. In April '24, it joined hands with Suiyuan Technology to provide one-stop AI computing power services for Bethany's brand, Beftin. As customers' demand for AI computing power continues to grow, it is expected to accelerate the intelligent computing business.
UPS's leading position is stable, and demand in various downstream fields continued to grow. In 2023, the company's smart power industry business revenue was 1,013 billion yuan, YOY +1.68%, accounting for 12.45% of total revenue, and a gross profit margin of 35.98%, a year-on-year increase of +2.34 pct.
The company has been deeply involved in the field of energy management for more than 10 years and has a leading position in the industry. The company's smart power business is centered on high-end power supplies. The product power range covers 0.5kVA-1200kVA, covering various fields such as nuclear grade power supplies, industrial power supplies, and power supplies. By the end of '23, the company had provided electricity support for nearly 50 cities and more than 200 rail transit lines across the country, and provided a full range of power guarantees for more than 200 petrochemical companies and more than 100 high-end manufacturing enterprises such as integrated circuits, semiconductors, and panels. According to Omdia's 2023 data, the company ranked fourth in the global modular UPS market share in 2022, ranked second in the country in terms of UPS sales in 2023, and ranked first in the financial, transportation, petrochemical, education and research industries.
As demand for power safety, power quality, and intelligent power management and control in various industries increases, the UPS market continues to grow, and the company is expected to fully benefit. At the same time, the development of AI, the Internet of Things and other technologies is driving the development of power products in the direction of high power, intelligence, and modularity, and product technology upgrades and iterations are expected to spawn more market space. In the field of nuclear power, nuclear power approval and construction will continue to advance under the national planning guidelines, and the scale of installed nuclear power will be further expanded. The “14th Five-Year Plan” suggests that by 2025, the installed capacity of nuclear power will reach about 70 million kilowatts. China's nuclear power is in a stage of rapid development and has broad prospects; in the transportation sector, the country has issued documents to support urban rail transit construction. As of 23, the scale of urban rail transit operating lines in mainland China has reached 11232.65 kilometers, and the number of operating cities will continue to expand. It is expected that the scale of urban rail transit will continue to expand to 25 The operating mileage of rail transit in mainland China will exceed 15,000 kilometers per year. In the future, as the urbanization process accelerates and traffic pressure increases in major central cities, the scale and investment amount of urban rail transit planning, construction, and operation routes are expected to continue to grow steadily, maintaining a rapid development trend.
New energy sources are growing rapidly and actively expanding overseas markets
In 2023, the company's new energy industry business revenue was 4.294 billion yuan, YOY +142.78%, accounting for 52.75% of total revenue, and a gross profit margin of 21.94%, -1.21 pct year on year.
The new energy industry maintained a strong growth trend in 23 years. Relying on mature power electronics technology, the company continued to develop the optical storage circuit to achieve significant growth in the new energy business, mainly in renewable energy applications such as photovoltaics, energy storage, and hydrogen energy. By the end of 23, the company's global shipments of photovoltaic products exceeded 46 GW, and the cumulative installed capacity of energy storage worldwide exceeded 15.2 GW/8.2 GWh, ranking first in the 2023 Chinese enterprise in global energy storage PCS shipments and number one in China's user-side energy storage system shipments in 2023. It ranked as the most influential enterprise in China's energy storage industry, the best system integration solution provider in China's energy storage industry, and the best PCS supplier in China's energy storage industry in 2018-2024. The 24Q1 company's new energy orders are growing rapidly. In particular, domestic and foreign energy storage orders are growing at a high rate. In January '24, the subsidiary Kehua Digital Energy is expected to win the bid for a new energy storage project worth about 1.2 billion yuan (subject to the signing of the contract).
Domestic and international energy storage markets are expected to continue to grow rapidly, and the company's new energy business is expected to continue to contribute significantly. Jibang Consulting predicts that China's new energy storage capacity is expected to reach 29.2 GW/66.3GWh in 24, an increase of about 46%/50% over the previous year; the Zhongguancun Energy Storage Industry Technology Alliance predicts that 24-25 will be the last two years of the “14th Five-Year Plan”, and the scale of new energy storage installations will continue to grow rapidly. In addition to this, the company actively lays out overseas markets, taking increasing the company's share of overseas revenue as an important development strategy. An overseas regional sales management division will be established in 24, and production bases in Malaysia will be put into operation one after another, and overseas business is expected to further enhance its performance.
Profit forecasting and valuation
Based on the “Gemini” strategy of “Kehua Data” + “Kehua Digital Energy”, the company is expected to obtain optimistic development opportunities under the rapid development of the AI industry chain and the boom in the new energy industry. The net profit for 24-26 is estimated to be 7.53/9.30/1,066 billion yuan. The current market value (closing price on May 7, 20234) is 17/13/12 times PE for 24-26, respectively, maintaining a “buy” rating.
Risk warning
Data center construction progress falls short of expectations; demand for new energy business falls short of expectations; industry competition intensifies, etc.