The company released its 2023 annual report and 2024 quarterly report. The company achieved operating income of 8.83 billion yuan in 2023, an increase of 8.2% year on year; net profit to mother was 410 million yuan, an increase of 3.4% year on year. The company achieved operating income of 2.14 billion yuan in the first quarter of 2024, a year-on-year decrease of 6.8%, and net profit to mother of 130 million yuan, a year-on-year decrease of 8.7%. The company's 24Q1 performance was mainly affected by the high base and the pace at which the new energy business started in the same period last year. We do not think it will affect the trend of the whole year.

The communications business has been growing steadily, and the company's security margin has been strengthened. In 2023, the company's communications management and maintenance business achieved revenue of 4.56 billion yuan, an increase of 4.2% over the previous year. The communications business continues to provide strong basic support for the company. As a steady sector in the operator's downstream business, the communications business is less affected by the communications construction cycle. At the same time, as the industry pattern continues to be optimized and the share of leading companies continues to increase, the company's communications business is expected to continue to be stable. The company empowers communication operation and maintenance business with AI. Currently, related AI operation and maintenance platforms are being actively built, and it is expected that the company's human efficiency and business efficiency will be improved in the future.

The digital business is once again accelerating, focusing on the needs of a large number of high-quality customers. Influenced by the macro environment in 2023, the company actively contracted back and refocused on quality customers. The digital business of the company industry declined in 2023, achieving revenue of 2.11 billion yuan, a year-on-year decline of 12.6%. Entering 2024, digitalization and informatization are still important directions for the current needs of government and enterprise customers in China. After adjusting the strategy, the company's digital business is expected to continue to grow with renewed use of software platforms, combined with the national sales and construction team.

The new energy business is making great strides to build a clear path of development. In 2023, the company's new energy business achieved revenue of 1.85 billion yuan, an increase of 61.7% over the previous year. 2023 is a landmark for the company's new energy business. With the framework agreements signed earlier starting one after another, the company's new energy business grew significantly in 2023. At the same time, the company continues to insist on using construction business to drive the volume of new energy operation and maintenance business. 24Q1 was affected by the pace of construction commencement, and there were few new energy business settlements, but based on the company's ongoing orders, we think the economy will remain the same throughout the year.

The computing power business continues to advance, building a future growth curve. In 2023, the company's cloud services and IDC business achieved revenue of 310 million yuan, an increase of 36.5% over the previous year. In 2023, in the context of global computing power expansion, the company relied on Wuxiangyungu's own IDC to steadily develop the computing power business. As the company's subsequent computing power is implemented one after another, related businesses are expected to accelerate revenue generation and provide the company with a new growth curve in the AI era. At the same time, the company actively participated in operator IDC operation and maintenance projects to achieve rapid reuse of communication operation and maintenance capabilities in IDC.

Investment advice: The company is a leading domestic communications management and maintenance leader. Affected by the decline in digital spending in the industry under macroeconomic pressure, we have revised the company's profit forecast to a certain extent. We expect the company's revenue in 2024-2026 to be 104.6/116.9/12.89 billion yuan, net profit to mother will be 5.8/6.9/780 million yuan, and the corresponding PE will be 17/14/13x, respectively. In the long run, the company actively lays out the three major businesses of digitalization, new energy, and computing power. It is expected that new and old businesses will resonate rapidly and maintain a “buy” rating.

Risk warning: The industry's digital business is recovering slowly, computing power is slow to be implemented, and settlement of new energy projects is slow.