Core views

The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 9.043 billion yuan, up 20.15% year on year; net profit to mother was 977 million yuan, up 17.80% year on year; net profit without return to mother was 818 million yuan, up 19.61% year on year. 2024Q1, the company's revenue was 2,006 billion yuan, up 36.02% year on year; net profit to mother was 247 million yuan, up 4.75% year on year; net profit after deducting non-return to mother was 228 million yuan, up 7.41% year on year. In 2023, the company performed well in international business, achieving revenue of 1,620 billion yuan, an increase of 50.47% over the previous year. Further deepen the layout of computing power, and construct a full-chain layout of data elements. As demand for AI catalytic computing power continues to grow and data elements enter the dividends of rapid development, the company's computing power and data element business can be expected to grow, which is expected to open up new growth space for the company. First coverage, giving a “buy” rating.

occurrences

On March 30, the company released its 2023 annual report. The company's revenue was 9.043 billion yuan, up 20.15% year on year; net profit to mother was 977 million yuan, up 17.80% year on year; net profit after deducting non-return to mother was 818 million yuan, up 19.61% year on year.

On April 26, the company released its report for the first quarter of 2024. The company's revenue was 2.06 billion yuan, up 36.02% year on year; net profit to mother was 247 million yuan, up 4.75% year on year; net profit after deducting non-return to mother was 228 million yuan, up 7.41% year on year.

Brief review

The company's business performance grew steadily in 2023, overseas business performance was outstanding, and the company's revenue increased in 2024Q1. In 2023, the company's revenue was 9.043 billion yuan, up 20.15% year on year; net profit to mother was 987 million yuan, up 17.80% year on year; net profit without return to mother was 818 million yuan, up 19.61% year on year. In 2023, the company's international business performance was outstanding, achieving revenue of 1,620 billion yuan, an increase of 50.47% over the previous year. The revenue from smart equipment sales and operation and maintenance services achieved double growth, mainly due to the company's increased publicity and promotion efforts in overseas markets. Good news spread frequently in regions such as Asia Pacific, North America, and Eastern Europe. Western Europe and the Middle East also gradually formed a breakthrough pattern from point to point. With 2024Q1, the company achieved operating income of 2,006 billion yuan, an increase of 36.02%; net profit to mother was 247 million yuan, an increase of 4.75% year on year; net profit after deducting non-return to mother was 228 million yuan, an increase of 7.41% year on year.

We believe that the high increase in the company's revenue is mainly due to the merger of its subsidiaries China Digital Smart Exchange and CICC Payment.

Use the advantages of card slots and deep industry experience to form a full-chain layout of the data element business. As a core member enterprise of Guangzhou Digital Technology Group, the company cooperates closely with data element related enterprises such as Guangzhou Data Exchange and Guangzhou Data Group to actively promote the layout of the entire data element business chain such as data element infrastructure, governance and operation, circulation transactions, and application services, and achieved phased progress in 2023. (1) In terms of infrastructure, the company AiCore System completed a breakthrough of 1.0 to 3.0, built a “Wangdao” industry model, and participated in the construction of the Guangzhou Artificial Intelligence Public Computing Power Center. (2) In the circulation transaction process, the company participated in the Guangzhou Data Exchange (10.5% shareholding ratio) and laid out a data element trading platform. (3) In the governance and operation process, the company and Guangzhou Data Group explored the establishment of a “five-step method” for the development and utilization of public data, and participated in the preparation work related to the development and utilization of public data in Guangzhou. Qingyuan Digital Investment, a holding subsidiary of the company, obtained the right to operate and process public data from Qingyuan City, and cooperated with Zhongke Jiangnan to create a public data product in the medical insurance field — “Qingyi Insurance (Health Insurance Claims)”. (4) In the application service sector, the company acquired China Digital Smart Exchange, which has achieved 100% coverage of the head office services of large state-owned commercial banks. The database covers 200 million commercial entities, and the average number of daily calls exceeds 46 million, ranking in the leading position in the domestic credit reporting business market. The company has gradually developed full-chain service capabilities for the data element business, and its market competitiveness is constantly improving, which is expected to fully benefit from the rapid development of data elements.

As the digital wave evolves in depth, the company's computing power and data element business can be expected to grow. Breakthrough advances in underlying technologies such as AI, blockchain, and big data are gradually becoming the main driving force driving the accelerated evolution of the digital wave. Since 2023, ChatGPT has driven the AI industry into a period of rapid development, spawning massive demand for intelligent computing power, and intelligent computing centers have become a key layout direction for the government, central enterprises, and many private enterprises. The company can rely on “four clouds and two centers” to output computing power. At the same time, the production capacity of the company's subsidiary Radio and Television Wuzhou servers has reached 240,000 units/year, and has the ability to develop and produce various intelligent computing products such as servers and PCs. Therefore, as demand for intelligent computing power continues to be released, the company's computing power-related business is expected to usher in further volume growth. In 2024, data elements may gradually move from a policy-driven stage to a stage of “government and production” resonance, and the data factor industry is expected to usher in a dividend period of rapid development. According to the “Data Factor Market Ecosystem Research Report (2023)” by the Information Center of the Ministry of Industry and Information Technology, the scale of the data factor market continues to expand and is expected to exceed 200 billion yuan in 2025. As one of the first listed companies to enter the data element market, the company has significant card advantages. As the company's full-chain data element business service capabilities gradually develop, it is expected to take the lead in achieving breakthrough progress in the data element business in Guangdong. Later, it may use this as a benchmark to spread across the country, and is optimistic about the rapid development of the company's data element business.

Investment proposal: The company relies on Guangzhou Digital Technology Group to use shareholders' resources and its own business advantages to deepen the computing power layout and promote data business development to form a full-chain layout of the data element business, which is expected to open up new growth space. Considering the steady growth of the company's traditional business and the new business just set sail, we expect the company to achieve operating income of 103.29/118.75/13.570 billion yuan in 2024-2026, up 14.21%/14.98%/14.27% year on year, and net profit to mother of 10.78/12.15/13.59 billion yuan, up 10.40%/12.70%/11.82% year on year, corresponding to PE 26.18/23.23/20.78 times. For the first time, coverage is given a “buy” rating.

Risk analysis

1) Macroeconomic recovery falls short of expectations: The overall macroeconomic recovery trend has been weak since 2023. If the subsequent macroeconomic recovery process is slow, it may cause banks and other financial institutions to lower their informatization budgets, which will have a certain impact on the company's operating performance.

2) International geopolitical risk: The company's international business covers a wide range of countries and regions, involving different countries and regions. Political and geographical factors may have a significant impact on the company's business activities.

3) Policy progress falls short of expectations: There is uncertainty about the promotion and implementation results of related policies such as data elements, etc., and may have a certain impact on the development of the company's data element business.

4) Increased market competition: More competitors may appear in the Guangdong data factor market, which may have a certain impact on the company's data element business.

5) Sensitivity analysis: If the company's equipment maintenance and service business falls short of expectations in 2024, the company's overall revenue will drop by 23.90%; if the company's smart equipment business falls short of expectations and falls by 50% in 2024, the company's overall revenue will fall 18.49%; if the company's technical service business falls short of expectations and falls by 50% in 2024, the company's overall revenue will drop 7.61%.