Incidents. On April 29, Ziguang Co., Ltd. released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 77.308 billion yuan, an increase of 4.39% over the previous year, and realized net profit of 2.03 billion yuan to mother, a year-on-year decrease of 2.54%. In the first quarter of 2024, the company achieved operating income of 17.06 billion yuan, an increase of 2.89% over the previous year; realized net profit of 414 million yuan, a year-on-year decrease of 5.76%.
AI empowers the rapid development of applications in multiple industries and drives steady growth in the company's revenue. In 2023, the company continued to deepen digital solutions and full-stack cloud computing service capabilities in the context of accelerated changes in AI cloud computing and other industries. In 2023, the company's share of networking, computing, storage, security, cloud computing and other products in the Chinese market was at the top. In 2023, the company achieved revenue of 77.308 billion yuan, an increase of 4.39% over the previous year. Among them, the ICT infrastructure and service business achieved revenue of 51,506 billion yuan, an increase of 10.15% over the previous year, accounting for 66.63% of revenue, which continued to increase; it achieved net profit of 2.03 billion yuan. The holding subsidiary Xinhua 3's revenue in 2023 reached 51.939 billion yuan, an increase of 4.27% over the previous year, and achieved net profit of 3.411 billion yuan. The business of Xinhua's three domestic enterprises progressed steadily, achieving revenue of 39.868 billion yuan, an increase of 1.86% over the previous year. The domestic operator business showed a strong momentum of development, with revenue reaching 9.869 billion yuan, an increase of 11.75% over the previous year. The overall sales scale of the international business continued to expand, with revenue reaching 2.02 billion yuan, up 19.70% year on year; revenue from H3C brand products and services was 1.41 billion yuan, up 62.04% year on year. The revenue growth rate of 2024Q1's various businesses was steady. The holding subsidiary Xinhua 3 achieved operating income of 12.132 billion yuan, an increase of 14% over the previous year; net profit of 754 million yuan, an increase of 8.27% over the previous year.
Build Yunzhi's native digital platform and comprehensively lay out AIGC industry applications. In 2023, the company officially launched the “AIGC” open strategy to grasp the development trend of AI industry technology and computing power requirements, and integrate the company's computing power platform with AI servers, liquid-cooled data center products and high-performance storage to form end-to-end intelligent computing solutions to help customers build and implement projects. At the same time, the subsidiary Xinhuasan continues to create “AI+” solutions with its “cloud-network-security-computing-storage-end” full-stack capabilities and understanding of industry digitalization to enable ecosystem construction in various industries such as smart cities, smart transportation, smart education, and smart medical care. In terms of ICT equipment collection, Xinhua bid for a number of centralized bidding projects for China Mobile, China Telecom, and China Unicom in 2023, continuously deepening strategic cooperation with operators. Ziguangyun also continues to enhance core digital product capabilities such as IoT platforms, digital twin platforms, data platforms, and code identification platforms, and has successively won bids for government and enterprise projects in many places.
Profit forecast and investment rating: We predict that the company's net profit for 2024-2026 will be 26.24/32.10/3.63 billion yuan, and the current stock price corresponding to PE is 23/19/17 times, respectively. In the future, the company will actively embrace AIGC's new technology and new business format, adhere to innovation-driven development strategies, further expand its domestic and foreign business, be optimistic about the company's long-term development, and maintain a “buy” rating.
Risk warning: risk of overseas business expansion falling short of expectations; risk of R&D failure; risk of increased market competition; risk of macroeconomic and industry fluctuations.