Key points of investment:
Q1 The performance was outstanding, and R&D capabilities continued to improve. The company publishes its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 5.264 billion yuan, an increase of 16.09%; net profit to mother of 193 million yuan, an increase of 6.70% year on year; net profit after deducting non-return to mother was 122 million yuan, an increase of 116.26% year on year. In Q1 2024, we achieved revenue of 1,425 billion yuan, an increase of 28.66% over the previous year, and realized net profit of 60 million yuan to mother, an increase of 44.04% over the previous year. In 2023, the company invested 373 million yuan in R&D and applied for 74 intellectual property rights, including 25 invention patents, 6 authorized invention patents, 14 subsidiaries maintained the title of high-tech enterprises, 3 companies held the title of municipal enterprise technology center, and added “Shanghai District-level Government Public Data Operation Service” and “Shanghai District-level Government Public Data Operation Service” to obtain “Shanghai Brand” certification. With the establishment of the Electronic Electronics Smart City Design and Research Institute, the company's second-level R&D system has been basically formed, and its data governance and customized software development capabilities have been continuously improved. It has full-chain service capabilities and accompanying service capabilities of “top-level planning - advanced design - construction and delivery - operation and maintenance - standard specifications - iterative innovation”. It has basically formed an overall solution and product array of Yunsai Zhilian IT digital innovation full-chain capabilities, and completed 9 key scientific research projects including the state-owned state-owned enterprise online supervision platform. In order to give full play to the leading role of standards and strengthen competitiveness in the field of smart city construction and “One Network Management”, the company took the lead in issuing the “Smart City Infrastructure - Comprehensive Information Column Data Sharing and Exchange Guide” (ISO/TR37178), the global smart city international standard, leading and participating in the publication of various national standards such as the “Smart City Sensing Terminal Application Guide” and the “Smart City Operation Index System General Framework”, and led the release of the first local standard “Prohibited Data Element Specification” for data in the prohibited field in China.
The company is actively implementing the “Improve IDC” strategy, and its advantages are obvious in the context of the continuous increase in computing power demand. Data center construction is an important cornerstone of Yunsai Zhilian's implementation of the “Improve IDC” strategic path. The company is positioned as a neutral third-party high-end data center operator to provide high-availability intelligent computing centers and high-performance computing power services for target customers. In 2023, the company continued to increase investment in the main business to better serve the company's development strategy. On May 16, 2023, the Shanghai Economic and Information Technology Commission announced a new batch of proposed data center projects that clearly comply with the “Shanghai Data Center Construction Guidelines (2021 Edition)”. Yunsai Zhilian Songjiang Big Data Computing Center Phase II successfully passed the proposed data center compliance assessment and expert review, and obtained energy consumption indicators for data center construction. At the same time, Yunsai Zhilian and other shareholders such as Yidian Group jointly funded the establishment of Shanghai Intelligent Computing Power Technology Co., Ltd. to actively lay out the intelligent computing power business and further promote the implementation of the “Improve IDC” strategy. In 2023, the first phase of the Songjiang Big Data Center project was officially put into operation. The 110KV power independent user station was put into use to achieve dual-channel power transmission, making preparations for the expansion of the Songjiang Big Data Center. The second phase of the project has begun related construction work after obtaining energy consumption indicators for data center construction. In July 2023, the second phase of the Songjiang Big Data Center project was introduced to Songjiang New Town as a major functional project in Shanghai. In October 2023, it was selected for the list of construction and investment opportunities for major new infrastructure projects in Shanghai. According to Shanghai's “Action Plan to Promote Innovation and Development of the Data Element Industry Based on the New Circuit of the Digital Economy (2023-2025)”, by 2025, the total computing power scale (Shanghai) will quadruple compared to the end of the 13th Five-Year Plan period, and Yunsai Zhilian was selected as the vice chairman unit of the Shanghai Computing Power Network Association in 2023. We believe that in the context of Shanghai's vigorous development of computing power, the company is expected to gain strong impetus for growth.
The company has a deep foundation in the field of data elements, which favors policies or directly benefits the company. “Making Shenzhen Big Data” is a strategic path for Yunsai Smart Connect to serve smart city solutions to strengthen the data center. The company has always been committed to exploring the practice and accumulation of government big data and industry big data. Relying on projects, the company continuously cultivates and enhances the team's consulting and planning capabilities, program design capabilities, implementation and delivery capabilities, data operation capabilities, ecological integration capabilities, and industry standard capabilities in big data resource platform construction and big data operation practices, forming a typical example of a “full-chain service” business model and replicable digital transformation. Yunsai Zhilian is the general integrator of the Shanghai Big Data Center Resource Platform, and the General Operator of the Data Operation Platform. In 2023, the company won the bid for the Shanghai Big Data Center data operation service project for the fifth year in a row. According to Shanghai's “Action Plan to Promote the Innovation and Development of the Data Factor Industry Based on the New Circuit of the Digital Economy (2023-2025)”, its overall goal is: “Make every effort to promote the global allocation of data resources, the layout of the entire data industry chain, and the all-round construction of a data ecosystem, and focus on building an internationally influential data element allocation hub node and a highland of innovation in the data element industry. By 2025, the data element market system was basically established, and the status of a national data exchange was basically established; the momentum of the data element industry reached 500 billion yuan, with an average compound annual growth rate of 15%, attracting 1,000 digital commercial enterprises; building a digital chain integration application supernode to form 1,000 high-quality data sets, creating 1,000 brand data products, and setting 20 national big data industry demonstration standards; the overall data element development ecosystem has risen, and the network and data security systems have been continuously improved, and international exchanges and cooperation have been fully deepened.” We believe that the company, as the general integrator and operator of the Shanghai Big Data Center resource platform, and the general operator of the data operation platform, is expected to directly benefit in the context of Shanghai's vigorous development of data elements.
The steady development of the cloud service business is expected to bring long-term stable income to the company. “Strengthening cloud services” is the implementation direction of the Yunsai Smart Link strategic path. The company continues to deepen MSP cloud service capabilities and build a cloud service ecosystem. In 2023, Yunsai Zhilian successively signed strategic cooperation agreements with Alibaba Cloud and Tencent Cloud. It is the core MSP service provider for mainstream international and domestic cloud service providers such as Microsoft, Ali, Huawei, Tencent, and China Telecom Tianyi Cloud. Shanghai Nanyang Wanbang Software Technology Co., Ltd., a subsidiary of the company, has been awarded the title of “Shanghai Top 100 Software and Information Service Industry” and “Shanghai Software Core Competitiveness Enterprise” for the sixth time in a row, on the “2023 Yangtze River Delta 100 Brand Software Companies” and “2023 Shanghai Top 100 Emerging Industry Enterprises” list. For the fourth time, it has been Adobe's Best Partner of the Year in China, and has been awarded Huawei's “Special Contribution Partner Award” and “Industry Outstanding Partner Award”. Beijing Xinnuo Times Technology Development Co., Ltd., a subsidiary of the company, was awarded the “2023 Digital Transformation Outstanding Innovative Enterprise”, won Adobe's “Best Market and Customer Service Practice Award”, and VMware's “Greater China Innovation Market Communication Award”. Both Nanyang Wanbang and Cigna Era are Microsoft Gold Partner, and both have obtained AEMSP certification, the highest level of cloud hosting service provider certification in the country, AIASP, etc. In 2023, the company won the bid for the “Shanghai Railway Dispatch, Operation and Skills Training Base Project Cloud Platform” project, which is another major industry cloud project after the state-owned assets supervision cloud, media cloud, etc.; it won the bid for the Shanghai e-government cloud disaster recovery center subsystem construction project, the 2023 e-government cloud infrastructure operation and maintenance project, and the cloud business support and guarantee service project, and completed the “Shanghai Supercomputing Center Public Computing Power Service Platform Project”. We believe that the company has developed steadily in the field of cloud services and has maintained good cooperative relationships with global technology giants such as Microsoft and Adobe, which is expected to bring long-term stable income to the company.
Profit forecasting and investment advice. We believe that the company's strategy of “improving IDC, strengthening cloud services, and deepening big data” is currently developing smoothly, driving the continuous and steady progress of the company's business. The company's excellent Q1 performance also indicates that the company is currently on the fast track of development and is expected to maintain a high growth rate in the future. We estimate that the company's 2024/2025/2026 net profit will be 226/2.69/325 million yuan, and EPS will be 0.17/0.20/0.24 yuan, respectively, giving the 2024 dynamic PE 90-100 times, with a reasonable value range of 14.87-16.52 yuan, maintaining the “better than the market” rating.
Risk warning. The development of artificial intelligence fell short of expectations, the development of data elements fell short of expectations, and policy progress fell short of expectations.