Runjian Co., Ltd.'s revenue in 2023 was 8.826 billion yuan, up 8.17%; net profit attributable to mother was 439 million yuan, up 3.38%. After deducting non-net profit of 427 million yuan, an increase of 4.10%. 2024Q1 achieved revenue of 2.119 billion yuan, a year-on-year decrease of 6.75%, and net profit to mother of 127 million yuan, a year-on-year decrease of 8.71%.

The increase in the share of revenue from new energy operation and maintenance has put pressure on gross profit, and shareholder return plans have been clarified. Starting in 2023, the company will separate and list the computing power network business. The revenue of the computing power business in '23 was 308 million yuan, accounting for 3.5% of revenue. The share of revenue from the new energy business increased from 13.99% to 20.91% in 2013, while the share of revenue from the communications and information network management and maintenance business decreased to 51.67% and 23.92%, respectively. At the same time, the company's overall gross margin declined by 1.17 pct in 2023, mainly due to an increase in the share of new energy business, and gross margin fell 2.11 pct to 14.64% due to the implementation of some large-scale important projects. The company's net cash flow from operating activities in 2023 was 193 million yuan, down 56%, mainly due to increased investment in the company's operating activities. The company announced a shareholder return plan for the next three years (2024-2026), including: 1) meeting the requirements of positive profit and no capital expenditure exceeding 50% of net assets in the next 12 months; 2) According to the different stages of the company's development, the proportion of cash dividends in profit distribution should not be less than 20%, 40%, and 80%, respectively. 3) Fully listen to suggestions from small and medium shareholders on profit distribution policies, respond promptly to questions from small and medium shareholders, etc.

Cost control is good, and continuous emphasis is placed on intelligent computing networks, energy operation and maintenance platforms, and AI+ industry research and development. The company strengthened cost control and improved operating efficiency. In 2023, sales and management expenses decreased by 2.54% and 4.88% respectively. R&D expenses increased 17.68% in 23 years, R&D personnel increased 14%, and the proportion of personnel increased from 25.6% to 27.9%. Looking at project development progress: 1) Artificial intelligence: the computing power scheduling platform has been applied in computing power centers such as Wuxiang Yungu; the curve platform 2.0 realizes customized output of industry models and algorithms suitable for industry application scenarios, and has been gradually commercialized, and has been implemented in various projects, including the Guangzhou e-government service model base of the Chinese Academy of Sciences; the algorithm supermarket that assisted model development has implemented various projects such as the company's internal knowledge dialogue robot, new energy smart construction site supervision algorithm, transmission line defect recognition algorithm, etc.; the 5G+AI integrated communication command and dispatch system has completed command, power deployment, and patrol preparation on the map Iteration of functions such as case, event center, AR reality fusion, and video command. 2) Operation and maintenance platform: Self-branded drones have provided inspection and multi-spectral and water washing auxiliary operation services for the South Network; the RunDo PV pipe maintenance platform V3.2.0 has been launched and has been connected to nearly 3GW of power plants. The number of power plants is nearly 2,000, and functions such as SVG management, configuration monitoring, and power generation warning have been added.

RunDobidder virtual power plants have been launched in Shenzhen, Guangzhou, Fujian, Zhejiang and other provinces. At the same time, key projects such as Qiankun data center, Beidou high-precision monitoring business, Qiaojianyun 3D holographic platform, and digital farmland management system are also progressing actively.

Major manufacturers and operators cooperate to verify large-scale computing power service capabilities and develop ASEAN business based in Guangxi. Runjian Co., Ltd.'s computing power management and maintenance service has been implemented in various supercomputing centers such as the National Supercomputing Center in Shenzhen and the China-ASEAN Artificial Intelligence Supercomputing Center. As an excellent A-level supplier of China Mobile and a five-star service provider for China Tower, the company has established long-term in-depth cooperation with operators in traditional communication operation and maintenance, and is expected to fully benefit from the development of the operator's computing power business in the future. In November 2023, Wuxiang Cloud Valley, a holding subsidiary of Runjian Co., Ltd., signed a “Cooperation Agreement” with Alibaba Cloud on computing power services and digital cloud, which mainly includes two in-depth cooperation between intelligent computing cloud and digital economy innovation center. In February 2024, Runjian Co., Ltd. signed a cooperation agreement with Huawei Digital Energy Technology Co., Ltd. to jointly build an end-to-end solution for technological transformation. As the “Baidu Intelligent Cloud Strategic Partner of the Year”, the company deployed Baidu Big Model to the Wuxiang Cloud Valley Intelligent Computing Center in April 2024. At the same time, the company has taken advantage of the policy advantages of the China (Guangxi) Pilot Free Trade Zone to focus on expanding business in the ASEAN region. In 2023, it has participated in the communication and digital construction of various large-scale industrial parks such as Morowali, Weidabe, and Kendal in Indonesia, and completed the construction of J&T computing power computer rooms.

The leading local government for communication network operation and maintenance is stable, and rich data accumulation and scenarios promote the implementation of the AI+ industry. The company won the bid for China Mobile's comprehensive network maintenance service procurement project from 2023 to 2026. The winning provinces continued to rank first in number, share, and amount, breaking new breakthroughs in communication operation and maintenance services in key provinces such as Shanghai, Jiangxi, Hubei, Liaoning, and Zhejiang, and its market share increased steadily. The implementation of the AI model requires two major elements of data and scenarios: 1) Data: in the field of communication networks, the company accumulates more than 10 million communication management and maintenance quality inspection and security inspection scenarios every year; in the field of information networks, the company has more than 30 million government and enterprise industry segmented scenario data sets; in the field of energy networks, it forms more than 10 million photovoltaic power generation and environmental data sets, photovoltaic power plant low performance data sets, and electricity load characteristics data sets. 2) Scenario: Runjian Co., Ltd. built the first urban management command platform in the country to achieve four-level linkage between municipal district, county, and street offices; smart campus solutions have been implemented in more than 300 schools; more than 100 digital village solutions have been implemented; smart communities and park businesses continue to maintain ecological co-creation with the China Mobile Internet of Things, etc., and has implemented nearly 100 projects since 2023.

Rich data accumulation and downstream scenarios promoted the implementation of the company's AI+ industry solutions. The company signed cooperation agreements with Baidu, Guangzhou Institute of Electronics of the Chinese Academy of Sciences, Dahua, etc., and relied on the “curve ruler” platform to promote the implementation of large models internally and externally.

Profit forecast and investment advice: The company's total revenue for 2024-2026 is expected to be RMB 106.41/129.00/15.465 billion, respectively, corresponding growth rates of 20.56%/21.23%/19.89%; net profit to mother is RMB 6.14/9.04/1.01 billion, up 40.13%/32.87% year on year. The corresponding EPS is 2.19/3.22/4.28 yuan, corresponding to PE 17/12/9. Give it a “Recommended” rating.

Risk warning: risk of major customer concentration, risk of communication business development falling short of expectations, market competition and technology development risk.