Continuously improve the company's overall competitiveness and promote continuous growth in performance. The company released its 2023 annual report, achieving full-year revenue of 14.353 billion yuan (+10%) and net profit of 1,836 billion yuan (+19%) to mother. Looking at Q1 2024 alone, the company's revenue was 2.48 billion yuan (+8%), and net profit to mother was 143 million yuan (+9%).
Gross profit margin is stable, and R&D efforts are being strengthened under reasonable cost control. In 2023, the company's overall gross margin was 26.26%, the same as in '22. By business, the company's gross profit margin for IT equipment was 21.88%, up 2.22pct year on year; gross margin for software development, system integration and technical services was 61.79%, a year-on-year decrease of 12.94 pct. This decrease in gross margin was mainly due to the increase in sales share of Shuguang Digital's cold plate products. In 24Q1 alone, the company's overall gross margin was 26.85%, an increase of 2.81 pct over the previous year, further improving profitability. In terms of cost ratios, sales/management/R&D expenses in 2023 were 5.23%/2.05%/9.17%, respectively, an increase of 0.47pct/-0.33pct/0.67pct over the previous year.
Computing power server+internet output powerful computing power, server+storage two-wheel drive. The rise of large AI models has brought about a boom in demand for algorithms. The Shuguang GPU deep learning platform computing system uses Shuguang's next-generation xMachine high-performance GPU servers to form large-scale GPU training and inference clusters, which are widely used in the fields of operators, finance, energy, and the Internet. The company has built a “national integrated computing power service platform” innovative computing power service platform, fully benefiting from the localization of computing power and becoming a leader in the computing power scheduling and construction industry. The AI technology software stack DASDAS has become the core of the Shuguang software ecosystem. Relying on basic hardware systems and development tool stacks, it collaborates with efficient operator libraries, frameworks and components to enhance AI full-stack optimization capabilities. Xinchuang products have both high adaptability and stable performance, and are closely linked to leading customers to establish a strong customer base, and further promote the business growth of Xinchuang product servers and storage in a two-pronged manner.
Build a “core—end—cloud” industrial ecosystem to achieve full coverage of upstream, middle, and downstream businesses. Shuguang's subsidiaries and participating companies cover all aspects of the computing business ecosystem for upstream chips, server hardware, IO storage; midstream cloud computing, big data, and computing power service platforms; and downstream cloud services. Upstream Haiguang Information is responsible for the chip business to provide powerful CPU+GPU services; Midstream Shuguang Digital Innovation is responsible for liquid cooling technology research and development to build a big data platform, connecting upstream and downstream with the computing power Internet developed by Shuguang Intelligent Computing and the cloud computing platform created by Shuguang Cloud Computing; downstream Zhongke Sanqing, Zhongke Xingtu and Lianfang Yuntian collaborated to build a green energy-saving smart modular data center and carry out a digital earth strategy.
Risk warning: Advances in technology related to AI models fall short of expectations, and related policies fall short of expectations.
Investment advice: The estimated net profit for 2024-2026 is 20.30/23.12/2,682 billion yuan, corresponding to current PE 29/25/22 times, respectively. We used the PE valuation method and selected comparable companies in the same industry, Inspur Information and Ziguang Co., Ltd. as comparable companies. The average PE in the industry for 24 years was 28 times. Considering the comprehensive layout of Zhongke Shuguang in the AI field and the strong synergy between the business. We gave the company 29-31 times PE in 2024, with an estimated reasonable valuation of 40.2-43.0 yuan. The first coverage gave it an “superior to the market” rating.