IFF: The world's leading intelligent manufacturing service provider for new electronic equipment products. The company has three business segments: cloud computing, communication and mobile network equipment, and industrial Internet, and is committed to building a “super link” in the global new manufacturing ecosystem. The company went public in 2018. Since its listing, the company has relied on the development opportunities of new infrastructure in the digital economy to promote high-quality development of the core business of “high-end intelligent manufacturing+industrial Internet”, achieve continuous innovation in product technology, and the company's performance has grown steadily. The company's revenue in 2023 was 476.340 billion yuan, and 2018-2023 CAGR = 2.78%.
Cloud Computing: Global leader in server ODM, benefiting from growing AI demand. Under the AI wave, demand for AI servers is growing rapidly. According to Trendforce data, global AI server shipments will reach 1.67 million units in 2024, +38% over the same period last year. The company is the world's leading server ODM company and one of the few enterprises in the world with manufacturing service capabilities for the entire AI industry chain. In 2023, the company's cloud computing business revenue was 194.308 billion yuan, of which AI server revenue accounted for about 30%, showing a strong growth trend. The company expects to account for about 40% of the global AI server market in 2024. Combined with the upgrading of the AI server product structure, the company is expected to achieve higher growth than the industry average, and the share of AI server revenue is expected to increase further.
Communications and mobile network equipment: Global switch foundry core enterprise. In terms of network equipment, the company is a global switch foundry core enterprise, accounting for more than 75% of the global customer share. Switches are one of the core components of the AI cluster. The company's 200G/400G high-speed switches have been mass-produced, 800G switches have entered the NPI stage, and are expected to contribute revenue in 2024. In terms of communication equipment, global terminal demand slowed in 2023, North American telecom operators cut capital expenses, and the company's 5G product shipments remained at the same level as in 2022. In terms of high-precision mechanisms, the titanium alloy middle frame upgrade is an important change in 2023. The company binds key customers to benefit from increased demand driven by the iteration of consumer terminal technology.
Industrial Internet: Leading the digital transformation of the global manufacturing industry. In the era of Industry 4.0, intelligence and digitalization are the main themes of upgrading the global manufacturing industry. The company is the world's leading intelligent manufacturing and industrial Internet overall solution service provider. In 2023, the company built 3 world-class lighthouse factories, helping to build a total of 9 lighthouse factories. The company is located in the Asia-Pacific region, the center of global manufacturing. Relying on a complete industrial chain layout and rich experience in manufacturing digitalization, it is expected to benefit from the wave of digital transformation in the manufacturing industry.
Investment advice: The company is profoundly benefiting from the growth in AI demand, and traditional businesses are expected to continue to contribute to the increase. We expect the company's net profit to be 253.09/304.40/34.977 billion yuan in 2024/2025/2026, respectively, and the corresponding PE is 19.25/16.01/13.93 times, respectively. Covered for the first time, a “gain” rating was given.
Risk warning: Demand for AI servers falls short of expectations, increased industry competition, geopolitical risks, macro demand falls short of expectations, risk of exchange rate fluctuations.