Core conclusion: We predict that the company is expected to achieve net profit of 26.605 billion yuan, 33.834 billion yuan, and 41.521 billion yuan from 2024 to 2026, respectively, corresponding to current PE 15.5x, 12.2x, and 9.9x. Combining industry-comparable company valuations and the company's own historical average valuation level, and considering the company's good customer base and the continued drive of generative AI computing power demand, the company was given PE21x in 2024, with a corresponding market value of 558.695 billion yuan. First coverage, giving a “buy” rating.

The company is the world's leading high-end intelligent manufacturing and industrial Internet service provider. The business has achieved full coverage of five categories of the digital economy industry, including cloud and edge computing, industrial Internet, smart home, 5G and network communication equipment, smart phones and smart wearable devices, and has certain advantages in terms of products, technology and global market share.

The company continues to increase R&D investment in AI and data processing, maintain a leading position in technology, continuously build lighthouse factory benchmarks and promote replication in factories around the world, and consolidate the competitiveness of its core business. As of December 31, 2023, through selection by the World Economic Forum (WEF), the company has participated in the construction of 9 lighthouse factories, including: the world's first precision metalworking lighthouse factory, the Shenzhen Guanlan factory, and the world's first AI server lighthouse factory, the Nanqing factory.

The company's cloud computing business mainly provides customers with the design and system integration of GPU modules, substrates and AI servers, and profits have been growing rapidly in recent years. The company's long-term relationships with major partners and the company's long-term high-end manufacturing experience are expected to become an important competitive barrier for the company in the field of cloud computing, supporting the steady development of the company's GPU module, substrate and AI server business.

The main products of the company's communications and mobile network equipment business are high-speed switches and routers, precision terminal components, and network communication equipment. Based on the company's accumulation and technical advantages in high-end manufacturing, the company is expected to further promote the development of its own switch business and create new growth points in the context of rapid iteration of AI data center networks.

Risk warning: downstream demand falls short of expectations; implementation and commercialization of artificial intelligence technology falls short of expectations; R&D progress falls short of expectations; macroeconomics falls short of expectations.