Incident review
On August 27, 2024, the company released its 2024 mid-year report. In 2024, H1 achieved operating income of 0.799 billion yuan, a year-on-year increase of 13.38%; net profit to mother was 0.022 billion yuan, a year-on-year decrease of 67.12%. Among them, Q2 achieved revenue of 0.525 billion yuan in a single quarter, up 21.47% year on year and 91.32% month on month; realized net profit to mother 0.017 billion yuan, down 56.30% year on year and 228.93% month on month.
Management analysis
Revenue increased steadily, expenses increased and profits were under pressure in the short term: In the first half of 2024, the company actively expanded its market and customers, and revenue grew steadily. By business, revenue from liquid thermostatic equipment and electric box thermostats increased, and revenue from pure water cooling units used in the field of power electronics temperature control decreased by 22.51% year-on-year. In the first half of 2024, due to increased competition in the power electronics temperature control products industry, profit pressure and gross margin declined under downward pressure on profit, and the company's gross margin fell 4.96 percentage points year on year. In addition, the company's three expenses, including sales expenses, management expenses, and R&D expenses, increased by 35.3802 million yuan year-on-year. The main reason was to expand the fields of energy storage, semiconductors, data centers, etc., continue to increase the development of new products, new processes and product iterations, increase corresponding personnel, and pay an increase in employee remuneration; and the company's active participation in various international and domestic professional exhibitions, and the corresponding increase in travel and exhibition expenses. The company's net profit declined year-on-year due to the decline in gross margin and the increase in expenses.
Energy storage temperature control continues to grow rapidly, and the data center temperature control business can be expected in the future: in the first half of 2024, the company's revenue in the energy storage temperature control field was about 0.363 billion yuan, an increase of about 46% over the previous year. It has already accumulated customers from the Ningde Era, Sunshine Power, CRRC, and China Airlines.
In the future, the data center business is expected to relay the energy storage business and become the company's second growth engine in the future. The rapid development of the AI industry accelerates the advent of the data center liquid cooling era. KeZhi Consulting expects China's liquid cooling data center market to reach 102 billion yuan by 2027. Currently, the company is actively expanding the data center temperature control business, and has developed products such as liquid-cooled CDU, chilled water units, and Feng Shui heat exchangers. The comprehensive PUE of the self-developed full-chain solution of plate liquid cooling and immersion liquid cooling can reach 1.04. The company completed the expansion phase from 0 to 1 in 2023, and is expected to start contributing revenue in 2024.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 2.573/3.36/4.331 billion yuan, respectively; net profit to mother will be 0.263/0.348/0.442 billion yuan, respectively, corresponding PE is 16/12/9 times, maintaining a “buy” rating.
Risk warning
There is a risk that the ban will be lifted for a large amount of money, increased market competition, demand for AI servers will fall short of expectations, and the price of lithium batteries will fall.