Precision temperature-controlled faucets accelerate scale expansion. Established in 2005, Invec mainly provides precision temperature control and energy-saving products and solutions for cloud computing data centers, communication networks, energy storage systems, power grids, etc. Most of the executives have been management managers for many years in large enterprises such as Huawei and Emerson, and have accumulated rich industry experience, which is conducive to grasping cutting-edge technology directions such as liquid cooling. The company consolidates its dominant position in the industry through leading technology and a market and after-sales service network covering key regions across the country and the world. Customers cover leading segments such as major Internet companies, telecom operators, energy storage system integrators, etc., and establish stable cooperative relationships to strongly support order growth. The company's 2023 revenue and net profit to mother were 3.53 billion yuan and 0.34 billion yuan respectively, and the 2013-2023 CAGR was 32.1% and 26.3% respectively. 2024H1 revenue and net profit to mother grew by 38.24% and 99.63% year-on-year respectively. The scale expansion mainly benefited from increased revenue from energy-saving products for computer room temperature control and energy saving products, and revenue related to liquid cooling technology for the 2024H1 data center and computing power equipment increased about 1 times year on year. Profitability benefited from falling upstream prices and product structure optimization It has gradually improved since 2022, and the profit level is expected to increase further as the volume of high-margin products and the reduction in cost pressure.

AI is driving more applications such as liquid cooling capacity and energy storage to blossom. High demand for AI computing power has led to a significant increase in chip performance and power consumption at the same time. Air cooling and cooling capacity is limited, compounding the continuous rise in energy consumption in data centers and stricter PUE requirements, forcing the upgrading of cooling technology. Liquid cooling has advantages such as low energy consumption, high heat dissipation, low noise, and low TCO, and is expected to usher in rapid development. Domestic manufacturers in industrial chains such as temperature control, IDC, and servers are actively deploying liquid cooling routes, and upstream and downstream collaboration is strengthened. The three major telecom operators have clearly piloted the application of liquid cooling technology on a 10% scale of new data center projects in 2024, and more than 50% of data center projects will adopt liquid cooling solutions in 2025. Liquid cooling mainly includes cold plate, immersion, and spray solutions. Currently, the cold plate type mainly has higher cooling efficiency, and the penetration rate is expected to increase. According to our estimates, the domestic liquid cooling data center market is expected to exceed 100 billion yuan in 2027, and the CAGR is about 76% in 2023-2027, of which the cold plate/immersion type is about 51 billion yuan and 56.7 billion yuan respectively, and the CAGR is 52% and 142% respectively. In addition, the scale of global energy storage installations such as new energy and electric vehicles continues to expand, and temperature control ensures safe operation. As the energy density, capacity and operating ratio of lithium batteries increase, the proportion of liquid cooling gradually increases. GGII predicts that domestic energy storage temperature control shipment value will reach about 16.4 billion yuan in 2025, of which the liquid cooling ratio is about 45%, and the corresponding scale is about 7.4 billion yuan.

Full chain liquid cooling solution capability, electronic heat dissipation to build a new growth curve. The company uses core technology platformization to achieve sharing and reuse of different products and application solutions, quickly meet customer customization needs, and has delivered a total of 900MW liquid cooling projects as of March 24. The Coolinside full chain solution includes various solutions such as cold plate liquid cooling, single phase/phase change immersion liquid cooling, etc., independently develops cold plates, pipelines, quick connectors, Manifold, CDU, liquid cooling materials, etc., to provide full life cycle services. It has launched the BattCool solution accordingly in the field of energy storage, and has mass production capacity for end-to-end liquid cooling solutions . The company strengthens its leading position in the market by deepening customer cooperation, participating in industry standard setting, etc., and is jointly promoting technical solutions with chip manufacturers such as Intel to further strengthen competitive barriers. In recent years, the company has actively expanded chip component cooling scenarios. Electronic cooling products, including GPU/CPU liquid cooling plates, server liquid cooling modules, heat pipes, 3D-TVC, etc., have been recognized by major customers in the communications, computing power equipment, power equipment and other industries. Cold plates and other products have begun to be shipped in batches, and the performance contribution is expected to increase further.

Investment advice: Invek is a leading domestic provider of precision temperature control and energy saving solutions. It has the capacity to mass-produce end-to-end liquid cooling solutions. It benefits from the growth of AI computing power and installed energy storage. The performance is expected to expand at an accelerated pace, and the layout of electronic cooling products opens up new growth space. Net profit for 2024-2026 is expected to be 0.552 billion/0.754 billion/0.982 billion yuan, respectively, and EPS is 0.75 yuan/1.02 yuan/1.33 yuan, respectively, corresponding to 2024 PE of 35X, which is lower than the industry average. Considering the company's leading position in the industry and performance growth expectations, it is covered for the first time, giving it a “buy” rating.

Risk warning: Risk of downstream demand falling short of expectations; risk of increased risk of market competition; risk of adverse risk of new business development; risk of industrial policy adjustments and changes in the international trade environment; risk of macroeconomic fluctuations; risk of impairment of goodwill calculation; risk of deviations in market size measurement; risk of information delays or untimely updates in public data used in research reports