Incident: On October 11, 2024, the company issued a notice “Voluntary Disclosure Notice on the Progress of the Company's Computing Power Business”, which mentions “in order to strengthen investor relations management and enable investors to better understand the company's development situation, we will disclose developments related to the company's computing power business”.

Since AIOT technology has been accumulated, the computing power research and development system has basically been completed. Based on its deep accumulation and technical accumulation of cloud video platforms and AI intelligent algorithms in the AIOT field, the company develops computing power data center construction to provide computing power services and AI intelligence applications. In recent years, the company has built computing power research and development systems in Shanghai and Hangzhou, and has core technical capabilities such as microservice architectures and containerization. At this stage, the company's ARM computing power, X86 computing power, and GPU computing power clusters are gradually being built and put into use. Self-developed intelligent computing platforms unify the management and scheduling of computing power, and can provide services according to different industries and application scenarios. We believe that demand for computing power, as the core productivity in the digital economy era, is exploding. The company accumulates and lays out AIGC based on its own technology, which is expected to enhance the company's profitability and overall competitiveness.

The AI computing power business has been successfully implemented, and orders are continuing. From June to October 2024, the company successively reached cooperation or service agreements with Japan's Best Choice, UO Computing, China Mobile International, Guangzhou Aojia, and leading domestic Internet companies, including cooperative operation, computing power procurement, etc., involving cloud computing power leasing, industry model applications, and the integration of computing power resources in overseas regions. Up to now, the company has purchased a number of ARM computing power, X86 computing power and GPU computing power servers, which have been deployed and put into operation in many parts of the country, mainly targeting computing power needs such as graphics rendering, video editing, data analysis, and game acceleration. We believe that at the beginning of the company's new business, several major orders were placed, and the supply and demand sides were successfully connected, and it is expected to become a new business growth point for the company in the future.

Investment advice: The company's original business has been fully upgraded, demand in the server remanufacturing market is strong, and the new layout of AI computing power services is progressing smoothly, and it is expected to usher in a period of rapid performance growth. We expect the company's revenue for 2024-2026 to be 7.948 billion yuan, 11.004 billion yuan, and 14.993 billion yuan, net profit to mother of 0.844 billion yuan, 1.184 billion yuan, and 1,674 billion yuan, and PE 21 times, 15 times, and 11 times. Maintain a “buy” rating.

Risk warning: Cloud business development falls short of expectations, server business falls short of expectations, macroeconomic fluctuations.