The profitability of 3Q2024 companies has declined. Guanghuan Xinwang released the 2024 third quarter report. Net profit for the first three quarters of 2024 reached 0.36 billion yuan, an increase of 1.93% year on year; after deducting non-net profit, it reached 0.34 billion yuan, a year-on-year decrease of 2.63%. Looking at a single quarter, net profit for 3Q24 reached 93.5 million yuan, a year-on-year decrease of 7.73%; net profit after deducting non-net profit reached 96.89 million yuan, a year-on-year decrease of 3.80%.

China's computing power is among the highest in the world. According to statistics from China's Ministry of Industry and Information Technology, as of September 2024, China's total computing power center racks exceeded 8.3 million standard racks, and the total computing power reached 246 EFLOPS (10 billion floating point operations per second), which is among the highest in the world.

The economy and society are speeding up the overall green and low-carbon transformation, and demand for green electricity is at the cusp. On October 8, 2024, the Information Office of the State Council stated at a press conference that the government will step up the implementation of a separate energy consumption schedule for major national projects. The National Development and Reform Commission is studying the inclusion of several major projects in line with the country's major production layout, improving the resilience and safety level of the industrial chain supply chain, and supporting the development of new quality productivity within the scope of the “14th Five-Year Plan” energy consumption list.

On October 15, 2024, China's interprovincial electricity spot market was officially put into operation. Since the market began trial operation in January 2022, the cumulative trading volume of electricity has exceeded 88 billion kilowatt-hours, of which clean energy accounts for more than 44%.

The Inner Mongolia government helps develop the local green computing power industry. On June 22, 2024, the General Office of the Inner Mongolia Government issued a series of policies favorable to the green computing power industry, including stabilizing the advantage of low-cost electricity prices and not less than 80% of green electricity, reducing enterprise electricity costs through low electricity prices from new energy sources, supporting data centers to raise the green power supply ratio to a higher level and reduce the price of green electricity to households through direct green power supply and grid-based energy storage, and appropriately allocating guaranteed new energy indicators for large-scale intelligent computing center projects.

China Tower will increase partnerships to help empower a digital China. In September 2024, Zhang Zhiyong, chairman of China Tower, said that China Tower will increase social cooperation, continue to promote “multiple use of one tower”, accelerate the upgrading of the “digital tower”, continue to build the tower into an “IoT sensor integration”, provide digital intelligence and IoT services to all walks of life, and help build a digital China.

Amazon Web Services promotes AIGC applications to the benefit of its regional operators. On July 12, 2024, at the Amazon Web Services Summit in New York, Amazon Web Services announced the official launch of a number of new technologies and services, including the official application of Amazon Q Apps, the integrated application of Amazon Q Developer, etc., and is committed to making it easier for everyone to start building AI applications.

Investment advice: In the context of the AI wave and digital economy, the data center industry and cloud computing industry will continue to grow rapidly. We expect the company's 2024-2026 revenue to be 9.12/10.9/12.87 billion yuan, and net profit to mother of 0.608/0.784/0.92 billion yuan, respectively. The current stock price corresponds to 2024-2026 P/E of 31/24/21x, respectively, maintaining the “recommended” rating.

Risk warning: Customer listing progress falls short of expectations; project construction and delivery progress falls short of expectations.