24Q1: The company's revenue grew steadily and positively. Digital Cloud + Xinchuang achieved explosive growth of 100% +, intelligent computing centers continued to break through, and car+ overseas built a new value fulcrum, and maintained a “highly recommended” investment rating.
Incident: The company released its report for the first quarter of 2024. In 24Q1, it achieved operating income of 29.272 billion yuan, YoY +7.95%; realized net profit due to mother of 235 million yuan, YoY +12.35%; realized net profit withheld from mother was 203 million yuan, YoY -14.73%; net cash flow from operating activities was -255 million yuan, compared to 82 million yuan for the same period last year.
The strategic business achieved explosive growth and continued to increase investment in R&D. 24Q1 benefited from AI, and Shenzhou Kuntai's AI computing power-related business achieved explosive growth, driving the company's high gross profit margin, high-quality cloud, digitalization, and independent brand business revenue growth, which first broke the double-digit share of overall revenue to 10%; at the same time, the company's overall gross margin increased by 0.90 pct to 4.57%. By business, 24Q1's cloud and digital business revenue reached 1.68 billion yuan, of which the digital cloud business (MSP+ISV) achieved revenue of 366 million yuan, an increase of 127% over the previous year; its own-brand business achieved 1.25 billion yuan, of which the Xinchuang business achieved revenue of 1,138 billion yuan, a sharp increase of 166% over the previous year, laying a solid foundation for rapid growth throughout the year. 24Q1's sales/management/R&D expense rates were 1.54%/0.28%/0.30%, respectively, with a year-on-year change of -0.01/0.02/0.04pct. Among them, R&D expenses increased 24% year on year. Mainly, the company continued to increase investment in AI-related product research and development, such as Shenzhou Wenxue, Shenzhou Kuntai all-in-one, and Shenzhou Kuntai self-developed servers.
Demand for intelligent computing is being released at an accelerated pace, and car+ overseas is building a new value fulcrum. In terms of AI computing power, the company won the bid for China Mobile's new 2023-2024 new intelligent computing center project in February 2024, with a bid share of 8.48%; in April 2024, China Mobile officially tendered the 2024-2025 new intelligent computing center procurement project to purchase 7,994 artificial intelligence servers, supporting products, and 60 white box switches, confirming that demand for intelligent computing continues to be strong; in addition, according to the company's official account, the Shenzhou Digital Shenzhen Artificial Intelligence Computing Center project was officially launched in the first quarter, and It will be launched soon. In terms of overseas travel, the company's international business headquarters is located in the Greater Bay Area of Shenzhen and signed a Memorandum of Understanding (MOU) with the Ministry of Digital Economy and Social Affairs of Thailand; in the automotive industry, the company launched a full-link operation service for the first comprehensive NEV live broadcast base in China, using data as the core to create a differentiated competitive advantage.
Maintain a “Highly Recommended” investment rating. The company's strategic business continues to grow rapidly, and Automotive+ Overseas builds a new value fulcrum. The net profit for 24-26 is estimated to be 1,384/16.00/1,830 billion yuan, maintaining a “Highly Recommended” investment rating.
Risk warning: policy implementation falls short of expectations, supply chain risk, market competition risk