1Q23's profit grew rapidly; the production capacity of newly delivered projects gradually released 1Q23's revenue of 372 million yuan, an increase of 8.61% over the previous year; the 1Q23 company's EBITDA was 264 million yuan, an increase of 12.09% over the previous year; 1Q23 company achieved net profit of 35 million yuan, an increase of 241.96% over the previous year, mainly due to the gradual electrification of the company's data center cabinets that were put into operation earlier and production capacity was gradually released. In the long run, the introduction of the “Digital China” policy and the development of new applications such as AIGC will continue to drive IDC demand. The company is expected to continue to strengthen its competitiveness with its core regional resource reserves. We expect the company's EBITDA for 23-25 to be 1,176/1373/1,628 billion, respectively. Considering the impact of the short-term listing rate of new projects, the company was given a 23-year EV/EBITDA of 15 times (comparable company average: 18.14) and a corresponding target price of 45.39 yuan (previous value: 41.82 yuan) to maintain the “buy” rating.
The business scale continues to expand steadily; new applications such as AIGC are expected to drive long-term industry demand growth. Since 2023, the company has responded positively to the national “digital China” strategy and gradually promoted the construction and related preparations of the China Unicom Big Data Innovation Industry Project Phase I, the Hebei Langfang Project, and the Shanghai Minhang Project. According to the company's official website, the company's IT load has now reached 371.1 MW, equivalent to about 74,200 standard cabinets, 100% located at Dongsu Western Computing's core hub nodes. In terms of greening, the company promotes green energy efficiency throughout the life cycle of data centers. The annual minimum PUE for operating data centers nationwide can reach 1.09. With the gradual commercialization of AIGC, data centers, as the underlying infrastructure that carries data storage, transmission, and computing power requirements, are expected to usher in a new round of growth opportunities. Looking at the long term, we believe that as the business needs of end customers increase and long-term orders lock in revenue, the company's revenue and profits are expected to grow steadily.
Gross margin increased 4.28 pct year-on-year in the first quarter. Expense rate control was good. As the company's terminal customer business requirements increased, the company's data center cabinets already in operation were gradually powered to generate operating income. The company's profitability gradually increased. The company's overall gross margin increased 4.28 pct to 29.38% year on year in 1Q23. In terms of cost rate, benefiting from scale effects and the company's good cost control ability, the company's R&D/management/sales/finance expense ratio in 1Q23 changed 1.11/-1.21/-0.01/-3.19pct to 5.44%/3.56% /0.18% %/ 9.30%. We believe that with the gradual release of production capacity for the company's new data center project and large-scale computing power demand brought about by the commercialization of AI, the company's profits are expected to continue the current good growth trend.
Optimistic about long-term growth space and maintain the “buy” rating
We are optimistic that the company's EBITDA and profit growth will continue under the trend of gradually increasing the penetration rate of new applications such as AIGC. The company's EBITDA for 23-25 is estimated to be 1,176/1373/1,628 billion, respectively.
Comparable company Wind in '23 unanimously expected an average EV/EBITDA value of 18.14 times. Considering the impact of the cabinet listing rate for new projects in the short term, the company was given 15 times the EV/EBITDA in '23, corresponding to the target price of 45.39 yuan (previous value: 41.82 yuan), maintaining the “buy” rating.
Risk warning: Customer power delivery progress falls short of expectations; project construction and delivery progress falls short of expectations.