1. Continue to lead intelligent operation and maintenance services, with steady revenue growth

Leading digital intelligent operation and maintenance services. Runjian Co., Ltd. is a leading digital intelligent operation and maintenance (AIOps) service provider. It continues to increase R&D investment, create an “online digital platform+offline technology service” business model, gradually expand into digital business and AI, empower it with technology, and add new business growth curves.

Performance growth is steady. The company's revenue continues to grow steadily. At the same time, the information management maintenance and energy management business layout has gradually matured in recent years, injecting new growth momentum into the company. The company's net profit to the mother rose from 239 million yuan in 2020 to 424 million yuan in '22, with an average compound annual growth of 33.19%. We believe that the company is expanding its layout in a new AI business direction, and the company's performance is expected to continue to benefit from the AI layout.

2. The digital economy is developing rapidly, and the company's business is expected to continue to expand

As the main force in the digital economy, operators' capital expenditure is skewed towards computing power and digitalization. Empowered by policies, the digital economy is growing rapidly. According to data from the Chinese Academy of Information and Communications Technology, the scale of China's digital industrialization and industrial digitalization in '21 was 8.35 trillion yuan and 37.18 trillion yuan respectively. As the vanguard of the digital economy, in '23, mobile capex guided 183.2 billion yuan, with computing power investment of 45.2 billion yuan, an increase of 34.9% over the previous year; Unicom and Telecom's planned capital expenses were 76.9 billion yuan and 99 billion yuan respectively, with a structural bias towards computing power and digitalization.

Build digital products, IDC's full service business chain layout. As of 2022, the Run+ series of digital products independently developed by Runjian Co., Ltd. has covered 12 product series and 65 application scenarios. Using operators' IDC and computing power network management and maintenance requirements as entry points, the entire IDC service business chain layout has been completed.

3. The big model empowers the B-side, and the AI layout is progressing steadily

Companies such as Baidu and Huawei have laid out big models one after another and have landed on the B-side. The “2022-2023 Assessment Report on the Development of Artificial Intelligence Computing Power in China” predicts that the compound annual growth rate of China's intelligent computing power scale will reach 52.3% in the next 5 years, and the scale of China's intelligent computing power is expected to reach 1271.4EFLOPS by 2026.

Companies such as Baidu and Huawei are speeding up investment in large-scale industry models and seeking commercialization paths for enterprise-level services.

Launched computing power leasing business and launched the “Curve Scale” platform. As of June '23, the Wuxiang Cloud Valley Cloud Computing Center has completed the first phase of project construction and has computing power leasing services. The first phase of the Runjian Intelligent Computing Center will provide customers with about 2500P computing power leasing services. In the future, there will be continuous investment according to customer needs. The Intelligent Computing Center of Runjian Co., Ltd. is built on the basis of the Wuxiang Cloud Computing Center and can carry a large computing capacity. Wuxiang Yungu is the highest-level and largest cloud computing data center in Guangxi so far. The first phase plans 6,000 cabinets, and there is a foundation for continued expansion of the company.

At the same time, the company actively embraces domestic computing power. We have collaborated with domestic computing power manufacturers on projects such as the China-ASEAN Artificial Intelligence Supercomputing Center in the field of computing power. Wuxiang Cloud Valley has also purchased some of its equipment, and the company will continue to deepen partnerships based on its original business in the future.

The company officially released the “Curve Ruler” artificial intelligence open platform in '23. The company continues to deepen the model's ability and expand the new application fields of the model with the ability to understand and understand it carefully. The company will further upgrade computing power services and build an intelligent computing power center. The company's AI infrastructure is being built steadily, and it is expected that technology will continue to be used to empower management and maintenance business.

AI-level customers are rich in resources. At the level of corporate cooperation, Runjian Co., Ltd. has not only established industry model partnerships with Baidu, Ali, etc., and reached strategic cooperation with Guangzhou Electronics of the Chinese Academy of Sciences, but is also expected to establish partnerships with leading industry model companies such as China Mobile, China Telecom, China Unicom, and Huawei, which is expected to continue to benefit.

Profit forecast and investment advice: The company has continued to grow steadily in recent years, while pioneering new AI directions and cooperating deeply with giants, which is expected to benefit from the future development of AI applications on the B-side. We expect the company's net profit from 23-25 to be 5.5/7.9/1.03 billion yuan, corresponding to the current valuation of 20/14/11 times, maintaining the “buy” rating!

Risk warning: Downstream demand falls short of expectations, industry competition exceeds expectations, there is uncertainty about whether some pre-bid orders can finally sign contracts, and the risk of AI business expansion falling short of expectations