Net profit for the first quarter increased 147% year over year. In the first quarter of 2023, the company achieved operating income of 750 million yuan, an increase of 41.4% year on year; realized net profit of 61.98 million yuan, an increase of 146.9% year on year; net profit after deducting non-return to mother was 54.31 million yuan, an increase of 169.7% year on year. The company's revenue growth in the first quarter mainly benefited from the growth of computer room temperature control products. According to previous annual reports, since 2023, the company's computer room temperature control has successively won bids for data center projects such as operators and Internet vendors, laying the foundation for continued revenue growth with subsequent delivery of ongoing projects.
Product structure affects gross profit margin, and the level of cost control continues to improve. In terms of gross margin, gross profit margin of 29.5% was achieved in the first quarter, down 3.2 pct year on year and 2.4 pct month-on-month, mainly due to increased delivery of temperature control products for computer rooms. The level of cost control continued to improve. In the first quarter of 2024, the company's sales expenses rate, management expense ratio, and R&D expense ratio decreased by 2.4/1.3/1.2pct year-on-year to 7.3%/4.8%/8.8%, including share payment expenses of 122.16 million yuan, affecting net profit to mother of about 10.384 million yuan. Benefiting from cost ratio optimization, the company's net interest rate increased by 2.9 pct to 8.3% year-on-year.
Data center liquid cooling full chain layout. The full chain layout of liquid cooling in data centers. The company has launched Coolinside liquid cooling cabinets and full-chain liquid cooling solutions for computing power equipment and data centers. The products include cooling sources, pipeline connections, CDU distribution, quick couplings, Manifold, cold plates, long-term liquid cooling materials, liquid leak detection, etc. In terms of electronic cooling, the company's liquid-cooled electronic cooling chain products, such as cold plates for computing power equipment, have begun to be shipped in batches, which began to contribute to the company's business revenue during the reporting period. According to previous announcements, as of March 2024, the company's cumulative delivery of the liquid cooling chain has reached 900 MW.
In the context of AI development and stricter domestic PUE assessments, liquid cooling is expected to become standard as the power of a single cabinet in the computing power center increases. At the same time, operators are actively promoting liquid cooling applications and planning to pilot the application of liquid cooling technology on a 10% scale of new data center projects in 2024; liquid cooling technology will be applied in more than 50% of data center projects in 2025.
The company's full-chain platformization capabilities are expected to benefit from liquid cooling application trends.
Risk warning: AI development falls short of expectations; energy storage development falls short of expectations; application of liquid cooling technology falls short of expectations; industry competition intensifies.
Investment advice: Maintain profit forecasts and maintain an “gain” rating.
Maintaining the company's profit forecast for 2024-2026, the company's net profit due to mother for 2024-2026 is estimated to be 5.4/7.0/890 million yuan, respectively, and the current stock price corresponding to PE is 32/24/19 times, respectively. Optimistic about the company's full liquid cooling chain layout potential, maintaining the “gain” rating.