Precise temperature control faucet, product lines and application fields are constantly being enriched. The company has been deeply involved in the precision temperature control industry for nearly 20 years. It is a technology-leading supplier of precision temperature control and energy-saving solutions and products. The product line and application fields are constantly expanding. Products and services are mainly used in temperature control scenarios such as IDC computer rooms, communication cabinets, energy storage cabinets, rail transit and new energy vehicles. The company has now formed four major business segments: energy-saving equipment for computer room temperature control, energy-saving equipment for cabinet temperature control, rail transit train air conditioning and services, and bus air conditioning.
Digital communication market, policy-driven energy consumption control and AIDC construction drive liquid cooling penetration rate increase. On the policy side, the country has strict requirements for data center energy consumption indicators. In the AIGC era, the demand for high-density computing power of large models continues to increase. The power consumption of computing power chips and the thermal density of data center cabinets have increased significantly. Traditional air cooling and cooling can no longer meet the needs of AI servers, and liquid cooling has become the standard for AIDC.
Telecom market: Mobile networks are being deployed ahead of schedule, energy consumption of terminal equipment is increasing, and liquid cooling technology is gradually penetrating. The 400G OTN upgrade of the operator backbone network and 5G-A began commercial deployment. The network performance upgrade was accompanied by an increase in equipment energy consumption, and the temperature control requirements for telecom computer rooms and communication base stations were upgraded. The three major operators have clarified the goals of liquid cooling technology, piloted liquid cooling technology on a scale of 10% of new construction projects in 24, and promoted ecological maturity.
In the energy storage market, the company has a leading position in the market and directly benefits from demand recovery. In '24, the price of lithium batteries stabilized, and demand delayed earlier due to price cuts was released. The company is technologically advanced in the field of energy storage and temperature control, has a stable market position, and will directly benefit from the restoration of energy storage demand.
Actively deploy liquid cooling technology to provide one-stop service for the whole chain. The company takes the lead in deploying liquid cooling from a strategic perspective and continues to release a variety of products and solutions. The company provides one-stop liquid cooling products. In the IDC field, the company released the Coolinside full-chain liquid cooling solution and signed a memorandum of cooperation with Intel in July 2023; in the field of energy storage, the company released BattCool full-chain liquid cooling solutions and SoluKing liquid cooling materials for energy storage, and has a stable market position in the field of temperature control for energy storage power plants.
Investment advice and profit forecast: We expect the company's revenue for 2024-2026 to be 4.649 billion yuan, 6.338 billion yuan, and 8.409 billion yuan, respectively, and net profit to mother of 513 million yuan, 684 million yuan and 821 million yuan respectively. The corresponding EPS is 5.46 yuan, 7.82 yuan and 10.29 yuan, respectively, and the corresponding PE for 24-26 is 35.22, 26.72, and 20.61 times, respectively. Comparable companies like Shuguang Shuchuang's corresponding 23-25 PE were 57.14, 44.03, and 35.08 times (based on consistent expectations); Shenling Environmental Corp. 24-26 PE was 22.22, 17.36, and 20.52 times, respectively (based on consistent expectations). The company has been deeply involved in the field of data center temperature control for many years, and is leading the industry in R&D and application in the field of liquid cooling. We judge that the company's leading valuation has a certain premium and give the company a “buy” rating.
Risk warning: AIGC's progress falls short of expectations, the promotion of liquid cooling technology falls short of expectations, and rising raw material prices have led to a decline in gross margin.