Key points of investment:
A veteran IDC+AIDC industry player. The company was founded in 2009, and its main business includes IDC business and AIDC business. IDC business: The company cooperates with basic telecom operators and mainly uses a wholesale model to jointly provide server hosting services to end customers such as leading Internet companies and large cloud vendors, while also providing operation and maintenance, security management and other value-added services. AIDC business: As the chain owner of the Intelligent Computing Center, the company collaborates with ecological partners to organize and build a complete industrial ecosystem from intelligent computing infrastructure, to intelligent computing platforms, to the overall solution of the intelligent computing center, with high-quality output of high-performance computing capabilities and large-scale parallel processing capabilities to provide intelligent computing services for large terminal model customers.
Revenue and net profit increased substantially. In 2023, the company's revenue was about RMB 4.351 billion, up 60.27% year on year, and realized net profit of about RMB 1,762 billion, up 47.03% year on year, after deducting non-net profit of about RMB 1,709 billion, up 50.18% year on year. The reason for the sharp increase in the company's revenue is that since 2023, the company developed the AIDC business and achieved revenue of about 1,199 billion yuan in that year.
In Q1 2024, the company's revenue was about 1,242 billion yuan, up 53.65% year on year, and realized net profit to mother of about 474 million yuan, an increase of 43.81% year on year.
The rapid development of AI technology has driven a rapid increase in demand for intelligent computing power, and intelligent computing centers have become an important new type of infrastructure. At the same time, cooling challenges brought about by the demand for high-density AI computing power and strict PUE control under the “dual carbon” policy are driving rapid growth in demand for liquid-cooled computing power centers, and demand for intelligent computing centers is strong.
After completing the layout of the national integrated computing power center system, AIDC gradually became the company's second growth curve. Since its establishment in 2009, the company has anchored the development strategy of park-level computing power centers. Currently, it has laid out 1 130,000 cabinet park, 1 50,000 cabinet park, 4 30,000 cabinet parks, and 1 14,000 cabinet park in six core regions across the country. In particular, the Beijing-Tianjin-Hebei Park has become one of the largest park-level computing power centers in the country, with remarkable scale and location advantages.
Benefiting from the application of liquid cooling solutions and the explosion of AI artificial intelligence, the demand for intelligent computing has grown rapidly, and the company's new AIDC business has expanded smoothly, and the scale of revenue continues to expand. At present, seven AIDC intelligent computing power infrastructure clusters have been planned and completed in six core regions, including Beijing-Tianjin-Hebei, Yangtze River Delta, Greater Bay Area, Chengdu-Chongqing Economic Zone, Gansu, and Hainan Free Trade Port. It has accumulated 61 intelligent computing centers and resource reserves of about 320,000 racks, and has basically completed the national “integrated computing power center system” framework layout.
In 2024, the company will speed up the construction of the new intelligent computing center project in Langfang B District and Yangtze River Delta Park, quickly build a single intelligent computing center project that can gather more than 100,000 cards, and provide a full range of service support and technical support for trillion-dollar model training and reasoning with high complexity and high computational requirements. The company's outlook for AIDC in 2024 is optimistic.
The company will issue public REITs for the first time in the IDC industry. According to the company's 2023 annual report, the company plans to use the A-18 data center of the “International Information Gathering Nuclear Port (ICFZ) Project” owned and operated by its wholly-owned subsidiary Runze Development as an underlying infrastructure project to carry out pilot infrastructure real estate investment trusts (REITs) reporting work.
Up to now, there are no cases of successful REITs issued in the IDC industry. As a leading company in the IDC industry, Runze Technology has many mature data center projects, mature and stable operation, strong profitability, and sustainable upgrade and iteration space, which meets the requirements of publicly funded REITs. The company is currently in a phase of rapid growth and is in need of equity financing.
The public offering of REITs is conducive to revitalizing high-quality existing assets, recovering operating investment and redeeming profits early, increasing asset turnover speed, and reducing the company's balance ratio. At the same time, a new corporate financing platform has been added to protect the company's healthy and sustainable development.
Profit forecasting and investment advice. The company has been deeply involved in the IDC field for many years, and has achieved significant growth by leveraging AIDC's new flashpoint. We believe that the company has great potential to grow at AIDC. We estimate that the company's revenue for 2024-2026 will be $58.14/77.31/99.67 billion yuan, respectively, up 33.64%/32.96%/28.93%; net profit to mother will be 22.27/30.83/4.049 billion yuan, up 26.42%/38.42%/31.32%; EPS will be 1.29/1.79/2.35 yuan, respectively. Referring to comparable companies, considering the company's good development trend in AIDC and the three-year EPS compound growth rate of each company, the company was given 32 times PE in 2024, with a target price of 41.42 yuan, for the first time coverage, and a “superior to the market” rating.
Risk warning. Demand growth at AIDC fell short of expectations; revenue and net profit fell short of expectations due to continued downturn in the IDC industry; and market competition intensified.