Performance performance

On August 24, 2024, the company released its 2024 interim report

[Overall performance]

(1) 24H1 revenue 2.89 billion (YoY +15.7%), net profit to mother 0.113 billion (YoY +21.78%), net profit not attributable to mother 0.097 billion (YoY +12.04%).

(2) 24Q2 revenue of 1.465 billion (YoY +5.36%), net profit attributable to mother 0.053 billion (YoY +3.64%), net profit not attributable to mother 0.041 billion (YoY -26.36%).

[Gross profit margin, cash flow]

24H1 gross profit margin 18.76% (year-on-year increase of 0.1 pct), 24Q2 gross profit margin 19.21% (year-on-year increase of 0.78 pct);

24H1 net cash flow from operating activities - 0.301 billion, 24Q2 net cash flow from operating activities 0.129 billion.

[Fee rate]

24H1 sales/management/R&D expenses rate 4.17%/4.20%/6.91%, sales expenses decreased 6.65% year on year, management expenses increased 0.46% year on year, and R&D expenses increased 17.32% year on year.

Performance reviews

Deeply involved in data center operations, the subsidiary's revenue and profit growth rate is impressive. The company's 24H1 revenue reached 2.89 billion yuan (+15.7%), and the net profit to the mother was 0.113 billion yuan (+21.78%). We believe that the high-end data center operation business is an important support for the company's outstanding performance.

According to the semi-annual report, Shanghai Technology Network Communications Co., Ltd. is positioned as a neutral third-party high-end data center operator and has cabinet resources such as Baoshan Cloud Computing Center, Baoshan Big Data Center, and Songjiang Big Data Center. 2023H1, Shanghai Science and Technology Network's revenue was 0.12 billion yuan, and net profit was 2.73 million yuan. 2024H1, the company's revenue reached 0.262 billion yuan, and net profit was 48.69 million yuan.

At the beginning of 2023, the first phase of the Songjiang Big Data Center was fully put into operation; in May of the same year, the second phase of the Songjiang Big Data Computing Center successfully passed the proposed data center compliance assessment and expert review to obtain energy consumption indicators for data center construction; in July, the second phase of the Songjiang Big Data Center construction project was introduced into Songjiang New Town as a major functional issue in Shanghai and selected for the 2024 Shanghai Major Projects List;

During the reporting period, the main structure of the second phase of the Songjiang Big Data Center project was fully capped. The company completed the construction of the Shanghai Computing Power Service Platform at the Baoshan Node at the Baoshan Big Data Center, and established a high-capacity OTN link between the two major data centers in Songjiang and Baoshan.

We believe that with the capping of the second phase of the project, the operating revenue and profit of the company's high-end data center is expected to break through further.

Operating cash flow continued to improve, with gross margin increasing the company's 24H1 net operating cash flow by 0.301 billion (+15.59%) and 24Q2 net operating cash flow 0.129 billion (+395.65%), while the company's 24H1 gross profit margin 18.76% (up 0.1 pct year on year) and 24Q2 gross profit margin 19.21% (up 0.78 pct year on year, 0.91 pct month on month); along with the gradual improvement of the company's technological level, operations+products The company's profitability is expected to be further enhanced throughout the year due to structural improvements brought about by the increase in sales revenue.

Profit forecasting and valuation

The company's cloud services, big data, industry solutions, and intelligent product business product systems are mature. It is based in Shanghai, spanning the Yangtze River Delta, Pearl River Delta and Beijing-Tianjin-Hebei regions to provide full-process scenario and business re-engineering for the digital transformation of cities. Driven by policy support, industry trends, and the company's use of its advantages, we predict that the company will achieve revenue of 6.053/7.143/8.572 billion yuan in 2024-2026, with year-on-year growth rates of 15.00%/18.00%/20.00%, and corresponding net profit to mother of 2.33/2.91/3.57 yuan, respectively. The year-on-year growth rates are 20.53% /25.14%/22.84%, corresponding EPS is 0.17/0.21/0.26 yuan, corresponding PE is 55.88/44.65/36.35 times Maintain a “buy” rating.

Risk warning

Macroenvironmental risks, risks where policy progress falls short of expectations, and risks of technological changes falling short of expectations.