LCXX(000977) CSC SECURITIES (HK) LTD·2025-05-06 07:12Investment Rating - The report assigns a "Buy" rating for the company, with a target price of 60 CNY per share [5][6]. Core Insights - The company reported a significant revenue growth of 165.3% year-on-year in Q1 2025, reaching 4.686 billion CNY, with a net profit increase of 52.8% to 463 million CNY [6]. - The demand for computing power from internet companies is driving the company's revenue growth, while economies of scale are reducing expense ratios [6]. - Major internet firms are increasing capital expenditures on computing power, which is expected to sustain high industry demand [6]. - The company maintains a strong position in the server industry, particularly in AI and liquid-cooled servers, with a market share of 36.8% in liquid-cooled servers in China [6]. - Future earnings are projected to grow significantly, with net profits expected to reach 3.43 billion CNY in 2025, reflecting a year-on-year growth of 49.67% [8]. Summary by Sections Company Overview - The company operates primarily in the computer industry, with a market capitalization of approximately 74.77 billion CNY and a share price of 50.85 CNY as of May 5, 2025 [1]. Financial Performance - The company achieved a gross margin of 34.5% in Q1 2025, despite a year-on-year decline of 4.68 percentage points due to increased sales to internet firms [6]. - Operating cash flow increased by 265.5% year-on-year, reaching 5.803 billion CNY, attributed to improved sales collection and changes in payment schedules [6]. Market Position - The company ranks second globally and first in China in server market share, with a strong foothold in AI server technology [6]. - The report highlights the company's technological advancements, including the launch of a general-purpose server capable of running large AI models [6]. Earnings Forecast - Projected net profits for 2025-2027 are 3.43 billion CNY, 4.67 billion CNY, and 6.25 billion CNY, respectively, with corresponding year-on-year growth rates of 49.67%, 36.07%, and 33.80% [8].