Envicool(SZ:002837) Changjiang Securities·2024-04-29 06:02Investment Rating - The investment rating for the company is "Buy" and is maintained [5]. Core Insights - The company achieved rapid growth in Q1 2024, with revenue and profit exceeding expectations. Revenue reached 746 million yuan, a year-on-year increase of 41.4%, while net profit attributable to shareholders was 62 million yuan, up 146.9% year-on-year. The growth in revenue was primarily driven by increased sales of energy-saving products for data center temperature control, and profit benefited from a significant decline in expense ratios [5][6][8]. - The company's liquid cooling business is advancing rapidly, with industry-leading scale. The company has begun mass shipments of cold plates for computing equipment, contributing significantly to revenue. As a leading player in the liquid cooling sector, the company is expected to benefit significantly from the accelerated adoption of liquid cooling technologies [7][8]. Summary by Sections Financial Performance - In Q1 2024, the company reported revenue of 746 million yuan, a 41.4% increase year-on-year, and a net profit of 62 million yuan, reflecting a 146.9% year-on-year growth. The increase in revenue was mainly due to higher sales of energy-saving temperature control products for data centers [5][6]. - The overall gross margin for Q1 2024 was 29.5%, a decrease of 3.2 percentage points year-on-year, primarily due to product mix effects. The expense ratio saw a significant decline, with sales, management, and R&D expense ratios decreasing by 2.4, 2.5, and 1.2 percentage points respectively [6][8]. Business Development - The liquid cooling business is progressing rapidly, with revenue from liquid cooling technologies related to data centers and computing equipment approximately four times that of 2022. As of March 2024, the cumulative delivery in the liquid cooling chain reached 900 MW, leading the industry [7]. - The company has secured significant contracts, including winning the first share in China Telecom's elastic DC cabin procurement project for 2024-2025 and the second share for small data center air conditioning projects for 2024-2026. These projects are expected to form a substantial revenue base for the company's temperature control business in the coming years [5][8]. Investment Outlook - The company is projected to achieve net profits of 507 million yuan, 694 million yuan, and 896 million yuan for 2024, 2025, and 2026 respectively, with year-on-year growth rates of 47%, 37%, and 29%. The corresponding price-to-earnings ratios are expected to be 38, 28, and 21 times [8].