Key takeaway

The company released its 2025 annual report, showing rapid revenue growth and short-term profit pressure. The company's IT distribution business fundamentals are solid. Benefiting from AI demand, the electronic components business revenue grows rapidly. It also cooperates with multiple embodied intelligence manufacturers to promote real-world applications. AI software and service business grows by more than double. Relying on the two core platforms of Smart Vision, it forms end-to-end solutions and creates benchmark cases in multiple industries. The company is seeing accelerated scaling of its proprietary hardware alongside a continuously maturing product portfolio. Through strategic acquisitions, it has successfully completed the computing-networking closed loop, building an integrated architecture from core infrastructure to vertical applications that underpins the foundation for the "AI Factory" model. The company's revenue for 2026-2028 is estimated to be RMB159.065bn/RMB174.857bn/RMB191.366bn, up 10.65%/9.93%/9.44% YoY. The net profit attributable to shareholders of the parent company is estimated to be RMB753mn/RMB938mn/RMB1.183bn, up 44.08%/24.55%/26.08% YoY. The corresponding PE is 34x/27x/22x. We maintain "Buy" rating on the company.

Event

The company released its 2025 annual report. In 2025, the company achieved an operating revenue of RMB143.751bn, up 12.16% YoY; the net profit attributable to shareholders of the parent company was RMB523mn, down 30.52% YoY; the net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB703mn, down 30.70%.

Quick Take

IT distribution fundamentals are solid, actively embracing new AI opportunities. As the company's fundamental business, IT distribution and value-added services achieved a revenue of RMB135.52bn, up 8.9%, and the after-tax net profit was RMB740mn. Among them, the electronic components business segment performed particularly well. Benefiting from the strong AI demand for chips, storage and other products, it achieved a revenue of RMB28.24bn, surging YoY by 39.6%. In addition, the company established cooperative relations with multiple embodied intelligence manufacturers such as Zhiyuan ROBOT, Unitree Robotics, and Deep Robotics. It promotes the market expansion and real-world applications of robot products around typical scenarios such as industrial manufacturing, logistics sorting, commercial services, and scientific research and education. The company unites with ecological partners to jointly build a "technology-product-scenario" collaborative system. It combines robot capabilities with industry needs, system integration, and service delivery to explore the overall solution path for industry customers.

AI empowers industry applications, and AI software and service business more than doubles. The company's annual digital cloud service and software business achieved an operating revenue of RMB3.67bn, up 23.9% YoY. The after-tax net profit was RMB154mn, up 7.7% YoY. Among them, the AI software and service business represented by Smart Vision achieved an operating revenue of RMB114mn, up 165.4% YoY. This shows the company's technical depth and unique understanding in the AI application field. Relying on the " Smart Vision enterprise-level Agent middle platform" and "Smart Vision intelligent process workbench" platforms, the company forms an end-to-end solution system covering computing power resource scheduling, data asset development and operation, enterprise-level Agent platform, and scenario-based services. The company's related solutions have formed benchmark applications in fields such as medical and pharmaceutical, high-end manufacturing, automotive, operators, retail, and consumption.

Accelerated scaling of proprietary hardware and a continuously diversifying product lineup. The company's proprietary business accelerates growth, achieving an annual operating revenue of RMB7.44bn, up 62.4% YoY. The rapid development of the proprietary product business stems from the strong demand of downstream customers. It also promotes the company to occupy a leading position in the computing power infrastructure industry. The company's proprietary products cover full-stack product forms including large model training and inference, center inference, edge inference, intelligent computing boards, and industry intelligent solutions. It continues to make breakthroughs in key industries such as national computing power fields, the Internet, operators, and finance, further enhancing its market competitiveness. In addition, the company completed the acquisition of Accton Technology's mainland China business entities through its joint venture Muxi Intelligence. This bridges the end-to-end key closed loop of AI computing power architecture and intelligent computing high-speed network. It lays a solid foundation for moving towards the AI Factory business model in the future. The company has formed an integrated support system covering core infrastructure to industry applications around the synergy of computing power, network, and related software and hardware capabilities. This helps enhance its comprehensive delivery capability and customer stickiness in large-scale intelligent computing projects.

Investment recommendation:The company released its 2025 annual report. Revenue grew rapidly. Profit is under short-term pressure. The company's IT distribution business fundamentals are solid. Benefiting from AI demand, the electronic components business revenue grows rapidly. It also cooperates with multiple embodied intelligence manufacturers to promote real-world applications. AI software and service business grows by more than double. Relying on the two core platforms of Smart Vision, it forms end-to-end solutions and creates benchmark cases in multiple industries. The company is seeing accelerated scaling of its proprietary hardware alongside a continuously maturing product portfolio. Through strategic acquisitions, it has successfully completed the computing-networking closed loop, building an integrated architecture from core infrastructure to vertical applications that underpins the foundation for the "AI Factory" model. The company's revenue for 2026-2028 is estimated to be RMB159.065bn/RMB174.857bn/RMB191.366bn, up 10.65%/9.93%/ 9.44% YoY. The net profit attributable to shareholders of the parent company is estimated to be RMB753mn/RMB938mn/RMB1.183bn, up 44.08%/24.55%/26.08% YoY. The corresponding PE is 34x/27x/22x. We maintain "Buy" rating on the company.

Risks

1) AI technology advancement falls short of expectations. The company launched the large model platform product "Smart Vision". It lowers the threshold of AI large model applications for enterprise users. If the implementation of AI technology and large model applications falls short of expectations, the company's product market expansion may be affected to some extent. 2) Macroeconomic recovery falls short of expectations. The macroeconomy shows a weak recovery momentum overall. If the subsequent macroeconomic recovery process is slow, it may lead to a decrease in the procurement budget of the government and enterprises for infrastructure such as computing power. 3) Market competition intensifies. The company's independent brand business mainly uses Huawei chips. The number of partners increases under the background of Huawei's ecological partner system construction. Market competition may intensify. 4) Litigation risk. The controlling shareholder of the company filed a lawsuit with the court as the plaintiff to request a divorce and property division. The court has currently ruled for divorce. The property division matter is yet to be tried. This may lead to changes in the shareholding ratio of the controlling shareholder of the company. It has no significant impact on the company's production and operation.