Company Profile

Beijing Asiacom Information Technology Co. Ltd. is a China-based company principally engaged in the information technology (IT) equipment sales as well as operation and maintenance services. IT equipment sales business includes the sales of servers, server accessories and network equipment accessories such as memory, hard disk, central processing unit card, graphic processing unit card and others. IT operation and maintenance services include on-site operation and maintenance services, delivery implementation services and after-sales maintenance services. The Company mainly conducts its businesses in the domestic and overseas markets, including North America. (Source: MarketScreener).

Comments

Beijing Asiacom Information Technology (“the company”) integrates the server industry, and AI server contributes to its performance growth.

Founded in 2000, the company has been engaged in the server industry for more than two decades. The company’s main business now covers the whole life cycle of data centers with servers as the core.

In 2022, the company’s performance grew against the trend. The revenue was CNY1.459 billion in 2022, a year-on-year increase of 24.12%. The net profit attributable to shareholders was CNY81 million, a year-on-year growth of 14.02%.

In the first quarter 2023, the company started strong, and AI servers brought performance growth. Its 1Q23 revenue was CNY427 million, a year-on-year increase of 45.69%. The 1Q23 net profit attributable to shareholders was CNY21 million, a year-on-year growth of 22.23%.

The company has abundant upstream and downstream industrial resources, and it has been focusing on the AI computing power industry.

Since March this year, GPT-4 and multiple domestic large models have been introduced, and the demand for AI computing power has grown explosively. Recently, computing power construction plans have been introduced, showing policy supports. The company is rich in server industry resources. Its strategy focuses on AI computing power and secondary entrepreneurship.

In terms of upstream resources, the company has long-term cooperation with leading server and chip manufacturers to ensure product supply. In terms of downstream resources, the company has a large number of computing power customers and has long-term in-depth cooperation with Alibaba, Tencent, Baidu, Kingsoft Cloud and other leading Internet customers, which will help it navigate technical development directions.

With mechanism supports, AI computing power will start a second growth curve for the company.

In the face of opportunities in AI computing power industry, the company works on equity structure and advanced financing for future development.

In terms of equity structure, the founder and effective controller, Xu Jiang, has a total effective holding of 54.72%. Major executives, including general manager Gu Guilin, deputy General Manager Wang Feng, and Board Secretary Cao Wei, all have more than 1% of the company’s stocks.

In terms of financing, in March 2023, the company issued CNY261 million of convertible bonds. Specifically, the company made it clear that it will build new computing power center business.

The company will purchase computing power equipment and lease cabinets, so that customers can use the computing power resources provided by the company through the Internet on demand. The company will charge fees based on the computing power used. The total cost of the financed project is expected to be CNY88 million.

Earnings forecast and investment recommendation

We estimate the company’s net profit attributable to shareholders at CNY107 million, million, CNY143 million and CNY192 million for 2023, 2024 and 2025 respectively, implying a PE ratio of 64x, 48x and 36x, respectively.

We cover the company for the first time and give it a rating of “Outperform”.

Potential risks

Intensified market competition; uncertainties in project progress.