() The Record Form of Investor Relations Activities was released on January 30, and the company was investigated by 84 institutions on January 29, 2024. The types of institutions are QFII, insurance companies, others, fund companies, overseas institutions, securities companies and Sunshine private equity institutions. The main contents of investor relations activities are introduced:
I. Ms. Shen Jingwei, the director and secretary of the company, introduced the overall situation of the company in 2023. Dear investors, good evening, I am Shen Jingwei, secretary of Runze Technology. Thank the Changjiang team for organizing this meeting for us, and welcome everyone to attend the 2023 annual performance forecast exchange meeting tonight. In the last month, the market expectation was weak, and there were many market corrections, but we are still full of confidence in the market, and we also cheer everyone up. I hope everyone will have confidence. The company has been deeply involved in the field of digital economy for 15 years, and has always insisted on continuous and large-scale investment in the fields of intelligent computing power and computing power infrastructure. Although the competition in the data center industry was fierce in the past year, it was also the biggest opportunity in the data center industry in the past decade. In the industry, we think that 2023 is the "first year of liquid cooling" and also the "first year of intelligent calculation". In terms of technology, the power of single cabinet in the market has jumped, and new liquid cooling technology has been gradually applied. In terms of demand, there are large AI artificial intelligence model customers in the market, and the demand is growing very fast. Let me briefly talk to you about the latest performance of the company in 2023. Financially, the company achieved a net profit of 1.75-1.85 billion yuan in 2023, a year-on-year increase of 46.05%-54.39%; The net profit after deducting non-homecoming was 1.74-1.84 billion yuan, a year-on-year increase of 52.91%-61.70%. Since its establishment in 2009, the company has always adhered to the super-large-scale park-level model, and has been in the early stage of investment loss for the first ten years.In 2019, it began to make a profit, and in that year, it realized a net profit of 108 million yuan, which was not returned to the mother. Up to now, it has achieved rapid growth for four consecutive years, with a compound annual growth rate of 100.26%-103.08%. Business: 2023 is a very important milestone year for the company. Before 2022, all the company’s income came from Langfang Park. In 2023, foreign parks were put into operation one after another, and the company officially entered a new stage of contributing income from one park to three parks. In 2023, the company delivered five new data centers, three from Langfang, one from the Yangtze River Delta and one from Guangdong-Hong Kong-Macao Greater Bay Area, with a total delivery of about 3w cabinets. By the end of 2023, the company had delivered 13 data centers and nearly 8w cabinets, and the number of cabinets delivered increased by 65.22% compared with the end of 2022. In addition to the rapid growth in the number of deliveries, the cabinet power delivered by the company in combination with market demand in 2023 has also been greatly improved compared with previous years. In 2023, the company delivered the whole pure liquid-cooled intelligent computing center with a single cabinet power of 21.5KW and the high-density air-cooled data center with a single cabinet power of 10.5KW, and gradually upgraded the low-power cabinets in Langfang Park. In terms of shelving rate, the original data center still maintains a high shelving rate, and the shelving speed of the newly delivered data center is in line with expectations, with the shelving speed of liquid cooling and high-density air cooling reaching the best level in history. The stable operation of the original data center and the gradual delivery of the new data center provide a stable profit source and cash flow increment for the company’s performance development.Power supply: The company’s self-built 220KV substation was put into operation this month. The substation is very high in configuration, with a total capacity of 4 * 240,000 KVA transformers, and the maximum power supply is as high as 960MW. The power supply of the whole Langfang Park is directly increased by more than 2 times, which can at least meet the rapid development of Langfang Park in the next five years and provide the most powerful guarantee for the company to undertake the growing demand of digital economy industry in Beijing, Tianjin and Hebei. New business of AIDC Intelligent Computing Center: In 2023, the company delivered the first pure liquid-cooled intelligent computing center in the industry. With a deep customer trust foundation, the company established a strong first-Mover advantage and accumulated rich experience in the design, research and development, construction and operation and maintenance of liquid-cooled intelligent computing centers. Benefiting from the rapid growth of demand for intelligent computing driven by the application of liquid cooling solutions and the outbreak of AI artificial intelligence, the company is cooperating with its ecological partners in the industry, Qi Xin, to deploy large-scale computing modules. The large team has the full link delivery capability of computing modules and the technical level is leading in the industry. New layout: 2023 is the third year for the company to acquire resources, and it is located in Danzhou, Hainan, with an overall planning of about 30,000 cabinets.
Second, investors are more concerned about the issue
Q: The performance has exceeded the market expectation. What about the traditional IDC customers, customer structure and the proportion of head manufacturers?
A: There is no essential change in the customer structure of the traditional IDC business, but the main change is the increase in the power of the delivered single cabinet. At present, the market demand for high-power cabinets is relatively strong, and the demand for cabinets below 5KW is gradually shrinking. Therefore, the shelves of high-power air-cooled and ultra-high-power liquid-cooled cabinets delivered by our mainstream in 2023 are very fast.
Q: What is the current market competition pattern? What is the market demand and when will the inflection point appear?
A: First of all, let’s limit the scope: first-tier cities and surrounding areas. 2023 is the most competitive year for traditional IDC. On the supply side, the market is constantly clearing out, even if it has not reached the inflection point, it is approaching the inflection point. This can refer to whether the shelf rate of first-tier cities is improving. If the improvement indicates that the inflection point has appeared; On the price side: In 2023, there were many large-scale accidents in Internet companies, cloud vendors and even financial industries all over the country, which will force end customers to pay more attention to the quality of service and the price will improve. Therefore, we judge that the inflection point of first-tier cities, whether on the left or on the right, is very close to the current time. Secondly, let’s talk about the current market situation. There are three types of cabinets in the market: traditional IDC rooms, modern IDC rooms and future AIDC rooms. Traditional IDC computer room: mainly produced in 2016 -2019, this kind of cabinets seized the dividend of the rapid development of mobile Internet. At that time, the market was in short supply, and the cost was recovered very early and the profit was realized. The characteristics of this kind of computer room are: small scattered points and average overall quality. At present, the difficulties are: after the servers that were put on the shelves gradually expired in 2017 -2019, they were continuously put off the shelves. Due to the small scale, high PUE and difficult transformation of such computer rooms, the head Internet or cloud vendors will not return their rents after they are taken off the shelves. They are under great pressure to take off the shelves and also face great transformation pressure. Modern IDC computer room: mainly produced in 2021 -2023,Due to the shortage of traditional IDC computer rooms before 2019, and the encouragement of new infrastructure at that time, many new market entrants poured into the industry, and this part of computer rooms were put into the market one after another in 2021, resulting in short-term oversupply in the market. With the introduction of policies such as "double carbon" and "calculating from the east to the west", the supply balance was alleviated to some extent. Due to centralized supply, and the traditional computer room has recovered its cost, it is also constantly reducing its price. At present, this kind of computer room is facing a low shelf rate and is in a difficult stage of recovering its cost. The future AIDC computer room was mainly produced in 2023. Due to the rapid outbreak of AI demand, the market put forward higher requirements for computing power per unit area. Now the IDC computer room can’t meet the transformation needs of AIDC. At the same time, AIDC needs multi-parties to participate in the planning and design, which is technically difficult and the investment scale is relatively large. Because the existing IDC participants were injured in previous years, their overall participation enthusiasm is not high. On the contrary, there are more cross-border participants, but the future AIDC computer room needs more. Let’s talk about our situation again. Since its establishment, Runze Technology has been focusing on ultra-large-scale park-level data centers, and there is no pressure on the removal of traditional IDC rooms. At the same time, the company actively controlled the delivery pace. The early delivery rate of eight modern IDC rooms exceeded 90%, so it has the resources, technology and strength to develop AIDC rooms. Regarding the market demand, it is divided into two parts: 1. As for the general server, because the market traffic is still increasing,The total number of servers in the overall market is still increasing. Although the growth rate of server demand is declining due to various capital expenditure plans, some new large-scale bidding orders can still be seen in the open market. 2. In terms of high-performance servers, AI broke out in February 2023, when the market was in a wait-and-see state. In the second half of the year, the market began to really invest. At present, the overall investment of customers who insist on making large models is not small, and foreign large models are also developing rapidly. Although domestic chips are limited to some extent and the development speed is also very fast, we should have full confidence in domestic related manufacturers.
Q: What is the difference between traditional IDC services and AIDC services? Is AIDC technically difficult?
A: Traditional IDC mainly serves general-purpose servers, that is, traditional X86CPU servers. Traditional IDC mainly focuses on how many basic resources we have, how many cabinets we can build and how many servers we can carry from the perspective of our own resources. AIDC business mainly serves high-performance servers, that is, GPU servers. AIDC mainly focuses on how much computing power the customer requires per square meter to provide and how large a computing power cluster to build. Therefore, the whole building of AIDC is equivalent to a super server. AIDC manufacturers need to organize the design of the internal architecture of this super server, and at the same time, they need to pay attention to "short distance", "high density", "high speed", "network architecture" and "expanding resources". I’ll give you some concrete technical examples. A computing POD is 64 high-performance servers, which is a layer of network. The two-tier network is spine-leaf. According to the calculation of 8 high-performance servers with a single port of 400G, the two-tier network of high-performance switches can interconnect 256 high-performance servers, and the three-tier network is core-spine-leaf, which can interconnect 8192 high-performance servers at the maximum. At the same time, the power demand of a high-performance server is 10KW, which also puts very high demands on the cabinet side. Therefore, it is very difficult to achieve such a large cluster interconnection. At present, there are very few manufacturers in the market who have built a three-tier network architecture.However, our joint ecological partners belong to a few who can do it, whether it is IB networking or RoCE networking. In addition, with regard to the delivery of large clusters, it is the first step to have equipment, but also to be able to buy enough auxiliary materials (cables and modules) to understand the track optimization of IB network. At the same time, it has the debugging ability of IB network, the tuning ability of server side, the understanding of large model communication library, and even the need to write monitoring software. Many factors are superimposed to have the full link delivery ability of large clusters, and even large manufacturers generally have their own "disassembly, modification and distribution" workshops. Because the motherboard design ideas of different brands of servers are different, when the same cluster involves multiple brands and specifications, it needs to be configured in a unified way. At this time, a "disassembly and assembly" workshop is needed to carry out standardization operation to improve efficiency, and at the same time, it is necessary to understand the motherboard design topology of different models of server manufacturers in order to facilitate the optimization of large clusters. It is difficult for any single manufacturer to do these things. We have also combined with many eco-partners. Qi Xin worked together to build a computing module to understand these things. Our technology and resources in this area are in the leading position in the industry.
Q: What is the revenue and net profit of IDC business and AIDC business in 2023? Why did the actual profit in 2023 communicate better than that in the performance briefing of the third quarterly report, and what part of the contribution mainly came from?
A: In 2023, the company’s operating income was about 4.4 billion yuan, of which AIDC business was less than 1 billion yuan, including our liquid cooling business and intelligent computing related business. Due to more company deliveries this year, the gross profit margin and net profit margin of traditional IDC business have been affected. The overall gross profit margin of AIDC business is about 40%, but it has developed rapidly. The actual profit in 2023 was better than that in the performance briefing of the third quarterly report, mainly due to the rapid growth of demand for intelligent computing driven by the application of liquid cooling solutions and the outbreak of AI artificial intelligence, the smooth expansion of new AIDC-related businesses and the continuous expansion of corresponding revenue scale.
Q: What is the future delivery plan communicated with customers and the future capital expenditure?
A: Our business model is based on sales and production. At present, there are still 4-5 data centers under construction in China. If customers have a clear demand for new orders, the company can complete the delivery quickly and need some new capital expenditure. Since the second half of 2023, the company has felt that the demand for AIDC business is relatively strong, so Heping Lake in Langfang Area B is planned according to AIDC mode. The company’s Langfang A data center has grasped the wave of mobile Internet in 2016-2019 and achieved good development. Pinghu, Zhejiang plans to become an intelligent computing center, hoping to seize the opportunity of AI development. At present, this piece of progress is relatively smooth, and it has also achieved a certain market position and popularity. The local government has also given some basic resources support. At present, the company has also established a stable ecological partnership with end customers, network cards, switches, servers and other manufacturers, and jointly completed the design of AIDC computer room. Business development stems from design, and design promotes customer strategy, which has formed a benign positive cycle.
Q: The specific composition of the company’s business, the removal of traditional IDC friends, and the company’s leaseback.
A: In 2022, the company’s traditional IDC business income was 2.7 billion, and in 2023, the traditional IDC business income was about 3.5 billion, an increase of 30%. The increase mainly came from: two buildings were full this year, and two new traditional buildings were added, and the shelves were not bad. During the reporting period, the company took the initiative to speed up the upgrading of low-power cabinets. The power of cabinets delivered in the early stage was mainly 4.4KW. At the end of the service of the servers carried by the aforementioned low-power cabinets, the company quickly upgraded them. At present, some low-power cabinets have been upgraded and have begun to be rented back. AIDC business mainly includes liquid cooling and intelligent calculation business.
Q: What is the synergy between AIDC business and traditional customers? How many traditional customers have been introduced into AIDC business? How many AIDC customers are waist customers? How long is the signing span of AIDC business?
A: Big model customers need computing power, algorithms and data. At present, there are mainly two types of customers in the market, one is large Internet companies and cloud vendors, and the other is entrepreneurial AI model companies, which is what everyone calls waist customers. We think that 2023 is the "first year of smart calculation". After another 3-5 years, waist customers will run out of great companies. Regarding the types of customers, we have signed a strict confidentiality agreement with our customers, and even the company will give customers a code name, so it is not convenient to say too much.
Q: How to predict the company’s performance in 2024, and are you confident in the completion of its performance commitment in 2024?
A: The company is full of confidence in its performance in 2024 and more confident in its performance commitment in 2024. In 2024, the company will continue to take the differentiation strategy: first, in terms of traditional IDC business, the company will mainly supply high-power cabinets that are scarce in the market in the future. The five data centers delivered in 2023 will continue to steadily increase the shelf rate in 2024, and make steady contributions to the performance together with the original eight data centers. Second, in terms of AIDC business, many AIDC customers of the company are growing sturdily and the demand for AIDC is increasing. Therefore, the company will continue to cooperate with ecological partners to the greatest extent, create an ecological circle of computing power, provide the most effective computing power, and then obtain business orders from the reasoning side with a larger market scale. Third, in 2024, the company will still combine the market demand and gradually deliver multiple data centers in Beijing-Tianjin-Hebei, Yangtze River Delta, Chengdu-Chongqing, Guangdong, Hong Kong and Macao to meet more customer needs and steadily improve the company’s performance.
Q: Is Foshan IDC or AIDC?
A: The first building delivered by Foshan is still a traditional data center, and there are also customers communicating, which can be transformed according to customer needs. AIDC is also an important development direction in the future.
Q: What is the progress and shelf rate outside Langfang?
A: Pinghu was put on the shelves slowly in the first three months, but now it is put on the shelves quickly. Foshan just delivered it at the end of the year, and the early stage is in the running-in stage, which is also in line with the company’s expectations. At present, the time is short and there is no reference.
Q: What is the trend of AIDC gross profit margin?
A: There was no AIDC business in previous years.
Q: What is the proportion of high-power cabinets in 2024?
A: Langfang Area B and Pinghu Phase II are both planned by the Intelligent Computing Center. In addition to high-power liquid cooling, at present, the company’s air cooling can be up to 40KW, and the company will mainly deliver high-power cabinets in the future, and the lowest power delivered in the future can also be 7KW, and the low power will be mainly used as cache nodes.
Q: Will the structure of IDC and AIDC change further in 2024? Will it maintain a steady year-on-year growth in 2024?
A: The traditional IDC business will continue to grow steadily. AIDC is not easy to predict. On the one hand, supply will affect business development, and on the other hand, the outbreak time of AIDC application side is uncertain. If it breaks out, the growth will be very rapid.
Q: What is the company’s dividend expectation?
A: At present, the company’s dividends are relatively stable, and it is also actively giving back to institutional shareholders and small and medium investors. The specific plan needs to wait until the annual board of directors puts forward a plan;
Details of participating institutions are as follows:
