Revenue Continues to Grow, Data Center Power Supply Business Keeps Rapid Growth Momentum 

Shenzhen Honor Electronic (300870.SZ) released its 2023 annual result and 2024 Q1 result. In 2023, the Company’s revenue reached RMB2.87 billion, up by of 6.17% year-on-year.

The Company’s gross profit grew by 15.29% year-on-year to RMB566 million and its gross profit margin improved by 1.56 percentage points to 19.72%. Net profit amounted to RMB194 million, representing a year-on-year increase of 120.30%. In the second half of 2023, the Company's business recovered significantly; its revenue in Q4 reached a single quarter record high. In recognition of the unwavering support from the Company’s shareholders, the Board proposed a final dividend of RMB34.00 cents (inclusive of tax) in cash per shares to all shareholders, the total cash dividend reached RMB33.85 million.

In 2024 Q1, the Company’s revenue recorded a rapid growth of 34.06% year-on-year to RMB696 million. The Company’s gross margin reached 19.88%, representing a year-on-year increase of 0.40 percentage points; and its net profit recorded a rapid growth of 2289.63% to RMB30.94 million.

Three Business Segments in 2023: Steady Growth in Revenue and Substantial Contribution to Profitability  

In 2023, Shenzhen Honor Electronic actively expanded new customers and optimized product structures, increasing the proportion of high-value products. By actively applied different strategies, such as cost-reduction and efficiency enhancement, the Company achieved significant increases in overall revenue and gross profits, and in its three businesses segments: power adapters, server power supplies, and other power supplies

In the power adapter business segment, the Company achieved operating revenue of RMB1.59 billion; its gross profit reached RMB320 million, representing a year-on-year increase of 13.74%; and its gross margin up by 4.11 percentage points to 20.10%.

In 2023, the Company continued to broaden its business in various downstream areas of the power adapter, increasing the proportion of high-end products for existing customers and actively expanding new market share. The Company's achieved reverse growth in sales of power adapters of office electronic equipment and maintained rapid sales growth in power adapters of smart homes, drones, and etc.

As a strategically important growth segment, the Company’s server power supply business showed strong growth momentum driven by the rapid development of the AI industry. By the end of 2023, the Company's server power supply segment achieved overall revenue of RMB811 million, representing a year-on-year increase of 35.91%; its contribution to overall revenue continued to increase. Its gross profit reaching 158 million yuan, representing a year-on-year increase of 19.95%.

The Company seized the market opportunity created by the increasing power of large-scale AI servers, achieving impressive sales results for high-power server power supplies. In 2023, the revenue from high-power server power supplies (≥ 2000W+) reached RMB123 million, representing a year-on-year increase of 1097.30%, further enhancing the Company's sales of high-end and high-margin products and continuously improving its product mix.

In other power supply businesses segment, the Company achieved operating revenue of RMB436 million, representing a year-on-year increase of 31.83%; its gross profit was 78.4815 million yuan, representing a year-on-year increase of 17.02%. Benefiting from the Company's breakthroughs in the field of power supplies in new energy equipment.

Keeping Pace with AI Industry Transformation, Server Power Supply Products Embrace Incremental Opportunities

With the rapid development of the AI industry, high-computing power demand scenarios, represented by the development and application of AIGC technology, are expected to emerge rapidly, further boosting the demand for data center construction. At the same time, the demand for iterations of server products featuring high power, high density, and high energy efficiency will become more urgent, creating greater development opportunities for the sales and upgrades of data center power supply products, including server power supplies.

Over the years, Shenzhen Honor Electronic has continuously focused on developing its server power supply business and vigorously conducting technology platform reserves. The Company has quickly captured market opportunities in server power upgrades, increasing the power of mainstream server power supplies to 800W and 1300W. At the same time, it has prospectively deployed a series of high-power server power supply products to embrace the incremental opportunities brought by the gradual increase in power of artificial intelligence servers and edge computing servers.

In terms of product layout, the company has formed a full range of core products, including 800W-3200W CRPS power supplies, 1300W-4000W high-power air-cooled server power supplies, 1600W-3500W distributed immersion liquid-cooled server power supplies, and 30KW centralized immersion liquid-cooled server power supplies. These products can be applied to data center edge computing servers, artificial intelligence servers, storage, switches, 5G micro base stations, and more. Currently, it is an important supplier for many high-computing power server customers such as Foxconn, Inspur Information, Huaqin, ZTE, H3C, and Lenovo.

In the future, seizing the historic opportunity of data center construction and server industry chain upgrades, the Company expects to continue accelerating the sales scale of high-value server power supply products, continuously optimizing its business structure, and steadily improving the profitability of its server power supply business.

Focusing on R&D to Maintain Technological Leadership and Promoting Convertible Bonds to Expand Data Center Power Supply Capacity

In 2024, Shenzhen Honor Electronic continues to focus on R&D innovation and exploring new application scenarios. The Company has stated that it will continue to work around its three main businesses segments, continuously enhancing its technological level and innovative capabilities, achieving breakthroughs in industry-leading technologies and high-end products, maintaining technological leadership, and leading new business development directions. In 2023, the company's R&D investment reached 230 million yuan, representing a year-on-year increase of 16.32% and accounting for 8.02% of the company's operating revenue.

In the server power supply business, the Company’s innovation technology and high-power server power products reach the leading position in China. At the same time, the Company follows the green, low-carbon, and high-density development trends of data centers and accelerates the development of products with high-power density and high conversion efficiency. The Company has full ranges of server power products, such as fully domestically produced digital server power supplies, air-cooled centralized power supply server power supplies, and high-power 5.5kW GPU server power supplies.

In addition, Shenzhen Honor Electronic has announced the issuance of convertible bonds, planning to raise funds around RMB645 million yuan. The Company plans to build data center power supply production lines in Dongguang, the upgrading of headquarters and R&D laboratory project.

In the future, the Company will continue to develop its existing business, increase production capacity for high-end products, achieve breakthroughs in multiple areas, expand into broader market spaces, and achieve higher-quality business results.