AI cloud drives profit surge, BOCI initiates ENVISION GREEN (01783) with "Buy" rating.

BOCI initiates coverage on ENVISION GREEN (01783) with "Buy" rating, target price HK$6.90, as AI cloud drives profit surge. BOCI has issued a research report initiating coverage on ENVISION GREEN (01783) with a "Buy" rating and a target price of HK$6.90. The report prices the stock at 20x FY2029 forecast P/E (EPS of approximately HK$0.34), believing that the AI cloud business will become the company's main profit growth engine, driving a qualitative transformation in its profit structure. AI Cloud Becomes Core Profit Engine The report notes that in June 2026, ENVISION GREEN acquired YV CLOUD and Shanghai Yovole cloud computing interests for a base consideration of HK$2.2 billion, formally entering the cloud computing and AI infrastructure services sector, and subsequently procured high-performance servers, commencing its transformation into a compliant AI computing power platform. Computing power scarcity is the bank's core thesis. Against the backdrop of US export controls, the company obtained scarce compliant procurement channels through the NVIDIA Cloud Partner (NCP) qualification held by Shanghai Yovole. According to BOCI channel research, the company has been allocated over 500 high-performance servers in the first batch, corresponding to more than 4,000 GPUs, while customer orders have significantly exceeded existing computing capacity. Domestic high-end computing power rental rates remain firm: Mysteel data shows that H100 on-demand rental rates in the Chengdu-Chongqing region reached RMB 12.90/GPU-hour by end-September, up approximately 19.1% month-on-month; overseas, Nebius also raised H200 on-demand rates by 20% to US$5.40/GPU-hour, with new contract value increasing nearly fourfold quarter-on-quarter. Rising Rental Rates Combined with Long-Term Contract Lock-In, Single Server Payback in Approximately 3.2 Years In terms of business model, the company has signed five-year GPU leasing long-term contracts with leading cloud service providers and large model customers, with approximately 12 months of prepaid rent. Based on a single eight-GPU server procurement cost of RMB 3.5 million and monthly rent of RMB 100,000, the simple payback period at full occupancy is approximately 3.2 years, and financial leverage can further shorten the equity payback time. Large model company MiniMax recently participated in the company's rights issue and convertible bond subscription, which the report interprets as recognition of the company's NCP procurement capabilities, with cooperation between the two parties expected to extend to resource planning and cluster deployment. In terms of profit forecasts, BOCI estimates the company's FY2027-2029 revenue at HK$3.849 billion, HK$6.854 billion, and HK$10.490 billion respectively, representing a three-year revenue CAGR of approximately 62%; net profit attributable to shareholders at HK$216 million, HK$762 million, and HK$1.407 billion respectively. AI cloud server scale will increase from 531 units to 4,031 units, with AI cloud revenue reaching HK$5.085 billion in 2029, contributing 76.5% of the group's gross profit, driving overall gross margin from 8.0% in FY2026 to 21.5%, with AI cloud becoming the largest source of both revenue and gross profit. Power Battery Recycling and AI Infrastructure Recycling Broaden Profit Base The report also notes that the company's Hong Kong first electric vehicle battery processing facility commenced operations in July 2026, with the Hong Kong SAR government projecting local retired battery volume to increase from approximately 1,300 tonnes in 2026 to 6,700 tonnes by 2030. The battery recycling business is expected to generate revenue of HK$760 million in FY2029; the AI infrastructure recycling business benefits from the US copper cable retirement wave (AT&T plans to shut down the vast majority of its copper network services by end-2029) and the exclusive trading partnership with Fortune Metal Group, with FY2029 revenue projected at HK$4.646 billion.