FIRST SHANGHAI released a research report assigning CLOUD FACTORY (02512) a "buy" rating. Considering the company's current market capitalization and active expansion into new business segments, the firm applies a 4x PS valuation to Cloud Factory Technology, deriving a target price of HK$6.9, representing 36% upside potential from current levels. Looking ahead, as the State Council advances the "AI+" initiative, the company's strategic positioning in intelligent computing services and model applications aligns with policy directions. The company is building a distributed edge cloud network based on IDC infrastructure, leveraging technological and market advantages to potentially capitalize on industry tailwinds and reshape its growth trajectory while continuously improving performance to create value for investors.

FIRST SHANGHAI's key perspectives are as follows:

**Steady Financial Performance with Continued Profit Structure Optimization**

For H1 2025, the Group achieved total revenue of HK$406.8 million (YoY +10.0%), primarily driven by regular business expansion and significant growth in edge computing services. Gross profit reached HK$47.7 million (YoY +1.2%), with an overall gross margin of 11.7%. Profit for the period was HK$14.9 million (YoY +19.0%), demonstrating solid profit growth momentum. Earnings per share attributable to ordinary equity holders of the parent company remained at HK$0.03. As of June 30, the Group's cash and cash equivalents totaled HK$348.1 million, providing ample liquidity reserves.

**IDC Solutions Services Show Steady Growth with Solid Market Foundation**

As the Group's core business, IDC solutions services generated revenue of HK$376.1 million (YoY +7.9%) in H1 2025, accounting for 92.5% of total revenue. Revenue growth primarily stemmed from regular business expansion leveraging the Group's strong reputation, stable customer base, and extensive business network. Due to strategic pricing adjustments amid intense market competition, this business segment achieved a gross margin of 10.2%.

**Edge Computing Services Demonstrate Significant Growth with Outstanding Technology Products**

H1 2025 edge computing services revenue grew to HK$29.2 million (YoY +39.0%), representing 7.2% of total revenue, driven by increased market demand for EdgeCDN services and new customer acquisition. Other services generated HK$1.45 million in revenue, accounting for 0.3% of total revenue.

During the reporting period, EdgeAIStation services completed adaptation of multiple mainstream AI models to the computing platform, providing reliable and secure computing services. The company launched the Lingjing Cloud large model private deployment solution, helping enterprise clients build proprietary knowledge bases and achieve model fine-tuning. It also officially launched a computing resource scheduling solution, simplifying client management of diverse computing resources. This business segment achieved a gross margin of 27.1%.

Additionally, the Group has been recognized as one of China's Top 20 Edge Computing Companies for three consecutive years, and its "Edge Intelligence Inspection V2.0" received Kunpeng native development technology certification, demonstrating industry recognition of its technical capabilities.

**Forward-Looking Intelligent Computing Layout with Multi-Dimensional Development**

The company's strategy focuses on four key areas. First, expanding intelligent computing services in response to the "East Data, West Computing" project, providing comprehensive services including hardware consulting. Second, deepening technology R&D by optimizing multimodal AI large models and upgrading computing scheduling platforms. Third, strengthening ecosystem partner collaboration through joint laboratories and comprehensive ecosystem development. Fourth, establishing a "government-enterprise dual-drive" model to provide targeted solutions.

Furthermore, after the reporting period, the company completed new share subscriptions, with proceeds allocated to various business development initiatives, and established a joint venture to explore the intelligent computing services market, injecting momentum for growth.

**Risk Warnings:** Risk of weak demand in core business, risk of new business market expansion falling short of expectations, risk of upstream cost fluctuations