Guestong signed a strategic cooperation agreement with Lighttree, a leading domestic privacy computing company, to jointly promote the construction of a secure data sharing and circulation service ecosystem. Lighttree has a self-developed trusted data collaboration framework. Its experience in the financial industry practice of private computing is very good to support the overall layout of Guardstone's data security compliance sharing service system. The two sides will cooperate to strengthen the integration of cryptographic technology into privacy computing products, integrate their superior products and other relevant resources to jointly create data security sharing service solutions for government, finance, the Internet and other industries, and jointly promote the application of private computing solutions in related industry fields.

As a leading private computing vendor in China, Lighttree is fully leading the two mainstream technology routes TEE and federal learning, and has deeply empowered the government, finance, and large Internet enterprises. 1) Lighttree has a leading position in the privacy computing industry, has the largest data collaboration platform for data assets in the world, and is the main drafter of “Technical Requirements and Test Methods for Data Circulation Products Based on Federal Learning” in China, leading WeBank, Huakong Qingjiao, etc.; 2) Currently, Lighttree has more than 10 customers, mainly large financial institutions and government customers, and is expected to greatly expand its customer base; 3) Lighttree's business model is mature. The first is to provide technology platforms and solutions. The specific profit advantages include software, hardware, modeling services, etc.; the second is cooperation with financial institutions, Jointly operate projects to obtain continuous profit sharing.

In addition to continuing to expand the cooperative ecosystem, Guishitong is also continuing to make efforts in the creation of privacy computing products and industry layout. In terms of product development, privacy computing uses cryptography as the underlying security mechanism, which is highly compatible with Guardstone's “cryptographic gene”. Relying on cryptographic research innovation platforms such as the company's corporate postdoctoral research workstations and Morstone Laboratories, Guardstone has maintained long-term cutting-edge exploration and practice in underlying cryptographic theory and cryptographic protocols such as homomorphic encryption, secure multi-party computing protocols, and zero-knowledge certification related to private computing. By integrating existing theoretical capabilities and results of private computing cryptography into the development of private computing products, it will be possible to improve the security and performance of private computing products. In terms of industry layout, Weishitong is actively participating in data sharing, circulation, and utilization in important industries such as government affairs, finance, energy, and the Internet, and relies on its own service ecosystem and system to create industry-oriented, application-oriented, and scenario-oriented data security compliance circulation and sharing solutions to help users achieve convenient and efficient data asset circulation and value monetization.

Internet and enterprise data security regulations are becoming stricter, and related orders are rising and certainty is being strengthened. As the only listed company under China's Internet Security, Guishitong is expected to be the most beneficial target for data security and privacy computing. 1) Data security has become the core of Internet supervision, and data security and private computing are expected to benefit significantly. Private computing is driven by the dual requirements of big data integration applications and privacy protection. KPMG expects its technical service revenue to reach 10 to 20 billion yuan in 2023, which will leverage the operating revenue space of 100 billion data platforms in the long term; 2) In addition to Internet vendors, there is huge potential for data security in the financial, energy, medical and other security industries. Data from insurance industries such as finance, healthcare, and energy naturally has commercial value, user privacy, and data security compliance requirements are urgent; 3) Some data will still be strongly regulated as strategic resources. China NetSecurity, the controlling shareholder of Weishitong, is a cybersecurity sub-group that China Telecom Group, the actual controller of the company, focuses on building a data security compliance and sharing ecosystem based on important data security directions such as the protection of important data and personal information, and the secure circulation of data, which is promoted simultaneously at multiple levels, from underlying cryptographic technology such as secret sharing and homomorphic encryption, private computing security products, and data sharing business models.

Cryptography continues to be booming, the implementation of regulations, the high growth of new application scenarios, and cybersecurity incidents are driving demand in the commercial cryptographic market. The ubiquitous application of cryptography has become a trend, and the company is actively launching a “Cryptographic Service Cloud Platform” to lay out new fields. 1) On the policy side, in 2019, China successively promulgated network security industry laws and regulations such as Wait Insurance 2.0 and the “Cryptographic Law”, and demand for cryptographic security is expected to continue to be released.

Among them, the new standard for “equivalent assurance 2.0” passwords is more detailed and clear than “equivalent 1.0”, which clarifies strict evaluation standards in terms of password authentication methods, cryptographic technology, cryptographic country and industry standards; 2) The ubiquitous application of passwords in new scenarios such as cloud computing and the Internet of Things has become a trend. Cryptographic technology serves applications such as cloud computing, big data, AI and the Internet of Things. Cryptographic services cover a wide range of governments, enterprises, organizations and the public, and ubiquitous applications are becoming a trend. Leading cryptographic vendors are expected to stand out from the ubiquitous trend, and China NetSecurity and Security has launched a new security solution to serve the digital economy — the “Password Service Cloud” layout in a new field.

Maintain a “buy” rating. We expect the company's revenue to be 30.10/3803/4.805 billion yuan in 2021/2022/2023, net profit of 3.552/511/765 million yuan, safe marginal market value of 60 billion yuan in 2021, and potential total market capitalization of 161,492 and 317.645 billion yuan in 2023 and 2025, maintaining the “buy” rating.

Risk warning: Competition increases risk; policies are not as strong as expected; risk of slow deployment of new fields.