Event: on September 26, 2021, the company issued an announcement to sign a strategic cooperation framework agreement with Zhejiang Century Huatong Group Co., Ltd. in line with the principle of complementary advantages and common development, the two sides will carry out comprehensive and in-depth cooperation in the field of Internet games and supercomputing centers, optimize and integrate resources, and create a win-win and sustainable strategic partnership.
The strategic cooperation between the company and Century Huatong represents the beginning of data security in the field of games and IDC, and the industry continues to accelerate. 1) Game data field: the two sides jointly promote the protection of personal information in game business scenarios and the implementation of game supervision policies for minors, to create a more comprehensive and reliable security solution for the game industry, to ensure the security of game master stations and payments, and to improve the privacy and security protection of game data. 2) IDC supercomputing center area: based on the large supercomputing centers of Century Huatong, we will jointly study the security operation capabilities based on cloud and big data architecture, provide customers with sustainable security risk situational awareness and adaptive protection capabilities, and jointly create cloud security solutions to provide password and security protection capabilities for the government, state-owned enterprises and other important information systems. Cooperate to establish a data security framework for supercomputing centers to help enterprises realize the ability to discover, classify, monitor, store, encrypt or destroy, and provide third-party secure storage services for important data of governments and enterprises.
With tighter Internet and corporate data security regulation and increased certainty of related orders, Visteon, as the only listed company under China's Internet Security, is expected to be the most beneficial target for data security and privacy computing. 1) data security has become the core of Internet regulation, and data security and privacy computing are expected to benefit significantly. Privacy computing is driven by the dual needs of big data's converged applications and privacy protection. KPMG expects its technical services revenue to reach 10-20 billion RMB in 2023, which will pry the 100 billion-level data platform operating income space for a long time. 2) in addition to all kinds of Internet manufacturers, there is a huge potential for data security in the financial, energy, medical and other security industries. Data in financial, medical and energy industries naturally have commercial value, user privacy, and there is an urgent need for data security compliance. 3) some data will still be strongly regulated as strategic resources. China Netcom, the controlling shareholder of Weststone, is a network security sub-group built by China Electric Power Group, which is the controller of the company, according to the needs of the development of the national security strategy. It has natural advantages in supporting the strategic task of national network security and winning the trust of customers in key areas. As the only listed company in China, the company has a truly scarce shareholder background and is expected to significantly benefit from the rapid release of privacy computing needs.
Long-term equity incentive plan superimposed management change is expected to improve operational efficiency. The new management of the company has a professional and technical background, the equity incentive plan is valid for ten years, and the total amount of the underlying shares involved in the restricted shares granted does not exceed 10% of the total share capital of the company. The initial incentive targets are about 335 managers, core technical personnel and backbone employees who have a direct impact on the overall performance and sustainable development of the company, the company and the holding subsidiary, accounting for about 15% of the employees. Long-term equity incentive plan superimposed management changes may improve operational efficiency.
With the continuous improvement of channel construction, Xinchuang has abundant orders on hand and high certainty of performance support. Weststone is the core beneficiary of Xinchuang. According to the annual report, it won the bid of more than 2 billion in 2020, ranking in the forefront of the market. The net cash flow of operating activities reached 620 million yuan, an increase of 736.15% over the same period last year. Centering on the requirements of Xinchuang, the company has built a full product system covering chips, modules, platforms, machines and systems, such as Godson and Weststone issued "Godson Security Module and SDK" and Xinchuang security solutions.
Maintain a "buy" rating. We estimate that the company's operating income in 2023 will be RMB 3010, RMB 38.03 / 4.805 billion, and its net profit will be RMB 3.52 million, with a net profit of RMB 765 million. Taking into account the demand of the data security market, the marginal market value of safety will be 60 billion in 2021 and the total potential market value in 2023 and 2025 may reach 1570.89 or 319.593 billion yuan, maintaining the "buy" rating.
Risk hints: competition aggravates risk; policy strength is not as strong as expected risk; slow layout of new areas; risk of key hypothesis error.