Event 1:

The company released its third quarter report 2021 after the close on October 29, 2021.

Comments:

The company accelerated its transformation to a solution-oriented enterprise, with a substantial increase in operating income and net profit in the third quarter. In the third quarter, the company realized operating income of 308 million yuan, an increase of 59.58% over the same period last year, and a net profit of 76.9592 million yuan, an increase of 508.26% over the same period last year. In the first three quarters, the company achieved an operating income of 603 million yuan, an increase of 44.97% over the same period last year, and a net profit of-20.779 million yuan. The company's revenue and performance improved significantly compared with the previous month, mainly due to the stable production and operation of the company, good order delivery, iterative upgrading of hardware products and continuously strengthened solution capabilities to improve the overall competitiveness of the market. new sales staff and "3D interlock" organization upgrade gradually release performance. The company continues to strengthen its solution capacity, with R & D investment of 197 million yuan in the first three quarters, an increase of 27.88% over the same period last year, accounting for 27.88% of operating revenue.

The company continues to promote the enrichment and optimization of various product lines, and a number of technology and new product release companies continue to increase R & D investment to promote the enrichment and optimization of the product line. 1) Border security: in the first half of the year, the revenue of the company's border security business reached 207 million yuan, an increase of 16.27% over the same period last year. As the company's traditional strength products, the company continues to strengthen product optimization and innovation, the launch of A200, A5500, A5800 and other new products, to further consolidate the competitive advantage. 2) Cloud security: in the first half of the year, the revenue of the company's cloud security business reached 16.2222 million yuan, an increase of 85.75% over the same period last year, accounting for 5.54% of the main business, up from 3.96% in the same period last year. In the first half of the year, the company reported on its cloud security products "Mountain Stone Cloud Jie" and "Mountain Stone Cloud Grid"

Wait to complete the update, and release the cloud security management platform "Mountain Stone Cloud Pool" (CloudPool) all-in-one machine. 3) other security areas: in the first half of the year, the revenue of the company's other security business reached 69.6908 million yuan, an increase of 107.09% over the same period last year, accounting for 23.80% of the main business, up from 15.27% in the same period last year.

To promote the coordinated development of multiple product lines, establish a three-dimensional interlock mechanism and initially complete the strategic layout, the company has completed the construction of a diversified product pattern, expanding its business scope from border security to cloud security, intranet security, data security and other eight categories of products and services, and forming complete solutions for more than 50 industries and scenarios, continuing to enhance the competitiveness of firewall products while promoting the coordinated development of multiple product lines. Since the beginning of this year, the company has continued to strengthen the construction of the channel distribution system and the layout of overseas key markets; carried out iterative updates of the internal management system, and has established a three-dimensional interlock mechanism of "region + industry + business group". The strategic layout of key industries, strategic products and strong regions has been initially completed, laying a foundation for improving the company's ability to expand comprehensive projects and its coverage in the regional market and the market of small and medium-sized enterprises.

Investment advice and profit Forecast

With the landing of policies such as Insurance 2.0, the network information security industry has ushered in a high growth cycle, and the company is expected to fully benefit from the medium-and long-term development process. It is predicted that the operating income of the company from 2021 to 2023 is 9.38,11.79 and 1.461 billion yuan, the net profit is 1.02,1.45 and 202 million yuan, the EPS is 0.57,0.81,1.12 yuan per share, and the corresponding PE is 45.76,32.19,23.18 times. At present, the PE TTM of the computer (Shenwan) index is 55.1times, the company's current income is relatively small, and it actively carries out transformation and upgrading, and there is more room for growth in the future. Taking into account the recent adjustment of the company's valuation level, it has lowered the company's 2021 target PE to 60 times, corresponding to a target price of 34.20 yuan. Maintain a "buy" rating.

Risk hint

COVID-19 's repeated epidemic situation has affected the network security investment of downstream government and enterprise customers; the landing of policies such as equal insurance 2.0 is lower than expected; the research and development and promotion of new products are lower than expected; the competition in the industry is intensified, the profitability of the industry is declining, and so on.