Internet / operator / SMB multipole drive growth company is the leading ICT equipment manufacturer in China. Network equipment, security products and cloud desktop work together to actively expand the breadth and depth of application. We are optimistic about the company's prospects: 1) at the industry level, the construction of the digital economy drives the demand for network equipment upward; 2) at the corporate level, Ruijie is expected to increase its market share in the Internet, operators and SMB by highlighting product competitiveness and channel advantages. We estimate that the company's homing net profit from 2022 to 2024 will be $550,750,011 million respectively. According to Wind's consensus forecast, the comparable company's 23-year average PE will be 35.29x. Taking into account the growth potential and industry leading position of the company's data center switch business, the company will be valued at 40x PE in 2023, corresponding to the target price of 52.82 yuan per share, covering for the first time, and given a "buy" rating.
With the development of digital economy, the demand for new network equipment is increasing.
As the underlying infrastructure of computing network, network devices such as switches, WLAN and routers are expected to be the first to benefit in the process of digital economy construction. From a downstream point of view, 1) with the gradual improvement of the policy side and profit side of the Internet industry, the demand of BAT in the field of network equipment will remain resilient; 2) for operators, the capital expenditure of the three major operators since 2022 is obviously tilted to the field of industrial digitization; 3) in the SMB market, the demand from small and medium-sized enterprises under economic recovery is expected to recover quickly. Overall, we expect the demand of the network equipment industry to grow steadily in the future. according to IDC, the domestic switch / enterprise WLAN/ router / network security industry market will grow to US $26.393 billion by 2025, with a CAGR of 8.0%, 10.4%, 4.6% and 21.3% respectively.
Embracing the trend of white box / high-speed industry, agile innovation ability drives market share improvement the company relies on agile innovation ability to increase market share. Network equipment revenue CAGR reached 33.4% in 2019-2021, significantly faster than the industry average CAGR of 9.8%. Among them, the data center switch / SMB market is the two major revenue growth poles. In the data center field, the company has a keen insight into the industry trend of high-speed and white-box switches, and continues to increase its R & D investment. according to IDC, the company's market share in the data center switch industry has gradually increased from 3.4% of 1Q19 to 13.4% of 2Q22. In the SMB market, the company innovatively launched cloud management platform services to improve the efficiency of installation and deployment, and has efficient channel management capabilities. From 2019 to 2021, the company's SMB series product revenue reached 57.76% CAGR.
The trend of the whole network is good for integrated manufacturers, and scene innovation promotes the accelerated penetration of network security + cloud desktops. With the continuous development of information technology, the detection and protection of information security threats is difficult to be completed by a single security device. The whole network requires that the network equipment should be brought into the security system. Ruijie can provide network equipment + security products at the same time, which naturally has the advantage of network coordination. The revenue of the company's network security products will grow by 51% in 2021. We expect the penetration of products such as the company's security gateways to continue to increase in the future, and cloud desktop products are expected to accelerate penetration in more application scenarios.
Risk hint: the company's product research and development progress is not as expected; the bidding situation is not as expected; the company's upstream raw material price risk.