China Mobile Holdings is imminent, and the leading network security company ushered in a new growth pole: in June 2022, the company signed an “Investment Cooperation Agreement” with China Mobile Capital and plans to target additional shares at 14.55 yuan/share to China Mobile Capital. After the issuance is completed, China Mobile Capital will directly hold 22.99% of the company's shares. The controlling shareholder will be changed to China Mobile Capital, and the actual controller will change to China Mobile Group. We believe that China Mobile Holdings will not only mean that Kai Ming Chen will change from a private enterprise to a central enterprise, further strengthening its resources and background; it will also bring new growth poles to Kai Ming Chen, including new channels and support for emerging businesses provided by China Mobile.
We portray the new growth poles of future companies from the four quadrants of Kickstart Star Chen's future growth:
First quadrant: A solid basic disc. Many classic products such as Kai Mingchen's secure gateway, gateway, log audit, data security, and operation and maintenance security audit have maintained the highest domestic market share for many years in a row. The classic channel business, which mainly focuses on security products and security services, has maintained steady growth of more than 15% throughout the year. It has a number of loyal government and enterprise customers, and has a solid foundation for future development.
Second quadrant: Sino-Mobile cooperation brings classic new channels for business growth. In recent years, the company has collected shortlisted products at its mobile headquarters, mainly WAF hardware, vulnerability scans, etc., which accounts for a low overall proportion. After strengthened cooperation, it is expected that the security capabilities of Kai Ming Chen will be included in China Mobile's dedicated line business and provincial e-government business in the future, broadening marketing channels and reducing marketing expenses for the company's classic business.
In the future, Kai Shing Chen will continue to empower China Mobile's dedicated line security and e-government security.
The third quadrant: Move hand in hand to cloud-related security. Kai Mingchen will empower China Mobile's DICT business security capabilities. In 2022, China Mobile continued to strengthen the “Net+Cloud+DICT” integration and expansion, and government and enterprise market revenue continued to grow rapidly in 2022, reaching RMB 168.2 billion. Currently, China Mobile's DICT business is mainly provided by ecological partners. After joining, Kai Mingchen will empower DICT business security and use China Mobile's state-owned cloud layout to export cloud security products and services.
Fourth quadrant: strategically lay out new security. The company's long-term deployment in emerging business sectors such as cloud security, data security, industrial Internet security, Internet of Vehicles security, and computing power network security has achieved remarkable results. In 2022, the company's new business segment achieved business revenue of 1,882 billion yuan, accounting for 42.42% of the company's annual revenue, reaching a record high. In the future, strategic new business will become a new sector supporting the expansion and rapid growth of the cybersecurity market.
Profit forecast and investment rating: We expect Kai Mingchen's net profit of 2023-2025 to be 9.27/12.42/1,641 billion yuan, an increase of 48%, 34%, and 32% over the previous year. Considering that the company will continue to increase R&D investment, we lowered the company's 2023-2024 EPS from 1.43/1.74 yuan to 0.97/1.30 yuan. We expect EPS in 2025 to be 1.72 yuan. We are optimistic that the company's strategic and emerging business layout has been very effective. China Mobile Holdings' cooperation is progressing smoothly. It is expected to continue to help the company grow rapidly in terms of business depth and channel expansion in the future, and maintain its “buy” rating.
Risk warning: Cooperation is progressing less than expected, and competition in the industry is intensifying.