Ruijie Network is the leading ICT solution provider in China.
Founded in 2003, the company has formed an integrated and two-wing product layout dominated by network equipment and supplemented by network security and cloud desktops. Among them, the switch is the company's absolute core product, accounting for more than half of the revenue. After years of development, the company takes the lead in the market share of ICT such as switches, wireless products, cloud desktops and IT operation and maintenance.
Under the tide of digital economy, the ICT market is booming.
1) Network equipment market: benefiting from global traffic growth and domestic policy support, the industry continues to expand. The global market for major network equipment (switches, wireless products and routers) is US $54.21 billion in 2021, and CAGR is 4.03% in 2016-2021. 2) Cloud desktop market: with the maturity of cloud desktop technology, cloud desktop has gradually replaced PC in government and enterprise office, teaching, medical care and other fields. According to IDC data, it is estimated that by 2025, shipments of cloud desktop terminal devices in China will reach 4.87 million, an increase of 109.01% and 15.89% over 2020. 3) Network security market: with the development of information technology, the demand for strengthening network security is increasing day by day. According to the China Network Security Industry Research report (2022), the global network information security market will be 155.4 billion US dollars in 2021.
Multi-growth pole: keenly grasp the application trend and quickly meet customer needs.
1) Internet: in response to the high demand for product compatibility and openness in the construction of large data centers, ① has become the mainstream supplier of white box switches in China. Data center switches have been widely used in large Internet enterprise customers such as BABA, Tencent and Bytes since 2018. The revenue CAGR of data center switches from 2018 to 2021 was 52.1%, contributing to an important revenue increase. To meet the demand of data center switch port rate upgrade, ② has become one of the few domestic enterprises with R & D capability of high-end data center switches, and has recently made remarkable progress in this field. 2022H1 200G/400G data center switch product revenue increased 7.78 times year-on-year, with a market share of 66.18%. 2) SMB: the company conforms to the digital needs of small and medium-sized customers, builds a sound distribution system, and channels allow profits to help rapidly expand customers; at the same time, the construction of a sub-brand Ruijie Ruiyi focuses on the commercial market and can fully meet all kinds of networking needs of small and medium-sized enterprises. With the highlight of brand effect and the upgrading of product structure, the unit price of SMB customers will continue to rise. 3) operators: in line with the trend of digital economy and cloud network convergence, the company has won a higher share in operators' cable + wireless and data center + small station collection. 4) Government and enterprises: to meet the needs of the digital transformation of government and enterprises, the company fully integrates technology and scenario applications, and targeted launched a number of scene-based innovative wireless network solutions, cloud desktop scene-based solutions and minimalist ethernet solutions, etc. it has gained high market share in many segments of the industry market.
Investment suggestion: as a leader in domestic network equipment, the company's performance has increased steadily in recent years. The digital economy is booming, the digital industry space is up, and the company has significant advantages in channel and product layout through a keen grasp of market trends and forward-looking layout, and continues to make breakthroughs in the lower reaches of many fields. we expect the company's 2022-2024 net profit to be 5.67 shock 7.91 trillion yuan, an increase of 23.9%, 39.5% and 36.1% respectively over the same period last year, and the PE multiple corresponding to the current market capitalization is 44x/32x/23x. Cover for the first time and give a "recommended" rating.
Risk tips: downstream market demand is lower than expected; market competition intensifies; some raw materials rely on imports.