Incident Overview
The company recently released its semi-annual report for 2023. In the first half of the year, it achieved revenue of 442 million yuan, an increase of 20.15% over the previous year, and achieved revenue of 211 million yuan in a single Q2, an increase of 36.78% over the previous year. Net profit for the first half of the year was 39 million yuan, down 3.98% year on year. Q2 alone achieved net profit of 07 billion yuan, reversing losses year on year. The company's 23Q2 performance recovered at an accelerated pace, and the results of bucking the trend and expanding gradually became apparent. We remain optimistic about the company's annual performance.
Performance is recovering at an accelerated pace, and expansion against the trend is beginning to bear fruit
On the revenue side, the company achieved a revenue increase of 20.15% year-on-year in the first half of 2023. Judging from the specific revenue split, the operator industry achieved revenue of 1,504 billion yuan, an increase of 27.84% over the previous year; the government industry achieved revenue of 1,421 million yuan, an increase of 16.21% over the previous year; and the utility industry achieved revenue of 78 million yuan, an increase of 3.44% over the previous year. The operator industry, which is the company's basic stock, has achieved significant recovery, and revenue has continued to grow rapidly. The government industry achieved a growth rate of 16.21% against the backdrop of pressure from the external environment, demonstrating the effectiveness of the company's expansion against the trend.
On the profit side, the company's comprehensive gross profit margin for the first half of the year was 67.48%, an increase of 1.58pct over the previous year. The improvement in gross margin reflects the further strengthening of the company's product capabilities. This is invaluable in the current competitive market environment. On the other hand, the company continued to push against the trend and expand its strategy. Sales/management/R&D expenses increased by 34.95%/20.67%/5.92% year-on-year in the first half of 2023. The company's investment in the marketing market maintained a high growth rate, actively seizing customer business opportunities. We believe it will help the continuous introduction of the company's products on the new customer side. Furthermore, the growth rate of the company's investment in R&D is lower than the growth rate of revenue, which shows that the company's product iterations are maturing, and it is expected to show a certain degree of profit flexibility in the future. Therefore, we believe that the company's overall operating quality is high, gross margin is steadily increasing, strategic investment on the cost side is clear, and gradually stabilizing, which is expected to drive the company to achieve scale expansion and future profit release.
Operators' business advantages are obvious. Application delivery, data security, AI, etc. help grow the company's core operator market is progressing steadily, and competitive advantages are gradually emerging. According to the interim report, among operator users, the company's products such as firewalls, intrusion prevention, abnormal traffic cleaning, web application firewalls, vulnerability scanning, and application delivery platforms have been shortlisted for the centralized procurement lists of the three major operators for many years, and have ranked first in multiple bids. The company's products have been used on a large scale in the national network of the three major operators, including metropolitan area networks, wireless Internet exports, and data centers, etc., and have become the core supplier of network security products in the industry.
Application delivery products in the financial sector were launched in batches. According to the Interim Report, the company's application delivery platform products are widely used in Bank of Communications, Industrial and Commercial Bank of China, Bank of China, Agricultural Bank, China Life Insurance, etc.; security products such as company firewalls are also widely used in data centers in many places such as Bank of China and Hang Fung Bank.
Data security solutions help the development of data elements. As data becomes a factor of production, data security governance has become a hot construction area. Focusing on the security requirements of data elements in data processing, Dipu Technology has launched a data security operation solution, with data protection as the core, to achieve data security management compliance, enhance data security protection capabilities, and avoid data security risks, thus achieving “data security is visible, manageable, and controllable.” Through the data security management and control platform, inspection (data classification, classification and risk assessment system), monitoring (full data flow probe system), and protection (database firewall, database audit system, data leakage prevention, data desensitization, data encryption, data watermarking, etc.) capabilities are unified and centralized to meet legal compliance requirements.
AI technology continues to empower. According to the Interim Report, the company continues to invest in artificial intelligence technology research and development. The products continue to be deeply cultivated in various technical fields such as APT attacks, automated vulnerability mining, abnormal behavior detection, cybersecurity situation prediction, API asset mapping, and intelligent data content identification and classification, and are also used in various products such as threat detection products, API risk monitoring products, and data security operation platforms, etc., to comprehensively enhance product detection, judgment, response and self-evolution capabilities. In the third China Artificial Intelligence Competition co-hosted by the Internet Information Office, the Ministry of Industry and Information Technology, and the Ministry of Public Security, the Prophet Threat Perception Big Data Platform, with its excellent AI detection capabilities, successfully obtained the highest level of A-level certificates from only two companies in the country in the field of cybersecurity among many participating teams.
Investment advice:
Dipu Technology focuses on the field of cybersecurity and application delivery, and is a leading manufacturer in the domestic cybersecurity industry. Currently, the company focuses on high-value customers such as operators, finance, power and energy, etc., and is gradually expanding to other customers such as government enterprises. We expect the company to achieve operating income of 11.28/13.83/170 billion yuan and net profit of 2.05/276/356 million yuan in 2023/24/25. Maintain the investment rating of holdings increase-A, and give a six-month target price of 19.10 yuan, corresponding to a dynamic price-earnings ratio of 60 times in 2023.
Risk warning: Macroeconomic recovery falls short of expectations; policy progress falls short of expectations; supply chain supply is insufficient.
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