China's leading network security, big data and cloud service provider
We maintain the company's 2023-2025 net profit forecasts of 384, 6.38, and 799 million yuan, EPS of 0.32, 0.54, and 0.67 yuan/share. The current stock price corresponding to 2023-2025 PE is 28.9, 17.4, and 13.9 times. Considering the company's forward-looking layout in the fields of cloud security, industrial control security, and data security, etc., we maintain a “buy” rating.
The effect of improving quality and efficiency is remarkable, and cash flow has improved markedly
(1) In the first three quarters of 2023, the company achieved operating income of 1,648 billion yuan, a year-on-year increase of 12.63%, a year-on-year net profit of 248 million yuan, a year-on-year decrease of 40.85%; among them, Q3 achieved operating income of 644 million yuan in a single quarter, an increase of 10.32% over the previous year, and realized net profit of 362.234 million yuan, a year-on-year decrease of 83.09%. (2) The company's gross sales margin for the first three quarters was 62.31%, up 1.08 percentage points from the previous year. Among them, the gross margin for the Q3 quarter was 73.03%, up 20.77 percentage points year on year, mainly due to the increase in the share of high-margin business.
The company's personnel structure continued to be optimized in the first three quarters, and the effect of improving quality and efficiency was remarkable. The sales expense ratio, management expense ratio, and R&D expense ratio were 39.03%, 12.98%, and 35.51%, down 0.95, 3.22, and 7 percentage points from the previous year. (3) The net cash flow from the company's operating activities in the first three quarters was -187 million yuan, a significant improvement over the previous year.
The industry is deeply cultivated, the market is declining, and the channel expansion strategy has been implemented effectively. New business revenue has maintained relatively rapid growth. By industry, corporate government customer revenue increased 32.62% year-on-year in the first three quarters; in addition, the revenue of the operator industry increased by 24.72%, and the revenue of the education industry increased by 16.04%. In the new business direction, cloud computing revenue increased 35.83%, innovation revenue increased 185.73%, cloud security revenue increased 45.46%, and data security revenue remained flat.
Data security revenue is growing rapidly, and products and technology continue to break through at the product level. The company officially released a privacy computing platform. With data privacy as a prerequisite, while ensuring that data providers do not disclose the original data, it analyzes and calculates data through technologies such as a trusted execution environment, federal learning, multi-party secure computing, etc., to provide a security guarantee mechanism for the entire life cycle of data for the supply and circulation of various data elements, giving full play to the value of data.
Risk warning: risk of tight government spending; risk of increased market competition; risk of declining cash flow.