Recently, the company released its three-quarter report for 2024. In the first three quarters, it achieved operating income of 0.3 billion yuan (+8.0% year over year) and net profit to mother of -81.533 million yuan (-16.7% year over year). The company thoroughly lays out computing power chips, creates a secure base for domestic computing power, and maintains purchase ratings.

Key points to support ratings

Accrued receivables impairment provisions increased, resulting in a decrease in net profit attributable to the mother in Q3. In Q3, the company achieved revenue of 0.11 billion yuan (-17.3%), net profit attributable to mother of -20.226 million yuan (-298.3%), and net profit not attributable to mother of -21.492 million yuan (-309.0%). The year-on-year decline in net profit attributable to mother in the first three quarters was mainly due to increased preparation for impairment of receivables. At the same time, the Internet security industry has strong seasonality. Fourth-quarter revenue accounts for a high proportion of annual revenue. The performance of the first three quarters does not fully reflect the company's development situation throughout the year.

Deeply lay out computing power chips to create a secure base for domestic computing power. On September 2, the company issued the “Voluntary Disclosure Notice on Signing a Strategic Cooperation Agreement”, announcing comprehensive and multi-level in-depth cooperation with Gangwon Technology in the fields of computing power software, hardware and services, and AI computing power security to promote the construction of the computing power industry ecosystem. In addition, the company has cooperated with operator customers such as Tower Group, Tower Research Institute, and mobile in a certain province, and has won bids and implemented some important projects. The company has a dedicated subsidiary to handle this work, and has formed a complete R&D team to carry out R&D work.

AI+ security continues to be implemented. The company conducts in-depth research on AI infrastructure and builds AI-based core systems on this basis, including operators, storage resources, and core software. The company will also cooperate with major model manufacturers such as Baidu, JD, and Inspur to develop AI security application models for its own security products. In April of this year, the company collaborated with Baidu to launch a next-generation firewall product, which received widespread attention and testing from many customers in the industry, and received a good market response. This is also an important milestone for the company in the field of “security+AI”.

valuations

The estimated net profit for 2024-2026 is 0.6, 0.8, and 110 million yuan, EPS is 0.83, 1.10, and 1.48 yuan, and the corresponding PE is 60X, 45X, and 34X, respectively. The company thoroughly lays out computing power chips, creates a domestic computing power security base, and maintains purchase ratings.

The main risks faced by ratings

Customer expansion falls short of expectations; implementation of computing power layout falls short of expectations; technology research and development falls short of expectations.