Recently, Hongteng Intelligence, a shareholder of the company, continued to increase its shares in the company. As of December 29, after the change in equity, Hongteng Intelligence held about 6.9938% of the company's total share capital; its co-actor, Qihoo Technology, held Shanshi Nettech shares about 3% of the company's total share capital. As a result, the two parties together hold close to 10% of the company's shares. Previously, Hongteng Intelligence initially planned to continue to increase its shares in Shanshi Network Technology with its own capital within the next 12 months. The increase in holdings is expected to be no less than 3% of the total share capital of listed companies, but it does not seek control of listed companies. This change in equity did not result in a change in Shanshi Nettech's status of having no controlling shareholders and no actual controllers.
Guoxin Computer's opinion:
1) The resources complement each other, and the synergies between the two sides are worth looking forward to. Shanshi Nettech is a traditional network security vendor known for its firewall; 360 is the largest internet security company in the market. After divesting Qianxin, it continued to lay out the government and enterprise security market. After 360 took a stake, the two sides had potential for cooperation in many fields. At the product level, 360 specializes in products in the field of terminal security, and Yamaishi is good at products in the border field. The two sides complement each other. At the customer level, the proportion of customers in the Shanshi government is low, and the financial and other industries account for a high proportion; 360 focuses on security operation centers and is better at the government sector, and the business of the two parties can cooperate in construction. At the technical level, 360 Security Brain can empower all kinds of products. Threat intelligence can be shared between the two parties, and security accumulation can do more with less.
2) Issue convertible bonds to increase security services and industrial Internet security. In November 2020, the company announced a convertible bond plan. It plans to issue convertible corporate bonds to unspecified targets to raise no more than 547 million yuan, mainly for the construction of the Suzhou Security Operation Center and security research and development based on the industrial Internet. The company has always focused on products. In the middle of this year, the company also followed the security service process and released a security service business. The construction of the Suzhou Safety Operation Center also carried the development of the company's safety service business. At the same time, industrial informatization and the Internet are also inevitable in the development of the industrial sector, and industrial control safety will also become a new market highlight. The company actively invests to grasp the development direction of the industry.
3) Equity incentives were introduced, and concerted efforts were made to return to a steady growth channel. In December 2020, the company announced a stock incentive plan. The number of restricted shares to be granted is 4.5055 million shares, accounting for about 2.5% of the company's total share capital. The incentive target was no more than 184 people, accounting for about 16.96% of the company's total of 1,085 employees at the end of 2019. The award price was 21.06 yuan/share. The company's assessment target is that, based on the revenue value in 2020, the revenue growth rate in 21-24 will not be less than 25%\ 50%\ 75%\ 100%. Affected by the epidemic in 2020, the company's performance in the first three quarters was average. As the industry gets back on track next year and the company's products and services are gradually perfected, it is expected that it will also return to a higher level of growth.
The company has deep technical strength and excellent performance in the high-end market. Currently, it is undervalued by the market and maintains a “buy” rating. Both 360 and Yamaishi have excellent technology, and each has “partial” security vendors. After 360's strategic investment this time, the two sides have great potential for future collaboration. Shanshi has joined forces with overseas firewall leaders Palo Alto and Fortinet to occupy a leading position in the next-generation firewall field, especially in the high-end market, as evidenced by the high share of the financial and Internet industries. Firewalls are still the biggest piece of cake in the security market. As traffic upgrades, performance requirements increase, and applications become more complex, it is the general trend that firewalls continue to evolve in the direction of the next generation of high performance. At the same time, Yamaishi has also gradually completed product lines such as WAF, IPS, situation awareness, and EDR; in the cutting-edge field, the company Cloud Ge is the only Chinese manufacturer selected for GartnercWPP's global market guide, and Yamaishi Smart Sense has been the only Chinese manufacturer selected for Gartner's “NDR Global Market Guide” for two consecutive years. With the firm implementation of the company's channel strategy, the company's growth rate is expected to pick up next year. The company's revenue for 2020-2022 is estimated to be 765/965/1,214 million yuan, net profit of the mother is 1.03/131/168 million yuan, the annual profit growth rate is 13%/27%/29% respectively, and the diluted EPS = 0.57/0.73/0.93 yuan. The company is an enterprise with technological competitiveness in the global information security industry. Currently, it is less than 10 times PS, is clearly underestimated by the market, and maintains a “buy” rating.
Risk warning
Repeated pandemics have led to macroeconomic weakness, and the overall IT spending of the whole society has declined.
Cooperation and collaboration between the two sides fell short of expectations.
Channel development fell short of expectations, and new products were released slowly.