Event: on February 25, the company released its annual results KuaiBao. Thanks to the strong demand for commercial secrets, security services and Xinchuang, and the continuous optimization of its product structure, the annual operating income reached 2.384 billion yuan, an increase of 13.31% over the same period last year, and a gross profit margin of 35.49%. Up 2.95% over the same period last year The company achieved a net profit of 159 million yuan, an increase of 2.31% over the same period last year, the company's operating capacity continued to improve, sales rebates for the whole year reached a record high, and the net cash flow generated by operating activities reached 620 million yuan, an increase of 736.15% over the same period last year. Xinchuang won the bid for the whole year by more than 2 billion, ranking in the forefront of the market.
The implementation of laws and regulations, the high growth of new application scenarios and network security events jointly promote the market demand for commercial passwords, and the widespread application of passwords has become a trend. 1) on the policy side, in 2019, China successively promulgated Equal Insurance 2.0 and the password Law.
And other network security industry laws and regulations, encryption security requirements are expected to continue to release. Among them, the new standard of "equal protection 2.0" password is more detailed and clear than "equal protection 1.0". Including password authentication, password technology, password national and industry standards and other aspects of the strict evaluation standards, the introduction of the "password Law" makes it clear that passwords are the core technology and basic support to ensure network and information security. Domestic substitution has become a trend in December 2020. Article 41 of the State Cryptography Administration issued 26 cryptographic industry standards, including the "trusted Computing trusted cryptographic Module Interface Specification", which will be implemented since July 1, 2021. 2) password is ubiquitous in cloud computing, Internet of things and other new scenarios, and service becomes a trend. Password technology escorts cloud computing, big data, artificial intelligence, Internet of things and other applications. Password services widely cover the government, enterprises, organizations and the public, and widespread application has become a trend. Weststone, as a leading manufacturer of integrated services for cryptographic algorithms, cryptographic technology, cryptographic products and cryptographic services, is expected to stand out in the general trend; 3) frequent security incidents such as data disclosure and network attacks are expected to increase the proportion of network security investment in IT expenditure. Multi-factor resonance is expected to drive the prosperity of the cryptographic industry.
As the only listed company in China, the company has the value of scarce platform with the transformation of institutions and the promotion of the policy of bigger and stronger state-owned enterprises. China Electronic Technology Network Information Security Co., Ltd., the controlling shareholder of the company, is a network security sub-group built by China Electric Power Group, the actual controller of the company, according to the development needs of the national security strategy. it has natural advantages in supporting national network security strategic tasks and winning the trust of customers at the top level in key areas, and has strong technical strength and innovation ability. It can provide strong support for the continuous improvement and innovation of the company's business, technology, products and other aspects. as the only listed company in China, the company has acquired 30 Jiawei, 30 Ruitong and other assets under 30 companies, with scarce platform value.
The company has advantages in strategic planning and implementation, product competitiveness and channel construction. The main management of the company has the professional background of network security technology, and the company actively promotes the product research and development strategy of universal password, intelligent attack and defense and security service, and insists on creating new high-intensity research and development. has built a full product system covering chips, modules, platforms, machines and systems, while continuing to participate in the formulation of national standards and major industry standards, the product competitiveness is strong. Through the five major regional marketing centers in North China, East China, South China, West China and Sichuan and more than 20 offices under them, combined with the background of high-quality shareholders, there is a significant comprehensive advantage in cutting into the password security needs of government customers at all levels and large enterprises.
Maintain a "buy" rating. We expect 2021amp 2022 to maintain a "buy" rating with operating income of 2.982 billion yuan and net profit of 215 million yuan.
Risk hint: competition aggravates risk; policy strength is not as strong as expected; risk of slow layout of new areas.