Recommendation logic: 1) Geer Software is a leading enterprise in the PKI field, with strong competitiveness in the industry. The company's revenue in 2019 was 370 million yuan, an increase of 20% over the same period last year, and the revenue side achieved steady growth. 2) the company has rich industry experience and customer resources, and has mastered the key technologies in the field of PKI infrastructure and PKI security applications. According to IDC data, Geer Software ranked third in the market share of identity and digital trust software in 2018, reaching 11.3%. Due to the strong customer stickiness and high replacement cost in the PKI industry, the company will fully enjoy the market-leading location advantage. 3) the company's revenue in the first three quarters of 2020 was 180 million yuan, an increase of 16% over the same period last year. Q3 achieved revenue of 64 million yuan in the single quarter of 2020, an increase of 54% over the same period last year. The significant increase in revenue is mainly due to the warming of the company's main business orders due to the effective prevention and control of the domestic epidemic.

Market demand superposition policy two-way pull, the PKI industry ushered in the opportunity for rapid development. From 2011 to 2015, the market scale of China's information security industry developed rapidly, with a compound growth rate of 20.6%. According to the forecasts of relevant institutions, the market size is expected to reach 76.2 billion yuan in 2020. For a long time in the future, Chinese government departments, military industry, financial institutions, large and medium-sized enterprises and institutions will continue to maintain a strong demand for information security products, especially PKI products, and the scale of the PKI market is expected to continue to grow at a high speed. At present, Equal Insurance 2.0 has been formally implemented on December 1, 2019, and the password Law was formally implemented on January 1, 2020. The autonomous control of cryptographic algorithms and password products has become an important construction task of information security in our country. The implementation of laws and regulations on information security will effectively standardize the construction of national information security and promote the rapid development of the field of information security in our country.

The construction system of PKI security field has been strengthened, and the company's business growth space has been expanded. At present, the company's main products include PKI infrastructure products, PKI security application products and general security products. In 2020, the company steadily promoted its main business in the fields of the party, government and military enterprises, carried out the top-level layout and planning of the trusted identity authentication system in an orderly manner, and gradually strengthened the market expansion of Smart things and the construction of PKI-based video security system. At the same time, the company will further expand the field of zero trust and promote the implementation of the zero trust pilot project. In terms of product system layout, the company increases its investment in the research and development of security products such as cloud computing, Internet of things, mobile Internet, industrial Internet and business docking with customer groups, so as to effectively enhance the competitiveness of the company.

Downstream customer cooperation is stable, accelerating the layout of emerging areas. The company's customers are mainly state ministries, local government departments, military enterprises, financial institutions, CA companies and so on. With the continuous improvement of information security level requirements, downstream customers will continue to invest high investment in information security construction in the process of system construction and upgrading, providing an important guarantee for the company to further open up new markets and customers and provide an important guarantee for sustained and rapid development. At the same time, with the evolution of the computing power of intelligent IoT equipment, intelligent IoT equipment is becoming an important direction of technology and industrial development, and the monopoly position of traditional security leading enterprises is obvious. Driven by the national industrial policy and the development trend of industry technology, the demand for intelligent Internet of things equipment security protection products is increasing day by day. Intelligent Internet connection security technology is expected to get more attention in the field of video surveillance, car networking, central bank digital currency and other specific application fields.

Profit forecast and investment advice. It is estimated that the EPS from 2020 to 2022 will be 0.52,0.85,1.16 yuan respectively, and the net profit of homing will reach a compound growth rate of 47.2% in the next three years. Considering that the country continues to increase investment in network security construction, the company occupies an absolute leading position in the field of PKI and works closely with downstream customers, and will fully enjoy the advantages brought by new orders, covering for the first time, giving the company 35 times PE in 2021, with a target price of 29.75 yuan and a "buy" rating.

Risk tips: network security construction investment tightening, key customer expansion is not as expected.