Events:

The company released its Annual report 2020 and first Quarterly report 2021 on the evening of April 21, 2021.

Comments:

In 2020, the company's operating income recovered quarter by quarter, and the demand in the fourth quarter picked up obviously in 2020. With the stabilization of the domestic epidemic situation, the company's performance accelerated quarter by quarter. For the whole year, the company achieved operating income of 725 million yuan, an increase of 7.53% over the same period last year, and 310 million yuan in the fourth quarter (single quarter), an increase of 19.26% over the same period last year. The company's performance declined in 2020, with a net profit of 38 million yuan deducted from the same period last year, down 48.50% from the same period last year, mainly because customer demand was affected by the epidemic, and operating costs increased more than the same period last year as a result of rising hardware costs and the expansion of personnel. In addition, the company accelerated the transformation to a program-oriented enterprise, continuously distributed R & D, and invested 212 million yuan in R & D, an increase of 13.64% over the same period last year, accounting for 29.26% of business income.

With the continuous innovation in the field of border security and the rapid growth of cloud security business in 2020, the company continues to enrich and optimize its product line. 1) the revenue from the border security business totaled 535.4309 million yuan, down 7.49 percent from the same period last year. The company has developed a new generation of firewall hardware platform, which will be released on the basis of the new hardware platform in 2020 and early 2021. 2) the revenue of cloud security business reached 46.2192 million yuan, an increase of 29.42% over the same period last year. Shanshiyunjie successfully completed the compatibility test of Huawei Yunpeng Cloud Service and Huawei Cloud Stack 8.0 (Kunpeng), and obtained the double compatibility certification. 3) the revenue of other security businesses reached 137.3351 million yuan, an increase of 144.45% over the same period last year. In 2020, the company established a new security service department, which adopts the delivery mode of "safety products + security services" to provide security services to customers in government, university, finance, energy and other industries.

In the first quarter of 2021, the company's operating scale expanded, and its operating income increased by 63.52% over the same period last year. In the first quarter of 2021, the company's production and operation were stable, orders were delivered well, and its operating income was 95 million yuan, an increase of 63.52% over the same period last year. The net profit of non-homing was-85 million yuan, a decrease of 15 million yuan over the same period last year. In the first quarter, the company's operating scale expanded, sales personnel and R & D personnel increased significantly compared with the same period last year, and new office leasing expenses increased: sales expenses were 73 million yuan, up 31.05 percent over the same period last year; management expenses were 13 million yuan, up 46.80 percent over the same period last year; and R & D expenses were 60 million yuan, an increase of 30.22 percent over the same period last year.

We believe that with the effective control of the domestic epidemic, the company actively expand the scale of operation and layout of emerging areas, the future business performance is expected to accelerate recovery.

Investment advice and profit Forecast

With the landing of policies such as Insurance 2.0, the network information security industry has ushered in a high growth cycle, and the company is expected to fully benefit from the medium-and long-term development process. It is predicted that the operating income of the company from 2021 to 2023 is 9.38,11.79 and 1.461 billion yuan, the net profit is 1.02,1.46 and 202 million yuan, the EPS is 0.57,0.81,1.12 yuan per share, and the corresponding PE is 57.56,40.49,29.16 times. At present, the PE TTM of the computer (Shenwan) index is 60.2. considering that the company's current income is small and actively carry out transformation and upgrading, there is more room for growth in the future, and the target price corresponding to the company's target PE, of 75 times in 2021 is 42.75 yuan. Maintain a "buy" rating.

Risk hint

COVID-19 epidemic situation is repeated, downstream government and enterprise customers' network security investment is affected; the landing of policies such as equal insurance 2.0 is lower than expected; new product research and development and market promotion are lower than expected; industry competition is intensified, industry profitability is declining, and so on.