The company is a leader in network visualization in China. Taking into account the impact of the epidemic and incentive costs, combined with the company's annual report, the EPS forecast for 2021-22 is reduced to 1.81 yuan 2.27 yuan (the original forecast is 2.59 yuan 3.41 yuan), the EPS forecast for 2023 is increased by 2.77 yuan, and the current price corresponds to PE 22x17x14x, maintaining the "overweight" rating.

Matters: the company released its annual report in 2020 and quarterly report in 2021, with revenue of 954 million yuan in 2020, + 5.48% year on year, net profit of 248 million yuan,-16.04%, and non-net profit of 238 million yuan, 17.97% of the same period last year. 2021Q1, the company achieved operating income of 186 million yuan, year-on-year + 21.27%; return to the mother net profit of 12 million yuan, year-on-year-61.40%; deduction of non-net profit of 11 million yuan,-62.43%.

The slowdown in industry demand superimposed equity incentive fees, and the company's performance was under short-term pressure. In 2020, affected by the COVID-19 epidemic, the capital investment of the government and operators temporarily slowed down in the expansion and construction progress of 5G construction and network visualization. In 2020, the company achieved operating income of 954 million yuan, + 5.48% compared with the same period last year. In terms of expenses, the company's sales expenses in 2020 were 184 million yuan, an increase of 7.79 percent over the same period last year, management expenses were 77 million yuan, up 20.24 percent over the same period last year, and research and development expenses were 237 million yuan, up 9.26 percent over the same period last year. Due to the increase in incentive costs brought about by the implementation of equity incentives by major companies, the company implemented equity incentive fees of 63 million yuan in 2020, accounting for 8.83 percent of the total operating costs. Under the influence of incentive fees, the company's net profit has declined, and the company achieved a net profit of 248 million yuan in 2020,-16.04% compared with the same period last year.

The synergy between products is further enhanced, and the back-end business is still growing rapidly. In 2020, the company's broadband network products realized revenue of 471 million yuan (- 17.34%), accounting for 49.35% of revenue (- 13.62pcts); mobile network products realized revenue of 159 million yuan (+ 5.90%), accounting for 16.70% of revenue (+ 0.07pct); and network content security products realized revenue of 108 million yuan (+ 15.10%), accounting for 11.36% of revenue (+ 0.95pct). Big data's operating product income reached 95 million yuan (+ 197.18%), accounting for 9.92% of revenue (+ 6.40pcts). With the coordination of front and back-end business, although the industry was affected by the epidemic and downstream customer expenditure in 2020, the company's back-end business still achieved rapid growth. In addition, the company has further enhanced the synergy between products and applied big data-related core technologies accumulated over the years to network content security products, network visualization infrastructure products and industrial Internet security products to enhance product competitiveness.

5G promotes the rise of industry demand and is expected to see growth in the long run. In 2020, affected by the COVID-19 epidemic, the government and operators' investment in the subdivided industries where the company is located has declined to a certain extent in the short term, but in the long run, the trend of corresponding upgrading demand and capital investment will not change. The development situation of information security industry, network visualization market and big data market is still good. The construction of national network infrastructure continues to improve, the scale of 5G users and network traffic continue to increase, and network applications are further enriched. In 2020, the 5G network has entered the stage of large-scale deployment, which has brought about the explosive growth of mobile applications and traffic. at the same time, more attention has been paid to industrial Internet security. The importance of data as a resource and application is increasingly valued by all sectors of society, and the demand for data collection and application is increasing day by day. Network content security and information security have been continuously concerned by governments, society and enterprises at home and abroad, and the information security market is expected to continue to grow.

Risk factors: increased competition in the industry; demand from the government and operators is lower than expected; research and development of new products such as 5G is not as expected.

Investment suggestion: the company is a leader in network visualization in China. Taking into account the impact of the epidemic and incentive costs, combined with the company's annual report performance, the EPS forecast for 2021-22 is reduced to 1.81 EPS 2.27 yuan (the original forecast is 2.59 EPS 3.41 yuan), and the EPS forecast for 2023 is 2.77 yuan, corresponding to the PE 22apace 14x. With reference to the industry valuation level, the company is given 25x PE in 2021, corresponding to the target price of 45 yuan. Maintain the "overweight" rating.