Beijing Zuojiang Technology Co.Ltd(300799) (300799)
Event overview:
Recently, according to the company’s disclosure on the investor interaction platform, the development of the company’s self-developed programmable network security processing series chips is progressing smoothly. It is expected that the chips will return in the second half of 2022. According to the market demand forecast, the company has subsequently planned multiple series and multiple chips in the DPU field, and will carry out relevant research and development in succession next year.
Analysis and judgment:
Relying on years of security equipment development technology, layout a new generation of security dedicated chips. The company is deeply engaged in the information security industry and has accumulated rich experience in product design and R & D technology application. In 2020, the company set up a subsidiary Beizhong NETCORE to carry out the research and development of special chips for network security. This series of chips is an important part of the company’s network security product system, with network access and service processing capabilities of up to 100gbps, and can cover the network requirements of different access capabilities from 1000Mbps to 100gbps; At the same time, it has programmable characteristics and can be applied to a variety of network business scenarios, including network communication, network security, cloud server and other fields. The chip has microsecond processing delay and low power consumption, which not only provides customers with high performance and high flexibility, but also reduces customers’ operation cost. At present, the development of this series of chips is progressing smoothly, and it is expected to return in the second half of 2022, laying a solid foundation for subsequent mass production and promoting the marketization of DPU products with multiple series and multiple application scenarios.
DPU effectively releases CPU computing power, and 3U integration will become a new development trend. DPU is a special processor with data as the center, and its core is to assist the master CPU in processing network, storage, computing and other functions as a coprocessor. With the explosive growth of global data volume and computing demand, the improvement of CPU computing power and performance growth encounter bottlenecks, which is difficult to match the fast-growing network transmission rate. DPU products are born on demand. The most direct function of DPU is to act as the unloading engine of CPU, take over infrastructure layer services such as network virtualization and hardware resource pooling, and release the computing power of CPU to upper layer applications. The new architecture integrating CPU, GPU and dpu3u can reduce the communication delay by more than 10 times, which will become the development direction of chip level data center in the future.
Self developed ASIC chip, seizing the differentiated market, has broad prospects for mass production and application. At present, several mainstream DPU architectures are different, which can be roughly divided into asicbased, fpgabased and socbased. More than 90% of China’s start-up DPU production lines are designed based on FPGA. The advantage of FPGA architecture is flexibility. It has rich logic units to realize fast parallel processing of data, but it is difficult to program and expensive to improve penetration. The company’s self-developed chip based on ASIC architecture has unique characteristics, which will effectively meet the differentiated needs of users. Although ASIC is relatively limited in flexibility, it has low cost and superior performance, and can provide the highest cost performance. More importantly, most FPGA based solutions in the existing market are dominated by the upper load and face the challenge of product standardization. The traditional “one size fit all” ASIC business model can meet most application scenarios of general network processing, has the potential for batch use, is expected to dilute the cost through scale, and has a broader market prospect.
DPU has a wide range of application scenarios, and the Chinese market is expected to reach US $4 billion. The downstream market of DPU industry is mature, covering cloud computing, telecommunications, intelligent driving and other fields. The market demand for cloud computing is the most vigorous, among which the bare metal server has a rigid demand for DPU; There is potential underlying demand in the telecommunications market, and DPU will effectively improve the data exchange rate; In the field of intelligent driving, DPU can help reduce time delay and is expected to become the standard configuration of intelligent vehicles in the future. The ASIC chip under development by the company can meet a variety of application scenarios and has a wide range of applications. It can be used in network, storage, security, cloud acceleration and other industries. According to the prediction of cheetah Research Institute, by 2025, the global DPU market is expected to exceed US $12 billion a year, while the Chinese market will reach US $4 billion a year.
Two capital increases were made to North China network core to promote the chip development process and consolidate technical barriers. The subsidiary Beizhong network core is the main body responsible for the development of the company’s network security special chip. On March 10, 2021, the company announced that it would jointly increase the capital of the North China network core by RMB 26.25 million with the North China Network in the future; On September 30, the company announced that the related parties North network blue ocean and North network smart core jointly increased the capital of North China network core by 25 million yuan. The two capital increases will further promote the development of the company’s high-end network security chip integrating data communication and network security, improve anti risk ability and market competitiveness, and enhance business capability. As an important layout direction of the company in the future, this series of special chips give products stronger performance and better power consumption through vertical integration of upstream and downstream, break through bottlenecks and form new industrial influence and technical barriers.
Investment suggestions:
As the core supplier of national network information security products, the company has rich research and development experience and advanced professional technology in relevant fields. The core benefits from the demand for security equipment for the upgrading of national information network and the large amount of new generation of high-level security equipment. Considering the smooth development of the company’s programmable network security chip, we raised the revenue forecast from RMB 287 / 374 million to RMB 353 / 529 million in 22-23, and EPS from RMB 1.63/2.13 to RMB 1.99/2.97 in 22-23. It is estimated that the company will achieve revenue of RMB 221 / 3.53/529 million, net profit attributable to the parent company of RMB 105 / 203 / 303 million, EPS of RMB 1.03/1.99/2.97, corresponding to the closing price of RMB 70.42/share on December 24, 2021, and PE of 68.50/35.41/23.72 times respectively, maintaining the buy rating.
Risk tips:
High customer concentration; Order fluctuation risk; New product R & D risk.
