In 2021q4, the overall scale of China’s IT security hardware market was US $1.54 billion, with a year-on-year increase of 9.25%, which was lower than expected. In addition to the base impact of the previous year, we believe that the epidemic situation and the shortage of raw materials are also important reasons for the lower than expected growth rate of network security hardware Q4.
In 2021, the scale of China’s IT security hardware market reached US $3.77 billion, with a year-on-year increase of about 15.2%, an increase of 9.1 percentage points over the previous year, and achieved good results under the background of the epidemic. At the same time, we also noticed that the growth of the industry has been lower than expected for three consecutive years. Since the data security law, the information protection law and the regulations on the security protection of key information infrastructure were successively issued in 2021, we believe that the network security industry will maintain a relatively strong demand in 2022, but we do not rule out that it will be affected by epidemic prevention and supply chain problems in stages.
The long-term development of the network security industry is still worth looking forward to. According to IDC’s prediction, the expenditure related to network security is expected to reach US $10.26 billion in 2021, and is expected to increase to US $21.46 billion by 2025. The five-year compound growth rate from 2021 to 2025 is 20.5%, ranking first in the world.
By 2025, security hardware is still expected to become the largest product type of network security, and security software will become the fastest-growing sub market. In 2025, the scale of network security hardware market will reach US $9.45 billion, with a five-year compound growth rate of 18.4%, and continue to become the largest primary sub market (accounting for more than 40%) of the network security industry; In 2025, network security software will become the fastest-growing primary sub market with a scale of US $5.9 billion and a five-year compound growth rate of 23.9%; The network security service market will reach US $6.11 billion in 2025, with a five-year compound growth rate of 20.8%.
From the data of IT security hardware segmentation, IDS / IPS has become the most volatile sub industry in the IT security hardware market in 2021. Among manufacturers, Venustech Group Inc(002439) not only maintains the first place in UTM and IDS / IPS2 fields and the second place in VPN fields, but also has significantly increased its share in these three markets and performed best.
From the perspective of valuation, based on the stock price on March 18, 2022, the median PE of Listed Companies in the industry (19 companies with wind’s unanimous expectation) in 2022 and 2023 was 27.48 times and 19.76 times, and the median peg was 0.68 and 0.58, significantly lower than 1. Moreover, the stock price adjustment of Companies in the industry since 2022 also fully reflected Q4 performance factors and market pessimistic expectations. The investment value is prominent and worthy of long-term attention.
In terms of individual stocks, Venustech Group Inc(002439) ( Venustech Group Inc(002439) ) and Topsec Technologies Group Inc(002212) ( Topsec Technologies Group Inc(002212) ) with both valuation advantages and growth are recommended.
Risk warning: the continuous pressure of shortage of raw material supply; The competitive pressure of the industry continues to increase; The epidemic development exceeded expectations; The government’s financial pressure has affected the network security investment budget.
