\u3000\u30 Guangdong Tengen Industrial Group Co.Ltd(003003) 69 Nsfocus Technologies Group Co.Ltd(300369) )
Event: the company released the annual report of 2021 and the performance forecast of Q1 in 2022. The company realized an operating revenue of 2.609 billion yuan in 2021, with a year-on-year increase of 29.80%; The net profit attributable to the parent company was 345 million yuan, a year-on-year increase of 14.42%. It is estimated that Q1 revenue in 2022 will be 318332 million yuan, with a year-on-year increase of 31.11% – 36.89%; The net profit attributable to the parent company lost 110 million yuan to 130 million yuan, slightly lower than the market expectation.
Key investment points
Rapid growth in revenue and continuous increase in personnel investment: the decline in the company’s net profit margin in 2021 and 2022q1 was mainly due to 1) the increase in the proportion of third-party products with relatively low gross profit margin in security solutions, 2) the continuous increase in investment in R & D and sales personnel. The employee salary increased by 35% year-on-year in 2021. In 2021, the employee stock ownership plan confirmed the share payment expense of 45 million yuan and the share payment expense of 2022q1 was about 24 million yuan. In terms of business, the company’s revenue of safety products in 2021 was 1.602 billion yuan, with a year-on-year increase of 19.48% and a gross profit margin of 67.78% (year-on-year -2.56pct); The safety service revenue was RMB 741million, with a year-on-year increase of 15.24% and a gross profit margin of 62.23% (year-on-year -10.91pct); The revenue of third-party products and services was 264 million yuan, with a year-on-year increase of 974.61% and a gross profit margin of 20.29% (year-on-year + 15.34pct). The rapid growth of third-party products and services was mainly due to the company’s development of comprehensive security solutions for multiple vertical industries and enterprise customers in 2021 and the formation of joint solutions with ecological partners.
Remarkable results have been achieved in channel construction: the company has made more in-depth adjustment and innovation in the sales model from the aspects of customer stratification and grading, horizontal and vertical combination of organization, upward and downward connection of industry, assessment mechanism and so on. It has carried out joint expansion and sales in the sales channel system of the company and ecological partners, and the annual ecological cooperation orders exceeded 200 million yuan in 2021. The cooperation with the national general agents was smoothly promoted, the new orders of the overall channel business exceeded 2 billion yuan, and nearly 4000 channel agents were expanded. With the joint efforts of business partners, the layout and coverage of the commercial market, and the sales of commercial products will exceed 100 million yuan in 2021.
Continue to increase R & D investment and expand emerging security scenarios: the company continued to increase R & D investment. In 2021, the R & D cost was 503 million yuan, a year-on-year increase of 40.90%, accounting for 19.29% of the operating revenue. On the one hand, continue to invest in the main products in the traditional network security field, on the other hand, increase efforts to invest in emerging business fields. In 2021, the company released a number of innovative solutions and services such as cloud security SASE, data watermarking products, Internet of vehicles security monitoring and protection system. In 2022, we will continue to launch new products in cloud security, privacy computing, industrial edge computing and other fields, injecting momentum into the company’s sustained growth.
Profit forecast and investment rating: considering that the company continues to increase personnel investment, we will reduce EPS from 0.71/0.91 yuan to 0.50/0.59 yuan in 20222023, and it is expected that EPS will be 0.70 yuan in 2024. The current market value corresponds to 22 / 19 / 16 times of PE from 2022 to 2024. The company has achieved remarkable results in channel transformation, actively layout emerging security fields, and is optimistic about the company’s comprehensive efforts to drive performance growth under the reform and transformation, so as to maintain the “buy” rating.
Risk warning: the progress of network security industry is lower than expected; The company’s business promotion was lower than expected.
