\u3000\u3 Guocheng Mining Co.Ltd(000688) 201 Beijing Infosec Technologies Co.Ltd(688201) )
Shangmi is a leading enterprise and has been deeply engaged in the core technology of password for more than 20 years. The company has been established for more than 20 years and has always focused on the research and development of commercial password products with password as the core. The ownership structure is relatively centralized, the management structure is stable and experienced. At present, the company has six product lines, among which the traditional security products focusing on identity security, communication security and data security account for nearly 90% of the main business revenue. At the same time, it has made efforts to layout new security products focusing on mobile security, cloud security and platform security products. From 2017 to 2021, the company’s revenue CAGR reached 33.7%, and the net profit attributable to the parent company CAGR was 40.5%.
Industry highlights: the network security market with password as the core is developing rapidly, and the digital economy and new infrastructure will continue to bring strong demand. According to CCID Consulting data, the scale of China’s network information security market reached 71.88 billion yuan in 2020, and the market scale CAGR from 2016 to 2020 was 20.92%. According to the guidance on promoting the development of network security industry (Draft for comments) issued by the Ministry of industry and information technology, China will reach 200 billion network security industry in 2025. According to the white paper on global digital economy, China’s digital economy continues to maintain rapid growth, with a year-on-year growth of 9.6% in 2020, ranking first in the world, far higher than gdp3.3 in the same period 0% nominal growth rate, and the proportion of digital economy in GDP also increased from 14.2% in 2005 to 38.6% in 2020. In the critical period of digital transformation, as an important strategic part of the new infrastructure, building an independent and controllable information security system is the basis for promoting the development of network security and digital economy. In the future, the domestic substitution and acceleration of network security products, and the compliance requirements with cryptographic technology as the core will further catalyze the development of network security market.
Company highlights: 1 Business secrets in the financial field are the leading ones, and domestic substitution and compliance drive strong demand. The company has focused on R & D investment for a long time. At present, it is in a leading position in the field of commercial passwords. The company’s products are strongly related to the core business of financial institutions. It has been deeply engaged in the financial field for more than 20 years, with a large number of financial customers and a high proportion of income. High coverage. The quality of the company’s products is excellent, and customers have strong stickiness and path dependence on the company’s products. Under the trend of accelerated domestic substitution of commercial secret security products and strong compliance demand, the company is expected to continue to benefit.
\u3000\u30002. New scenes give birth to new growth points of performance. With the continuous enrichment of customer business scenarios, the demand for network security is becoming stronger and stronger. Network security products can ensure the security of data, communication and other information in the customer’s business system. The application of such products is directly related to the scale of the customer’s business system. With the rapid development of new scenarios such as financial it, Internet of vehicles and digital currency, a large number of communication and transaction data put forward higher security requirements for anti-counterfeiting and fidelity, giving birth to greater network security requirements. As a leading enterprise of password, The company is expected to take the lead in benefiting.
\u3000\u30003. Gradually improve the product operation, and the profitability is expected to continue to improve. The company’s main business is to sell safety products with high maturity, supplemented by technical services. The gross profit space is higher than that of comparable companies in the same industry. From 2017 to 2020, the gross profit level of the company has increased steadily. In the future, with the further optimization of product structure, the profitability of the company is expected to continue to improve.
Investment suggestion: we predict that the operating revenue of the company from 2022 to 2024 will be RMB 729 / 965 / 1304 million respectively, and the net profit attributable to the parent company will be RMB 190 / 253 / 375 million respectively. The PE multiples of the company’s current stock price to the predicted EPS from 2022 to 2024 are 25.8 / 19.4 / 13.1 times respectively. Referring to the valuation of comparable companies, the current valuation of the company is lower than the industry average. Considering the high growth brought by the continuous prosperity of the industry, we raise the company to the “buy” rating.
Risk tips: the risk of covid-19 epidemic spreading continuously, the risk that the product iteration cannot meet the needs of market development, the risk of goodwill impairment, the risk that the business expansion is less than expected, the risk of market space measurement deviation, and the risk that the public data used in the research report may not be updated in time or after the information.
