\u3000\u30 Beijing Telesound Electronics Co.Ltd(003004) 54 Sangfor Technologies Inc(300454) )
Key investment points
Investment Event: the company released the annual report of 2021: the operating revenue in 2021 was 6.805 billion yuan, a year-on-year increase of 24.67%; The net profit attributable to the parent company was 273 million yuan, a year-on-year decrease of 66.29%; Net profit deducted from non parent company was 131 million yuan, a year-on-year decrease of 80.66%; The net operating cash flow was 991 million yuan.
The company has made clear the strategic goal of xaas priority, and the wrong input, production and distribution will affect the revenue growth in stages. In 2021, the company achieved a revenue of 6.805 billion yuan, with a year-on-year increase of 24.67%. Affected by the weak growth of network security business, which accounts for the largest proportion of the company’s revenue, the revenue growth rate was slightly slow. The company has steadily promoted xaas business, including managed cloud, MSS and SASE, with the goal of gradually realizing cloud, online and service-oriented business. By item, the revenue from cloud computing and it infrastructure business was about 2.379 billion yuan, a year-on-year increase of 49.53%, and the proportion in the company’s overall revenue increased from 29.15% in the same period last year to 34.97% in the current period; The revenue of basic network and Internet of things business was RMB 737 million, with a year-on-year increase of 42.15%, and the proportion in the company’s overall revenue increased from 9.50% in the same period last year to 10.83% in the current period; The revenue of network security business was about 3.689 billion yuan, with a year-on-year increase of 10.15%, and its proportion in the company’s overall revenue decreased from 61.35% in the same period last year to 54.20% in the current period. The sluggish growth of network security business is mainly due to multiple factors, the input and output of the company’s customer base in some industries such as government and public institutions do not match, and the limited resources have not been effectively allocated to maximize revenue. Meanwhile, the landing effect of the company’s new safety strategy during the reporting period has not been well reflected. During the reporting period, the company’s super integrated products incubated a number of scenes with great potential, and the ecological cooperation was further optimized; The core technology of desktop cloud business continues to take the lead, with rapid growth in finance, enterprises, localization adaptation and other scenarios.
The gross profit margin declined, and the high R & D sales Investment and share based payment expenses affected the net profit. In 2021, the company’s gross profit margin continued to decline to 65.49%, down 4.49pcts from the same period last year. The decrease in gross profit margin is due to the increase in the proportion of cloud computing business and it infrastructure business revenue with low gross profit margin, and the rise in hardware procurement costs caused by the tight global chip supply is also one of the reasons. The decrease in the net profit attributable to the parent company was mainly due to the further increase of the company’s investment, the year-on-year increase of 38.34% in R & D expenses, and the proportion of R & D investment in revenue rose to 30.68%; During the reporting period, with the growth of the company’s business and the promotion of the market expansion and business landing of new business, the scale of sales personnel also further increased. At the market end, the company also invested more resources, and the sales expenses increased by 27.91% year-on-year; At the same time, the company implemented a multi-stage equity incentive plan, resulting in a year-on-year increase in the share based payment expenses recognized during the reporting period. The company adheres to continuous technological innovation and attaches importance to R & D investment. For six consecutive years, R & D investment accounts for more than 20% of operating revenue. During the reporting period, the company established five R & D centers in Shenzhen, Beijing, Changsha, Nanjing and Chengdu, with nearly 40% of R & D personnel, of which 26% have master’s degree.
The network security and cloud computing industry continues to be booming. As a leading enterprise, the company is optimistic about its future development. The world has entered the era of digital economy, and the digital transformation of various industries has become a key development direction. China attaches great importance to the development of digital economy. In December 2021, the Ministry of industry and information technology issued the “14th five year plan” to promote the development of small and medium-sized enterprises, which will promote the transformation of enterprises from three aspects: promoting the digital development, networked coordination and intelligent upgrading of small and medium-sized enterprises. According to the relevant statistics of China information and Communication Research Institute, the overall market scale of cloud computing in China reached 209.1 billion yuan in 2020, with a growth rate of 56.6%, of which the private cloud market scale reached 81.4 billion yuan. It is expected that the private cloud market scale will be close to 150 billion yuan by 2023. At the same time, due to the continuous impact of the epidemic, the transformation of IT infrastructure of users in various industries to cloud services has become irreversible. The company has accumulated profound experience in the industry, continues to promote cloud, online and service-oriented business, makes full use of the multi product advantages of various business segments of the company, such as network security and cloud computing, and gives full play to the synergy of various business segments, which is expected to occupy a more favorable position in the long-term development.
Investment suggestion: Sangfor Technologies Inc(300454) is a leading enterprise in China’s network security and cloud computing. We are optimistic about the future development of the company for a long time. Considering the risk of intensified market competition and the risk of rising raw material costs caused by repeated epidemics, we lowered the company’s revenue growth forecast. We estimated that the company’s revenue in 2022 / 2023 / 2024 was 8.649 billion yuan, 11.287 billion yuan and 14.854 billion yuan (10.233/13.364 billion yuan in the previous 22-23 years), with a year-on-year increase of 27%, 31% and 32%; The net profit attributable to the parent company is RMB 514 million, RMB 1051 million and RMB 1918 million (RMB 1110 million and RMB 1409 million before adjustment). The company’s EPS in 2022, 2023 and 2024 are 1.24/2.53/4.61 yuan respectively (the original forecast of 22-23 years is 2.68 yuan and 3.41 yuan), corresponding to PE80 9 / 39.6 / 21.7 times, giving the company a “buy” rating.
Risk tips: policy changes; The risk that the direction of new business investment deviates from the needs of users and the market promotion does not meet the expectations; The risk of delayed supply of raw materials and blocked market expansion caused by repeated epidemics; The intensification of market competition leads to the company’s profitability less than expected.
