\u3000\u3 China Vanke Co.Ltd(000002) 268 Westone Information Industry Inc(002268) )
The operating capacity improved significantly in 21 years, and the growth rate of 22q1 revenue exceeded expectations. Focusing on the five major businesses of basic security, network security, data security, security applications and security services, the company achieved an operating revenue of RMB 2.789 billion in 2021, a year-on-year increase of 17.00%, a net profit attributable to the parent company of RMB 238million, a year-on-year increase of 47.48%, a gross profit margin of 37.92%, and a year-on-year increase of 2.44%. By product, the revenue from security chips and modules, complete machines and systems, and integrated services was RMB 503, 727, and 1558 million, respectively, with a gross profit margin of 56.16% 65.94%, 18.96%, with year-on-year growth of 33.65%, 25.17% and 9.27%, and the revenue structure was significantly improved. The annual operating capacity has also been greatly improved. The annual cash inflow from operating activities reached 4.130 billion yuan, a record high, with a year-on-year increase of 32.91%. The net cash flow from operating activities reached 681 million, and there is still significant room for profit improvement. Meanwhile, the company’s operating revenue in 2022q1 was 631 million yuan, a year-on-year increase of 123.07%, which was significantly higher than expected, and the net profit attributable to the parent was -384523 million yuan, a year-on-year decrease of 49.54%. The company takes the lead in the layout of new technologies, products and models of data security, which is expected to further ensure the long-term and rapid growth of the company. Under the background of the formal implementation of the data security law and the personal information protection law, the speed and scale of industrial implementation are expected to exceed expectations.
Industry security has blossomed in many places, and the fields of Internet data security, new energy, Internet of vehicles and financial technology are expected to relay to support the high growth of revenue. The company has released and applied a series of industry-level solutions in the party and government, military industry, digital RMB, Internet of vehicles, new energy and other industries: 1) Internet Oriented personal data, user privacy, sensitive data protection and other application scenarios, and has carried out cooperation with data owners and data operators; 2) Further expand the ubiquitous application of security chips, realize the wide application of low-power security chips in IOT terminals, and realize the integrated application of embedded security Se in the party, government and key industries; 3) The field of Internet of vehicles security is progressing smoothly. As a major password manufacturer, it participated in the application and pilot construction of various top-level special passwords, and the Internet of vehicles business secret application demonstration project was selected into the pilot list of the Ministry of industry and information technology; 4) In the field of new energy endogenous security, China’s first set of new energy centralized control commercial password endogenous security system has been successfully connected to the network, which has solved the prominent problems caused by security risks in the current new energy field, such as many points and a wide range, discrete equipment and so on; 5) The application platform has been successfully promoted. Taking orange news as the core platform, it has formed security application products covering key industries such as e-government, public security, law enforcement, finance, energy and so on.
The trend of data security supervision is clear, and the certainty of high increase of relevant orders is strengthened. Westone Information Industry Inc(002268) as the only listed company under China netsecurity, it is expected to become the most beneficial target of data security, and its performance ushers in an outbreak period. 1) Data security has become the core of Internet regulation, and data security and privacy computing are expected to benefit significantly. Privacy computing is driven by the dual needs of big data fusion application and privacy protection. KPMG expects that its technical service revenue is expected to reach RMB 10-20 billion in 2023, which will leverage the operating revenue space of 100 billion data platform in the long term; 2) In addition to various Internet manufacturers, there is huge potential space for data security in finance, energy, medical and other customs protection industries. The data of finance, medical treatment, energy and other customs protection industries naturally have commercial value and user privacy, and the demand for data security and compliance is urgent; 3) Some data as strategic resources will still be subject to strong supervision Westone Information Industry Inc(002268) ‘s controlling shareholder, China network security, is a network security sub group built by the company’s actual controller, CETC group, according to the needs of national security strategic development. It has natural advantages in supporting the national network security strategic task and winning the trust of customers in key fields. As the only listed company of China network security, the company has a truly scarce shareholder background and is expected to benefit from the rapid release of privacy security needs.
Referring to Internet application software, overseas experience and order charging characteristics, it is expected that the data security charging mode is SaaS mode of charging by number and flow. 1) The first order landed Zhejiang Century Huatong Group Co.Ltd(002602) , the contract amount exceeded the expectation, and the three-year service period was determined at one time, reflecting the urgent demand for data security and compliance, Westone Information Industry Inc(002268) ensuring that Shengqu company establishes and maintains a personal information security and compliance system, the service period is three years, the total contract amount is 120 million yuan (including tax), and the progress and amount exceeded the expectation. 2) referring to overseas securitysaas company, we expect that relevant partners may refer to overseas SaaS service mode, Charging according to the number of services or traffic, the business model is significantly better than the traditional network security demand, and the volume of data security orders and business model exceed expectations.
The superposition of long-term equity incentive plan and management change is expected to improve operating efficiency, and there is significant room for improvement of net profit supported by cash flow. The new management of the company has professional and technical background, the equity incentive plan is valid for 10 years, and the total amount of subject shares involved in the granted restricted shares shall not exceed 10% of the total share capital of the company. The first phase of incentive targets are about 335 executives, core technicians and key employees of the company, the company and its holding subsidiaries who have a direct impact on the overall performance and sustainable development, accounting for about 15% of the employees. The superposition of long-term equity incentive plan and management changes may improve the operating efficiency. As the core benefit target of Xinchuang, according to the disclosure of the annual report, the net cash flow from operating activities reached 681 million yuan. With the continuous high growth of high gross profit security chips and network security products, the pressure drop of expense rate contributed to the great elasticity of net profit. Focusing on the needs of Xinchuang, the company has built a full product system covering chips, modules, platforms, complete machines and systems. For example, Longxin Zhongke jointly Westone Information Industry Inc(002268) released “Longxin security module and SDK” and Xinchuang security solutions, which significantly benefited from the trend of localization industry.
Maintain the “buy” rating. Considering that the layout of the company’s new industrial security scene is progressing smoothly, and the amount, business model and progress of the first Zhejiang Century Huatong Group Co.Ltd(002602) order in the field of data security are higher than expected, we raised the company’s operating revenue to RMB 3.970/51.806631 billion in 2022 / 2023 / 2024 and the net profit attributable to the parent company to RMB 605 / 1017 / 1407 million. The safety margin market value in 2022 is 60 billion yuan, and the potential total market value in 2023 and 2025 may reach 157089 billion yuan and 319593 billion yuan, maintaining the “buy” rating.
Risk warning: competition intensifies risk; The policy strength is less than the expected risk; Risk of slow layout of new fields; Risk of error in key assumptions.
