\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 360 360 Security Technology Inc(601360) )
Core view
Event: on April 21, 2022, 360 Security Technology Inc(601360) released the annual report of 2021 and the first quarterly report of 2022. In 2021, the company achieved an operating revenue of 10.886 billion yuan, a year-on-year decrease of 6.28%; The net profit attributable to the parent company was 902 million yuan, a year-on-year decrease of 69.02%; Deduct non net profit of 608 million yuan, a year-on-year decrease of 76.11%. In the first quarter of 2022, the company achieved an operating revenue of 2.526 billion yuan, a year-on-year decrease of 1.02%; The net profit attributable to the parent company was 222 million yuan, a year-on-year decrease of 17.78%; Deduct non net profit of 190 million yuan, a year-on-year decrease of 17.39%. The company plans to pay a cash dividend of 1 yuan (including tax) for every 10 shares, and it is expected to pay a total cash dividend of 704 million yuan (including tax).
The company's profit decreased significantly, mainly because the company continued to increase investment in safety business. The continuous development of government enterprise security business and the technical reserve of digital security have greatly increased the scale of sales personnel and related R & D expenses. In 2021, the company's sales expenses and R & D expenses were 2.233 billion yuan and 3.129 billion yuan respectively, an increase of 573 million yuan and 258 million yuan respectively over the previous year, with an increase of 34.54% and 8.97% respectively. The security business with "safety brain" as the core adopts the business model of "holding high and fighting high". There is a lot of investment in the early stage. Now the construction of the overall team and structure has been completed, which provides a solid foundation for the follow-up business.
The security business achieved high growth, the proportion of revenue nearly doubled, and the business territory continued to expand. The company comprehensively upgraded its development strategy, focused on the field of network security, put forward the overall strategy of "building a national distributed security brain", and announced the comprehensive transformation of 360 digital security company. In 2021, the company's safety and other businesses realized an operating revenue of 1.381 billion yuan, a year-on-year increase of 70.91%, accounting for 12.72% of the revenue; The gross profit margin was 67.26%, down 8.45 PCT from the previous year. In 2021, the company completed the development of five important cities and the full coverage of 15 core customers. The number of customers and newly signed amount increased significantly: it completed new contracts with nearly 2000 customers, covering more than 90% of central ministries and commissions, 80% of central enterprises and 95% of large financial institutions, and carried out network security cooperation with millions of small and medium-sized enterprises. In the first quarter of 2012, the company's safety business orders were received smoothly, and the urban safety orders of 547 million yuan have been received, and the completion progress of safety related operating revenue has reached 39.6% of that in 2021. At present, the company has sufficient orders on hand, and a large number of interested customers are expected to sign contracts. Superimposed with deferred order recognition Revenue of nearly hundreds of millions of yuan, the company's government enterprise security business is expected to accelerate growth in 2022.
Affected by the general environment, Internet business declined slightly. In 2021, the company's Internet advertising and service and Internet value-added service business achieved operating revenue of 6.306 billion yuan and 1.104 billion yuan respectively, with a year-on-year decrease of 16.06% and 2.67% respectively; The gross profit margin was 70.16% and 82.95% respectively, with year-on-year changes of + 0.06 PCT and -2.92 PCT respectively. Internet advertising business is affected by factors such as the slowdown in the growth of the industry in which the delivery subject is located and the intensification of diversified competition in the Internet advertising market. According to the data of the second hand system, the proportion of digital advertising traffic on PC ( 360 Security Technology Inc(601360) Internet advertising business main position) in the total terminal traffic decreased from 12% in 2020 to 8% in 2021. The company's Internet business performance has declined, but it is still better than the overall performance of its industry. In the second half of 2021, the release of game version number was suspended, while the reopening of game version number in 2022 released a good signal for the market.
Strong cash reserves. As of 2022q1, the company's monetary capital was 22.1 billion, an increase of 2.854 billion over the end of 2021. The company has strong cash reserves, which provides a solid accumulation for the rapid development of business.
Investment suggestion: considering that the company will continue to increase investment in the development of safety business in recent years and adjust the company's revenue and profit expectations, the company's revenue is expected to be 10.970 billion yuan, 12.058 billion yuan and 13.555 billion yuan from 2022 to 2024, with a year-on-year growth rate of 0.8%, 9.9% and 12.4% respectively; The net profit attributable to the parent company was 914 million yuan, 1122 million yuan and 1416 million yuan respectively, with a year-on-year growth rate of 1.36%, 22.71% and 26.16% respectively. From 2022 to 2024, the EPS was 0.13, 0.16 and 0.20 yuan respectively, and the corresponding PE was 68.2, 55.6 and 44.1 respectively, maintaining the "buy" rating.
Risk warning: market competition intensifies; The R & D of new products is less than expected; The strategic advance is less than expected; Economic downside risk.
