\u3000\u3 Guocheng Mining Co.Ltd(000688) 561 Qi An Xin Technology Group Inc(688561) )
Event overview
Qi An Xin Technology Group Inc(688561) 4 / 25 release the annual report of 2021 and the first quarter report of 2022. The company achieved a revenue of 5.809 billion yuan in 2021, with a year-on-year increase of 39.60%; Net profit attributable to parent company -554 million yuan; Deduct net profit not attributable to parent company -788 million yuan. The company achieved a revenue of 659 million yuan in 2022q1, with a year-on-year increase of 44.52%; Net profit attributable to parent company -481 million yuan; Deduct net profit not attributable to parent company -605 million yuan.
The revenue of the annual report and the first quarter report increased sharply, and the performance of net profit improved
On the revenue side, the company achieved a revenue of 5.809 billion yuan in 2021, a year-on-year increase of 39.60%; In 2022q1, the revenue was 659 million yuan, with a year-on-year increase of 44.52%. The main reasons are: 1) due to the platform empowerment and strong market demand for core products: in 2021, the total revenue of the company’s core products such as situation awareness, terminal security and data security exceeded 3.1 billion yuan, accounting for about 54% of the total revenue, with a year-on-year growth rate of more than 30%; 2) Under the hard requirements of the policy, the g-end infrastructure related business increased rapidly: in 2021, the company’s government industry revenue accounted for more than 29%, with a year-on-year growth rate of more than 40%; The client income of the public security, procuratorial and judicial department accounted for more than 16%, with a year-on-year growth rate of nearly 36%; The revenue growth rate of operators, medical and health care, energy and other industries exceeded 50% year-on-year; 3) Breakthroughs in overseas markets: the company’s new track products show international competitiveness. For example, in 21 years, the company signed a large overseas order of 70million, which is expected to be promoted in the the Belt and Road and other third world countries in the future. On the profit side, the company realized a net profit attributable to the parent company of -554 million yuan in 2021; In 2022q1, the net profit attributable to the parent company was -481 million yuan. The net profit loss attributable to the parent company in 2022q1 narrowed year-on-year, mainly due to: 1) the end of the company’s high R & D investment period and the gradual control of R & D expense rate; 2) With the R & D platform gradually put into operation, the company’s human efficiency ratio increased, driving the gross profit margin of core products: the gross profit margin of the company’s network security products was about 77%, an increase of 4.78 PCT over the same period last year. We believe that with the high growth of revenue and cost control, the company has the explosive power to turn losses into profits in 2022.
The leading position is stable, and the efficiency is improved at both ends of the product organization
According to IDC data in 2021, the company ranks first in China in terms of market share in multiple segments, such as terminal security, hosting security, cloud security, security consulting services, security analysis and Threat Intelligence. In the first quarter of 2022, the company also led the industry with a year-on-year growth rate of nearly 45%. We believe that the company’s leading position in the industry is stable. On the product side, the eight R & D platforms formed by the company cover the pain points in information creation, such as application security, big data application development, data visualization and cloud data security, which can shorten the project delivery period. For example, the R & D cycle of situation awareness customized products can be reduced from nine months to three months to improve the delivery efficiency. On the organizational side, the company established various business legions in 2022. Each Legion directly looks for product technology within the group from the perspective of customers, which can shorten business processes and control personnel costs. In addition, the company will open the platform interface to PKS ecological partners to help them carry out digital business. Due to the access of R & D platform, the cooperative manufacturers are expected to continue to purchase the company’s products and services for high-level systematic defense.
The importance of policies is increased, and hard indicators promote the growth of the industry
With the competent department of network security paying more attention to “practical” defense and issuing relevant policies, government and enterprise users gradually abandon the past “compliant” products and actively purchase network security products and services with higher systematic protection level. Among them, the key infrastructure protection regulations promulgated in the second half of 2021 will also be implemented in a large number in key pillar industries and government institutions in 2022, such as telecom operators, energy, finance, public security and law departments, etc. According to the three-year action plan for high-quality development of network security industry (20212023) of the Ministry of industry and information technology, by 2023, the proportion of network security investment in key industries in the total IT investment shall not be less than 10%; By then, the scale of the network security industry is expected to exceed 250 billion yuan, with a compound growth rate of about 15%.
Investment advice
Qi An Xin Technology Group Inc(688561) maintain the first market share of the network security industry, basically end the period of high investment in R & D, and have the conditions to realize large-scale growth of revenue and profit in the future. The demand for network security products and services continues to release under the catalysis of policies such as the “Customs base protection regulations”. At the same time, the platform strategy is conducive to the company’s development ecology and expand its customer base. We expect the company to achieve revenue of RMB 8.137/11.397/16.005 billion from 2022 to 2024, with a year-on-year increase of 40.1% / 40.1% / 40.4%; The net profit attributable to the parent company was 185 / 383 / 653 million yuan, with a year-on-year increase of 133.3% / 107.4% / 70.2%, maintaining the “buy” rating.
Risk tips
1) the effect of controlling expenses of the company in the future is not as expected; 2) The effect of policy stimulus is less than expected; 3) After the landing of the company’s platform, the efficiency was lower than expected.
