\u3000\u3 Guocheng Mining Co.Ltd(000688) 030 Hillstone Networks Co.Ltd(688030) )
Core view
In 2021, the company showed a positive reversal, and the revenue growth rate in the first quarter of 2022 exceeded 50%. In 2021, the company realized revenue of 1.027 billion yuan (+ 41.57%), net profit attributable to parent company of 76 million yuan (+ 25.39%), net profit not attributable to parent company of 54 million yuan (+ 41.68%). Excluding the impact of share based payment, the net profit attributable to the parent company is 95 million yuan (+ 56.18%). Since the second half of the year, the company has gradually implemented its internal mechanism, product upgrading and solutions, showing an obvious reversal trend as a whole. In 2022q1, the company realized an income of 145 million yuan (+ 52.97%), a net profit attributable to the parent company of – 72 million yuan (loss reduction of 14.71%), and a net profit not attributable to the parent company of – 76 million yuan (loss reduction of 10.56%).
The growth rate of self owned safety products was faster, and the proportion of the financial industry was further increased. In terms of products, the company’s own safety product revenue is 972 million yuan (+ 46.36%), and the integrated business is 45 million yuan (- 17.08%); Including 757 million yuan (+ 41.35%) for border security products, 52 million yuan (+ 12.06%) for cloud security products and 209 million yuan (+ 52.22%) for other security products. At the same time, the company is also increasing investment in overseas markets, with an annual revenue of 51 million yuan (+ 100%) in 21 years. Overseas markets are also one of the important strategies of the company at present. The company further optimized the three-dimensional interlocking mechanism of “industry expansion + region and channel + product business”, and determined the development objectives of key industries represented by finance, operators, Internet, medical treatment and education. Based on the competitive advantage of border security, the company has gradually expanded and penetrated into the business lines of products such as security services, application delivery, situational awareness and Xinchuang. In 2021, the revenue of the financial industry was 255 million yuan (+ 51.11%).
Increase gross profit margin and increase personnel and cost investment. In the past 21 years, the company upgraded the original hardware platform and launched a series of cost-effective products. The gross profit margin of its own safety products was further increased, and the gross profit margin of the company was 73.25% (+ 4.18pct). In 2021, the company increased personnel recruitment, with a total of 1808 employees (+ 33.83%), including 487 pure sales posts (+ 42.82%); There are 611 R & D personnel (+ 25%), of which master’s degree or above accounts for 36.5%. Therefore, in terms of expense rate, in 2021, the sales expense rate is 33.58% (+ 2.95pct), the management expense rate is 6.59% (+ 0.88pct), and the R & D expense rate is 29.14% (- 0.12pct).
Financial Xinchuang is expected to benefit, and the security chip strategy is worth looking forward to. The company has obvious advantages in the high-end firewall market; In 2021, it also became the first manufacturer in China to enter the Gartner Challenger quadrant. Finance is still the largest industry of the company, and the company is expected to fully benefit from the development of financial information and innovation. The company is also actively promoting the security chip strategy, introducing FPGA modules with forwarding and acceleration functions into the hardware system, significantly improving the competitiveness of the company’s high-end hardware system and laying the foundation for further improving the market share; In the future, it is expected to take Fortinet as an example and further implement it to ASIC.
Risk tip: the epidemic situation repeatedly affects the normal operation rhythm of the company, and the industry competition intensifies.
Investment advice: maintain the “buy” rating. It is estimated that the operating revenue from 2022 to 2024 will be RMB 1.418/1.915/2.470 billion, with growth rates of 38% / 35% / 29% respectively, and the net profit attributable to the parent company will be RMB 130 / 2.06/295 million, corresponding to the current PE of 24 / 15 / 11 times, maintaining the “buy” rating.
