\u3000\u3 China Vanke Co.Ltd(000002) 212 Topsec Technologies Group Inc(002212) )
Event: the company recently released its 2021 annual report and 2022q1 quarterly report: the company’s revenue in 2021 was 3.352 billion yuan, a year-on-year decrease of 41.24%; The net profit attributable to the parent company was 230 million yuan, a year-on-year decrease of 42.52%; Deduct non net profit of 153 million yuan, a year-on-year decrease of 65.57%. In 2022q1, the company’s revenue was 378 million yuan, a year-on-year increase of 42.80%; The net profit was – 65 million, and the loss narrowed by 32.14%; Deduct non net profit of – 71 million yuan, and the loss narrowed by 27.04%.
The new business promotes the steady growth of revenue. The company is greatly affected by the subsidiary Tongtian technology. In April 2021, the company signed the equity transfer agreement with Tongtian technology, which will no longer be included in the scope of the company’s consolidated statements in the future. If the influence of Tongtian technology is excluded, the company will realize a revenue of 3.312 billion yuan in 2021, with a year-on-year increase of 36.42% and a year-on-year increase of 48.09% in the amount of new orders; New businesses have achieved rapid growth. Cloud services increased by 36.21% year-on-year, and cloud computing increased by 244.02% year-on-year; Big data and situational awareness increased by 20.77% year-on-year, and industrial Internet increased by 689.77% year-on-year; Data security revenue increased by 192.68% year-on-year, and localization business increased by nearly 10 times year-on-year.
The profit model continued to be optimized, and the proportion of service and subscription models increased steadily. The company’s products mainly focus on product sales, service provision and ability subscription. The total revenue of service + subscription of the company increased from 301 million yuan in 2018 to 817 million yuan in 2021, accounting for 24.40% in 2021 from 17.39% in 2018. Relying on its more than 20 products at the forefront of the industry, the company continued to enable the subsequent business model focusing on service and subscription.
The strategic layout leads to pressure on short-term net profit and does not change the long-term industry competitiveness. In 2021, the company’s R & D expenses and sales expenses increased by 47.35% and 33.56% respectively year-on-year. The high growth of R & D and sales has laid a solid foundation in terms of product layout, industry deepening, land market sinking and channel expansion. It is expected to gradually carry out relevant layout and drive the continuous improvement of profitability margin. At present, it has been preliminarily reflected in Q1 of 22. The revenue in the first quarter of 2022 was 378 million yuan, with a year-on-year increase of 42.80%; The net profit was – 65 million, and the loss narrowed by 32.14%; Deduct non net profit of – 71 million yuan, and the loss narrowed by 27.04%.
Investment suggestion: the overall network security sector has experienced a sharp correction in recent one year, which is mainly due to the unbalanced financial expenditure caused by the epidemic and the international situation. In this context, the company has also experienced pressure for half a year. At present, the valuation is at the bottom of history. With the normalization of the epidemic and the emergence of data security and other needs, the valuation is expected to bring corresponding repair. It is estimated that the EPS from 2022 to 2024 will be: 0.44 yuan, 0.61 yuan and 0.80 yuan; The PE valuation corresponding to the current stock price is 21x, 15x and 11x, maintaining the “recommended” rating.
Risk tip: the industry competition pattern intensifies, and the repeated epidemic situation leads to risks such as delivery delay.
