Current investment tips:
The State Council issued the “14th five year plan” for the development of digital economy, and the general secretary proposed to continuously strengthen, optimize and expand the digital economy. Recently, the top level of the state has continuously issued documents to emphasize the development direction of the digital economy, and the 14th five year plan has also implemented the development indicators of the digital economy in detail.
The plan outlines the network security requirements in an independent chapter, which has a strong demonstration significance. Chapter 9 of the document requires “efforts to strengthen the digital economy security system”, and puts forward three detailed requirements: enhancing the network security protection ability, improving the data security level, and effectively preventing various risks. In addition, the fourth chapter “giving full play to the role of data elements” also requires “strengthening data security risk assessment, monitoring, early warning and emergency disposal”. The plan outlines the network security requirements in an independent chapter, highlighting the important position of network security. As a national top-level plan, the document has a strong demonstration significance.
The recent stock price correction of security companies reflects the pessimistic expectations for 21q4 and 22 years. In the past six months, security companies have made significant corrections: Sangfor Technologies Inc(300454) 44% from July 13, 2021 to now, Topsec Technologies Group Inc(002212) 21% from July 14, Venustech Group Inc(002439) 24% from July 14, Nsfocus Technologies Group Co.Ltd(300369) 41% from August 4, Dbappsecurity Co.Ltd(688023) 43% from July 28, Qi An Xin Technology Group Inc(688561) 34% from July 13. The reason behind this is that it reflects the pessimistic expectation of 21q4 performance. Further, it reflects the slowdown of the company’s performance caused by the reduction of financial expenditure under economic pressure. The sharp correction of the half year dimension has fully priced pessimistic expectations in.
We believe that the demand of the security industry will not fall like a cliff. In the downstream of information security and self-control, the two largest purchasers are the government and special industries. Since the government and special industries follow the “Five-Year Plan”, it is usually low in the front and high in the rear. In addition to the negative growth in the external environment in 2020q1, the growth rate of the industry is basically more than 10% or even more than 20% in other quarters.
In the long run, there are three driving forces for safety acceleration, and the focus on 2022 should be optimistic. 1) Policy requirements: the procurement cycle of budget enterprises follows the “five-year law”; New policies continue to be implemented, such as “equal protection 2.0”, “data security” and “Customs Protection” (it is expected that the implementation in 22 years will be a strong catalyst, similar to the effectiveness of equal protection). 2) Spontaneous drive: due to digital transformation, the importance of data assets has increased and investment has increased. 3) Information security Xinchuang brings 10 billion incremental market. Focusing on 2022, it is expected that the implementation of “Customs Protection” and top-level policies and specific implementation plans will increase the demand for security.
The valuation of the security company has reached the bottom and has excellent configuration value. The most pessimistic factor has been price in. We believe that the real demand may not be as pessimistic as the market expected, and the expected repair process is about to usher in. At the same time, in the digital economy, the importance of security is emphasized separately, which will also usher in catalysis.
Stock selection strategy: 1) select leaders with high deterministic growth, 2) select large companies with marginal changes based on new products and models (the growth rate of new trends is faster)
Targets involved: Sangfor Technologies Inc(300454) (constantly breaking through the business boundary), Dbappsecurity Co.Ltd(688023) (overtaking at the dark horse curve of information security), Nsfocus Technologies Group Co.Ltd(300369) (turning point of fundamentals upward), Topsec Technologies Group Inc(002212) (continuous breakthrough of firewall leaders), Venustech Group Inc(002439) (new mode of urban security operation), Qi An Xin Technology Group Inc(688561) (profit turnaround is imminent)
Risk: the development of the industry is not as expected, and the government demand will decline in 2022.
