\u3000\u3000 Sangfor Technologies Inc(300454) (300454)
Core view:
The event company released the annual performance forecast for 2021, and achieved a revenue of 6.707 billion yuan – 6.816 billion yuan during the reporting period, with a year-on-year increase of 22.87% – 24.87%; The net profit attributable to the parent company was 2.41 billion yuan – 3.09 billion yuan, a year-on-year decrease of 61.82% – 70.22%; Deduction of net profit not attributable to the parent company was RMB 1.01 billion to RMB 1.69 billion, with a year-on-year decrease of 75.05% – 85.09%.
Revenue growth slowed, the overall gross profit margin decreased, and the performance was lower than expected. The company issued the annual performance forecast for 2021. During the reporting period, the company achieved a revenue of 6.707 billion yuan – 6.816 billion yuan, with a year-on-year increase of 22.87% – 24.87%; The net profit attributable to the parent company was 2.41 billion yuan – 3.09 billion yuan, a year-on-year decrease of 61.82% – 70.22%; Deduction of net profit not attributable to the parent company was RMB 1.01 billion to RMB 1.69 billion, with a year-on-year decrease of 75.05% – 85.09%. The slowdown in revenue growth is mainly due to the weak short-term growth of the company’s network security business and the short-term mismatch between input and output. In addition, the decline of the company’s overall gross profit margin was mainly due to the change of revenue structure, and the proportion of cloud computing business revenue with low gross profit margin further increased. Upstream, the tight global chip supply also has a certain impact on the cost side.
We will continue to increase investment in R & D and sales, and make steady progress in strategic transformation. During the reporting period, the company continued to increase R & D investment, and R & D expenses increased by 36.96% – 38.35% year-on-year; The growth rate of sales expenses is also higher than that of revenue; Superimposed on the year-on-year growth of multi period equity incentive expenses, the company’s performance was lower than expected. We believe that the company’s continued increase in R & D investment and equity incentive for R & D talents will help to continuously consolidate the long-term competitiveness of the company’s products and services; In addition, xaas (everything as a service) model is a relatively new business model in the Chinese market. The market is in a growth period. Increasing sales expenses and expanding the market will help to form a first mover advantage and be optimistic about the long-term growth of the company’s strategic transformation.
The prosperity of network security and cloud computing remains the same, and the company’s xaas strategy is in line with the long-term growth trend. In terms of network security industry, the company maintains the first market share in VPN, content security management and UTM. According to the latest IDC data, the market share of the company is 22.7%, 20.6% and 22.6% respectively, and the leading position is stable. The data security law was officially promulgated and implemented on September 1 this year. It will focus on the security protection of the whole process and life cycle of data, and the space expansion of the subdivided field of data security. In addition, the Ministry of industry and information technology issued a draft for comments on the three-year action plan for the high-quality development of the network security industry, which mentioned that the scale of the network security industry will exceed 250 billion by 2023, and the CAGR will exceed 15%; The proportion of security expenditure in key industries such as telecommunications in it expenditure shall not be less than 10%. Compared with 20% of the US government, China’s average is only about 2%, so there is much room for improvement in the future; The revision of isobao 2.0 will change the past plus score system into minus score system, which will increase the safety expenditure of applicable projects of enterprises and increase the safety investment. Third, the revision of network security review measures will expand the scope of regulatory objects, and the security investment of key infrastructure operators will increase. The policy is favorable to the opening of the overall space of the industry, and the company will benefit as an industry leader.
In terms of cloud computing, the company’s strategic formulation has changed from the past “security” + “cloud” dual engine to the comprehensive cloud transformation of xaas proposed in the reporting period, including infrastructure as a service hosting cloud, sangfor access of security as a service SASE architecture, desktop as a service desktop cloud adesk and operation and maintenance management as a service MSS. According to IDC data, the market share of the company in the super integration market is 13.7%, ranking among the top three. According to IDC’s prediction, the CAGR of China’s super integrated market is expected to be about 18.5% in the next five years. By 2025, the market scale will exceed US $3.3 billion, and the industry will maintain a high boom. SASE is currently in the stage of low permeability and high growth, and the future space can be expected. Gartner predicts that by 2023, 20% of enterprises will purchase SWG, CASB, ztna and branch fwaas (firewall as a service) services from the same manufacturer, compared with only 5% in 2019. In 2024, more than 40% of enterprises will have a clear SASE switching strategy, which is only 1% at the end of 2018. In 2025, at least one IAAs leading service chamber will provide competitive SASE service suite. It is estimated that the global total revenue of SASE will reach US $11 billion in 2024. The current total revenue is US $1.9 billion, with a compound growth rate of 42%. The market size of Greater China is about US $769 million, equivalent to 4.922 billion yuan (exchange rate of US $1 and RMB 6.4). We believe that cloud computing and enterprise cloud are the trend. Xaas service model is a business model with high user stickiness and reduced marginal cost in line with the market trend, which is optimistic for a long time.
Investment suggestion we predict that the company’s EPS from 2021 to 2023 will be 0.65/1.96/2.51, and the corresponding P / E ratio will be 260 / 89 / 67 respectively. At present, the prosperity of the network security industry is high. As a leading enterprise in the industry, the company has a stable position and strong market competitiveness of its core products; The prosperity of cloud computing remains the same. The company’s xaas strategic transformation continues to advance. It is optimistic about the company’s future development and maintains the “recommended” rating.
The risk indicates the risk of intensified market competition; The risk of slow progress in international market expansion caused by overseas epidemic spread; R & D and sales investment plus general period expenses are high, and can not bring the risk of expected growth of revenue and profit; Risk of mismatch between technological innovation, product iteration and market.
