\u3000\u3000 Qi An Xin Technology Group Inc(688561) (688561)
Event overview
The company announced that it expects to achieve an operating revenue of 5.67 billion yuan to 5.82 billion yuan in 2021, with a year-on-year increase of 36.3% to 39.9%; The net profit attributable to the parent company is expected to be – 600 to – 500 million yuan, with a year-on-year loss of 49.5% to 79.4%.
Analysis and judgment:
Emerging security continues to expand, strategically focusing on operators, energy and other enterprise customers
On the revenue side, the expected revenue growth range of the company in 2021 is close to 40%, ranking in the forefront among the network security industry. We believe that the company can maintain rapid growth under the pressure of 2G budget, mainly for two reasons:
First, driven by HW and other events, emerging security products continue to expand in large quantities, and the trend of large-scale expansion appears. The company’s emerging security products continue to lead the industry in terms of technical competitiveness in the fields of data security and privacy protection, practical situational awareness, cloud security, terminal security, border security, security services and security operations, and have obvious advantages in business scale and growth. From the 2021h1 breakdown, several emerging security products performed well:
1) terminal security products: terminal EDR and virtualization security are growing rapidly, and the interpretation of the strong is always strong (H1 has increased by nearly 70%).
2) border security products: the trend of new (sd-wan, etc.) with old (firewall, etc.) is obvious. The products / solutions are evolving to the scenario of interconnection of all things and continue to play an important role in HW (H1 has increased by more than 80%).
3) data security products: the first mover advantage is obvious. Many hot products such as zero trust, transaction sandbox, database security and privacy compliance are becoming popular (H1 has increased by more than 100%).
4) situational awareness products: among them, safety supervision, safe operation and actual attack and defense go hand in hand, with a growth rate of more than 50%, leading the whole industry (H1 has contributed nearly 300 million yuan).
5) safety service business: in HW scenario, safety service and various safety products show strong synergy and strong demand. It is expected that the proportion of safety service revenue will further increase during the year (H1 has contributed more than 200 million yuan).
Second, focus on developing and guiding downstream operators, energy, medical treatment, finance and other large and medium-sized customers to improve their procurement needs. From the perspective of the business environment in 2021, the tight financial budget of governments at all levels restricts the procurement and settlement of safety products / services by big G customers to a certain extent. According to the official account of the group, the company focused on mining the side customers of the enterprises, and deeply cultivated the high net worth and strong demand customers. The first three quarters saw the operators grow 192% year-on-year, the energy industry grew by 122%, the medical and health industry grew 90%, the financial industry grew by 73%, and the follow-up business side safety growth rate was better.
Profits are under pressure, losses are expanding, and the expansion of high R & D + strong personnel is becoming more and more effective
On the profit side, the company expects to realize a net profit attributable to the parent company of – 600 million to – 500 million yuan in 2021, which is narrower than the loss of 1.16 billion yuan in the first three quarters. However, from the perspective of year-on-year, the gap is still further expanding, but the main reason is still the share based payment brought by the employee incentive plan. The share based payment fee in 2021 increased by nearly 260 million yuan compared with that in 2020.
From the cost side, strong R & D + personnel expansion brings cost expansion, and the overall cost rate is falling. According to the data of the previous three quarters, the sales expense was 1.28 billion yuan, and the sales expense rate was 48.0%, a year-on-year decrease of 3.7 PCT; The management expense was 470 million yuan, and the management expense rate was 17.5%, a year-on-year decrease of 1.9 PCT; The R & D cost was 1.24 billion yuan, and the R & D cost rate was 46.4%, a year-on-year decrease of 0.17 PCT, with an obvious optimization trend. 1) In terms of R & D: the company invested 1.24 billion yuan in R & D in the first three quarters, with a year-on-year increase of 46.4%. By the end of the third quarter, the company had launched new products such as yuntianyan and security DNS. At the same time, the terminal EDR products passed the threat detection ability of Saida laboratory and the firewall, and won the bid for China Mobile centralized purchase project for two consecutive years. In addition, the operation areas of the eight R & D platforms are mature and work together to further improve R & D efficiency. 2) Personnel: previously, in the H1 financial report, the number of personnel disclosed by the company has increased to more than 8100 (safety service accounts for a large proportion). It is judged that the pressure of personnel expansion in the first three quarters is still large. In terms of cash flow indicators, the company’s operating cash flow gap reached -1.67 billion yuan, further expanding compared with -1.13 billion yuan in the same period in 2020. We believe that 2021q4 has a high probability of continuing the investment trend of the first three quarters. At the current stage, personnel growth is the bottom support of the emerging security expansion logic, and actual attack and defense, expert service and security education will continue to contribute increment in subsequent quarters.
Favorable policies raise the ceiling of Wangan racetrack and benefit the core of the company
Since July 2021, the policies of the network security industry have been continuously favorable, focusing on two heavy weights: the qualitative analysis of didi event: the curtain of data security / review has opened, and the security industry has been on the air. The didi data security incident highlighted the hidden dangers of China’s data security, and the curtain of data security supervision and review was opened. At the personal level, the disclosure of private information may cause significant property losses and even endanger personal safety. From the perspective of government and enterprises, the leakage of key data assets may lead to the risk of national network information system being attacked, especially the network attack on key infrastructure will lead to major national security accidents. Judging from this didi incident, we will officially move from the first half of “Cyberspace Security” (focusing on traditional border security such as firewalls) to the second half (focusing on emerging security fields such as data security).
The action plan quantifies that 10% of the designated area will open hundreds of billions of spaces. In the three-year action plan for high-quality development of the network security industry (2021-2023) (Draft for comments), the Ministry of industry and information technology made it clear that the scale of the network security industry will exceed 250 billion yuan by 2023, with an annual compound growth rate of more than 15%. At the same time, it made it clear that the network security investment in key industries such as telecommunications will account for 10% of the information investment. 1) On the demand side: if the industrial space of 250 billion yuan is realized in 2023 and the compound annual growth rate is 15%, the industrial scale in 2021 will be 160-170 billion. 2) On the supply side: in terms of the supply of security products / services provided, CCID data show that the scale of China’s network information security market will increase from 60.8 billion yuan to 92.7 billion yuan from 2019 to 2021, with CAGR of 23.5%. 3) Linear extrapolation: if the proportion of network security IT investment is defined in combination with 10% and linearly extrapolated to all government and enterprise customers (it is judged to be in line with the top-level planning idea), then the security supply and demand gap in 2021 = the business expansion space of security manufacturers = 70-80 billion yuan, the industrial opportunities are clear, and it will be implemented in subsequent years. Judge that this round of policies will promote the rise of the network security budget center and guide the industry to usher in a bull.
We believe that: on the one hand, the company’s new security track has clear first mover advantages in the field of data security. Hot products include but are not limited to zero trust data security, big data transaction sandbox, database security, data content encryption, source code security, APP privacy compliance, electronic data forensics, etc. it is expected to maximize the dividend of data security supervision in the future. On the other hand, in the past three years, the company’s share expansion trend has been established. Once the track width is further opened in the next stage, it will bring amplification effect to the company’s performance growth, or continue to exceed the expected performance.
Investment suggestions:
According to the latest performance forecast, the revenue forecast for 2021-2023 was lowered by 5.86/81.9/11.48 billion yuan to 5.78/80.0/11.13 billion yuan, with a year-on-year growth rate of 39.0% / 38.3% / 39.1% respectively. At the same time, based on the current situation of the company’s personnel expansion, it is judged that the cost side pressure will still restrict the full realization of profits, and the net profit attributable to the parent company from 2021 to 2023 will be reduced from -1.2/3.6/1.03 billion yuan to -5.3/1.2/670 million yuan; In three years, EPS was adjusted from -0.17/0.54/1.52 yuan to -0.77/0.18/0.98 yuan. On January 25, 2022, the share price was 87.05 yuan, corresponding to 10.1 / 7.3 / 5.2 times of PS respectively, maintaining the “buy” rating.
Risk tips:
The risk that the promotion of ISO 2.0 policy is less than expected and the progress of emerging security business is less than expected.
