AVIC Securities: Gave Qianxin a buy rating with a target price of 85.2 yuan

2022-04-05 AVIC Securities Zhang Chao, Qiu Jingbo, Lu Zhengyu conducted a study on Qianxin and released a research report "Recent Business Review: Orders, Revenue Growth Is Fast, This Year or Meet the Performance Inflection Point", this report gives a buy rating to Qianxin, believing that its target price is 85.20 yuan, the current stock price is 58.16 yuan, and the expected increase is 46.49%.

Qianxin (688561)

Event: The company announced on March 30 that as of now, the company has more than 2.3 billion yuan in orders in hand, and more than 900 million yuan of new orders in 2022, an increase of more than 65% year-on-year. According to preliminary financial estimates, the company expects operating income to increase by 43% to 47% year-on-year from January to March 2022.

Investment Points:

The network security industry will remain prosperous for a long time, and Qianxin occupies a leading position in domestic network security. IDC data shows that in 2021, in the context of the impact of the epidemic and the poor economic situation in the global context, the global network security industry maintained a growth rate of about 10%. The overall scale of global cybersecurity is expected to reach $151.95 billion in 2021 and is expected to grow to $223.34 billion in 2025, with a five-year compound growth rate of 10.4%. From the perspective of the Chinese market, IDC data shows that cybersecurity-related expenditure is expected to reach $10.26 billion in 2021, and is expected to grow to $21.46 billion by 2025, with a compound growth rate of 20.5% in the five-year period from 2021 to 2025, ranking first in the world. According to the "2021 China Network Security Product Analysis Report", in 2020, Qianxin ranked first in the market share of the mainland's network security industry, with a market share of 7.8%, and its market position has steadily improved (2018 market share: 6.1%, 2019 market share: 6.6%). According to the "2021 China Cyber Security Industry Competitiveness Top 50 List" released by the China Cyber Security Industry Alliance (CCIA), Qianxin ranked first in the list.

This year, network security revenue continues to maintain a high-speed growth trend, and the annual performance may turn a loss into a profit. The company announced on March 30 that as of now, the company has more than 2.3 billion yuan of orders in hand, and the new orders in 2022 will exceed 900 million yuan, an increase of more than 65% year-on-year. According to preliminary financial estimates, the company expects operating income to increase by 43% to 47% year-on-year from January to March 2022. Since 2022, the company has continued to implement the development strategy of "Olympicization", "Internationalization", "Legoization" and "Service-oriented", and the main businesses have continued to maintain a high-speed development momentum, with the mass production of the R&D platform and the organizational adjustment of the legion, the company's R&D efficiency has been greatly improved, and it is expected that the proportion of R&D expenses and revenue will decline significantly throughout the year. On March 20, Chairman Qi Xiangdong said at the company's annual meeting that it is necessary to carry forward the spirit of "zero accidents" in the Winter Olympics and achieve high-quality development, and the goal of high-quality development of Qianxin this year is to turn losses into profits.

The first phase of "LEGOization" aims to complete mass production of platform products. According to the company's annual meeting information, Qianxin has realized the mass production of many platforms such as Dayu, Chuantuo, Kunpeng, Rael, Qianxing, etc., achieved the goal of the first stage of Legoization, liberated many people from the current situation of repeated wheel building, and greatly improved the efficiency of research and development. Taking the Dayu platform as an example, before the platform is invested, dozens of situational awareness products need to be invested in independent research and development by the team, and this manpower scale will be hundreds of people. The basic structure of situational awareness products is common, which will lead to repeated development, resulting in a huge waste of manpower and cost costs. The Dayu platform, which extracts the core programs of all situational awareness platforms into a public platform, standardizes data and interfaces on the basis of this platform, shortening the development cycle of most security products from the past 3-6 months to less than a few weeks. The size of the workforce has also been drastically reduced, which is equivalent to the efficiency of 1 for 10 or even 1 for 100. The establishment of these platforms is the exchange of 5 years of deep cultivation and high R& D investment of Qian Credit, and the data shows that from 2017 to 2020, the investment scale of R&D expenses in the four years of Qianxin reached 3.634 billion yuan. We believe that the company's R&D platform will be a large number of basic parts and a small number of special parts of network security in the way of "building blocks", which can put together a kaleidoscopic new product, so that the entire industry has come out of the strange circle of high development costs, long cycle, poor scalability and weak profitability, and the improvement of its operational efficiency in the future is worth looking forward to.

The Winter Olympics network security "zero accidents" actual combat verification of the company's strong network security guarantee strength, the future sustained and rapid growth of the certainty is high. On March 16, in order to further summarize the achievements and experience of cyber security protection of the Winter Olympics and apply it to the network security protection of critical infrastructure, the Qianxin Winter Olympics Cyber Security Zero Accident Experience Publicity Group was officially established. In order to more effectively summarize the experience of "zero accidents" in network security of the Winter Olympics, and to effectively promote and apply the "China Plan" of zero accidents in network security, Wu Yunkun, president of Qianxin Group and deputy commander of network security guarantee of The Winter Olympics, served as the head of the propaganda group, and Li Jianbin, professor and doctoral supervisor of North China Electric Power University, and 7 well-known experts and professors who have long been deeply involved in the network security industry as external experts, as well as Qianxin security experts, jointly formed the Winter Olympics network security zero accident experience publicity team. According to public information, from the beginning of the Winter Olympic Games to the end of the Winter Paralympic Games, the total number of detection logs of Qianxin has exceeded 185 billion, the average daily detection log has exceeded 3.7 billion, about 5,800 vulnerabilities have been found and repaired, 54 malicious samples have been found, 150 risk hosts have been checked, more than 380 million network attacks have been monitored, and 105 Public opinion and threat incidents related to the Olympics have been tracked, judged and disposed of. We believe that the "zero accident" of network security in the Winter Olympics fully verifies the company's technical strength, the company maintains a high degree of certainty of sustained and rapid growth, the gradual reduction of the R & D expense rate will also bring more certainty to the improvement of profits, and in the future, the R & D platforms such as Dayu, Chuantuo, Kunpeng and other R & D platforms will also release more supporting energy in mass production.

Steadily open the journey of the international market. On March 30, 20 defense attachés from 18 Middle Eastern and African countries, including the United Arab Emirates, Tunisia, Egypt, Kuwait, Morocco and Zambia, visited Qianxin. It is reported that Qianxin has carried out network security business in Central and South Asia, South Asia, Central Asia, the Middle East and Africa in Europe, and provided network security services and solutions for some large enterprises that have "gone global" in China and overseas branches of large Chinese banks. In 2021, Qianxin participated in the network security construction of key infrastructure departments and important government units in Indonesia, Algeria, Angola, Ethiopia and other countries, and on December 31 of the same year, Qianxin International Business obtained 70 million APT (Advanced Persistent Threat) monitoring cooperation, starting from the internationalization of products, services and systematic construction, and fully launched the internationalization strategy.

Investment proposal: We believe that the cyber security industry, as the premise and cornerstone of the development of the digital economy, will remain prosperous in the long run. The company's high R & D investment to help the company's product standardization, modularization, componentization capabilities greatly improved, the company as an industry leader will enjoy the industry development dividends, is expected to R & D expense rate will gradually reduce, is expected to promote the rapid improvement of profitability. It is predicted that the operating income of Qianxin in 2021, 2022 and 2023 will be 5.811 billion yuan, 7.973 billion yuan and 10.720 billion yuan, respectively; the net profit attributable to the mother will be -552 million yuan, 0.58 billion yuan and 170 million yuan, the corresponding EPS will be -0.81 yuan, 0.08 yuan and 0.25 yuan, and the current stock price will correspond to 6.91 times, 5.04 times and 3.75 times, respectively. Considering the company's industry position and future development prospects, we give a target price of 85.20 yuan, corresponding to 10.00 times, 7.29 times, 5.42 times PS, respectively, and give a "buy" rating.

According to the research report data released by Securities Star Data Center in the past three years, the team of researchers Chen Baojian of Kaiyuan Securities has studied the stock in depth, and the average forecast accuracy in the past three years is 78.48%, and its forecast for the net profit attributable to 2021 is 552 million.

The latest profit forecast breakdown is as follows:

A total of 12 institutions have given ratings and 12 buy ratings in the last 90 days; the average target price of institutions in the past 90 days has been 116.03. The Securities Star Valuation Analysis Tool shows that 688561) good company rating is 2.5 stars, good price rating is 1 star, and valuation comprehensive rating is 2 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)

The above content is compiled by Securities Star based on public information, if you have any questions, please contact us.