三六零（601360）深度研究报告：乘"大安全"之舰，展鸿鹄之志 zh-cN en

Company Research
Software Development
Equity Research 2019 year 11 month twenty four day
Three hundred and sixty ( 601 360 ) Deep Research Report

recommend (first)
Target price: 25.19 yuan
Take the "big security" of the ship, exhibition Hongguzhizhi Current price: 21.11 yuan
• Three hundred sixty staunch practitioner of "great security" strategy. company was founded on 2005 , Is the Chinese Internet Free
data CRE Securities Research Institute
secure the initiator, with advanced technology and a good user experience, successfully develop and accumulated a large user base, and
form a security capabilities as the core, to form a product and content-driven business closed . from 2018 The company early return A After
Securities Analyst: Chenbao Jian
the shares, the company will accumulate in leading network security technology, successful experience and vast amounts of data widely
phone: 010-66500984
used "big safe" areas, and comprehensively promote national security, urban safety and operational layout in the field of home security. In
mailbox: chenbaojian@hcyjs.com
recent years, the company net profit remained stable growth for two consecutive years over the completion of performance commitment. With
No practice: S0360517060001
the gradual development effort of government and enterprise security business, the business is expected to enter a new stage of
development. Securities analyst: Deng Fang Cheng
• Policy and demand-wheel drive, network security space is about to open one hundred billion. according to Gartner Data Display, 2018 phone: 021-20572565
Global Information Security expenditure IT The proportion of expenditure for the 3.05% ,and 2019 China's information security spending mailbox: dengfangcheng@hcyjs.com
accounts IT Expenditure compared to just 1.7% Left and right, relative to the global average there is a large gap. As network security law, No practice: S0360518080001
protection rating 2.0 , The emergence of new security needs of the gradual landing, regulatory supervision of continuous improvement of
Contact: Liu Happy
relevant laws and regulations "national critical information infrastructure security regulations," etc., and cloud computing, networking, big data
security, China's network security market is expected to continued to maintain rapid growth. according to IDC prediction, 2019 The overall phone: 010-63214650
expenditure in China's network security market will reach 73.5 Billion dollars to 2021 China's network security market will form a one hundred mailbox: liuxiaoyao@hcyjs.com
billion level. future 5 Years, China's network security market overall spending growth is expected to compound 25.1% , Far higher than the 9.44%
Company fundamental
The global level.
• Depth security arrangement between government and enterprises to create new growth pole. 2019 The company is a crucial year for the The total share capital (shares) 676,406
implementation of the "big security" strategy, the company is also fully into the first year of government and enterprise security business. And Tradable shares (million shares) 39,718
the Ministry of Public Security companies have thirteen, Tianjin Hi-tech Zone government cooperation, and successful 2.4 Aikawa zones billion The total market value (million) 1,427.89
Market capitalization (million) 83.85
of Chongqing City 360 Network Security Collaborative Innovation Industrial Park, a project to build a successful benchmark for government and
Assets and liabilities(%) 15.8
enterprise business. At the same time, the company invested in the areas of government and enterprise security moves frequently, has a stake
Net assets per share (yuan) 4.1
of the deep, Hillstone, Hans Pan-security areas such as science and technology of high-quality companies, has laid a good foundation for
12 Within months, the highest / lowest price 29.51 / 16.95
building a "great security" ecology. In addition, the company is actively involved in the localization of ecological construction, security products
support all domestic operating systems, 360 a security guard, 360 Antivirus, 360 compression, 360 Secure browser and other products on the
Market performance comparison chart (near 12 Months)
basis of existing features on the realization of customer Kylin, Kylin, depth, and other operating systems end adapted to achieve the Godson,
Katherine core, soar, etc. CPU Full support, assistance and enhancing our government and enterprise IT system safe and controlled upgrade. 2018-11-26 ~ 2019-11-22
• profit prediction: Based on core assumptions, we expect the company 2019-2021 On his maternal net profit 55.21 Million
32%
39.35 Million 45.11 Billion. Consider the company's main revenue and profits from the commercial business, and major R & D investment to
14%
invest in the security business, there is a certain departure from the company's actual profits and therefore only as the basis for valuations --5%
underestimate the real value of the company, we will 30% R & D expenses added back to net income manner valuation, 2019-2021 After adding
-three%
twenty
back net profit 63.75 Million 48.68 Million 55.59 Billion. Select Tencent, Baidu, Netease, Kingsoft, People as a comparable company, referring to
18/11 19/01 19/03 19/05 19/07 19/09
the average valuation of comparable companies, giving the company 2020 year 35 Time PE , Corresponding to a market capitalization of target 1703.8 CSI 300 Three hundred sixty
Billion (calculated after adding back to net income portion of R & D expenses), the target price 25.19 Yuan, initiate coverage with a
"recommended" rating.
• risk warning : New business development less than expected; Internet advertising market downturn; tighter supervision of the gaming industry;
increased competition.
Key Financial Indicators
2018 2019E 2020E 2021E
Main income (in millions) 13,129 13,366 15,173 17,477

Year on year growth (%) 7.3% 1.8% 13.5% 15.2%
His maternal Net profit (millions) 3,535 5,521 3,935 4,511
Year on year growth (%) 4.8% 56.2% - 28.7% 14.6%
Earnings per share (yuan) 0.52 0.82 0.58 0.67
Price-earnings ratio (times) 40 26 36 32
Book value (times) 6 5 5 4
Source: Company announcements, CRE Securities estimates Note: The price is 2019 year 11 month twenty two Day closing price
Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number Without permission prohibited reproduced
Eye record
One, three hundred and sixty: "Great security" strategy firm practitioner .................................................. .................................................. ....................... 4
(A) leading to the attitude, the layout of the "big security" strategy .................................................. .................................................. ................. 5
(B) technology, data, brands and talent to build a development cornerstone .................................................. .................................................. . 6
(C) the ability to secure the core, to form a product and content-driven business closed .................................................. ........................... 8
(Iv) to maintain revenue and net profit growth, excellent cash flow performance .................................................. .................................................. ... 10
Second, the policy and demand-wheel drive, network security space is about to open one hundred billion .................................................. ................................................. 12
(A) network security regulations, policies gradually fall to promote the development of the whole industry .................................................. ......................... 12
(B) the security industry is reshaping business models: from "product" to "product + service" .................................................. ....................... 15
(C) a strong national team incoming network security market and demonstrates optimistic about the prospects of network security .................................................. ..................... 16
Third, actively promote the "great security" strategy, the depth of the layout of government and enterprise markets .................................................. .................................................. ....... 16
(A) government-enterprise business has already started to become a new growth pole strategy .................................................. .................................................. ... 16
(B) enabling emphasis on security, create a safe ecosystem .................................................. .................................................. ................... 18
Fourth, investment advice .................................................. .................................................. .................................................. ..................... 19
(A) core assumptions .................................................. .................................................. .................................................. ......... 19
(B) profit forecast .................................................. .................................................. .................................................. ......... 19
(C) valuation analysis .................................................. .................................................. .................................................. ......... 19
V. Risk Warning .................................................. .................................................. .................................................. ..................... 20
Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number 2
Table of figures
chart 1 Three hundred sixty overview of the development process .................................................. .................................................. ............................................. 4
chart 2 Three hundred sixty Internet ecosystem .................................................. .................................................. ......................................... 4
chart 3 Three hundred sixty shareholding structure .................................................. .................................................. ................................................. 5
chart 4360 Safety brain - Distributed Intelligent ecological security system .................................................. .................................................. ...... 5
chart 52019 In Microsoft TOP100 Security contributions list .................................................. .................................................. ........................ 7
chart 6 Three hundred sixty business model .................................................. .................................................. .................................................. ... 8
chart 7 Three hundred sixty and Internet advertising services business .................................................. .................................................. ............................. 9
chart 8 Three hundred sixty Internet value-added services business .................................................. .................................................. ................................. 9
chart 9 Three hundred sixty IoT Things security products and services business .................................................. .................................................. .......... 10
chart 10 Three hundred sixty revenue and Growth .................................................. .................................................. ............................. 11
chart 11 Three hundred sixty and Growth of net profit .................................................. .................................................. ................................. 11
chart 12 Three hundred sixty constituted the main business income .................................................. .................................................. ................................. 11
chart 13 Three hundred sixty margin changes .................................................. .................................................. ..................................... 12
chart 14 Expense ratio changes during the three hundred and sixty .................................................. .................................................. ............................. 12
chart 15 Three hundred sixty sales of goods and services received in cash .................................................. .................................................. ......... 12
chart 16 Three hundred sixty Net cash flow from operating activities .................................................. .................................................. ......................... 12
chart 172011-2018 Global IT Spending and the global information security spending .................................................. ............................................... 13
chart 18 Our network security industry development policy support .................................................. .................................................. ..................... 13
chart 192018-2023 In China IT Scale security spending forecast .................................................. .................................................. ......... 15
chart 20 The proportion of the global network security market structure .................................................. .................................................. ............................. 15
chart 212016-2021 China's network security market structure and forecast .................................................. .................................................. ... 15
chart twenty two Third Research Institute of Ministry of Public Security and 360 Group signed a cooperation agreement to build network security brain .................................................. ................... 17
chart twenty three Network letter signing ceremony industrial projects .................................................. .................................................. ..................................... 17
chart twenty four Chongqing network security against al renderings .................................................. .................................................. ......................... 17
chart 25360 Security guards and Kylin completed compatibility testing .................................................. .................................................. ...... 18
chart 26 Three hundred and sixty in "great security" in the field of ecological investment .................................................. .................................................. ..... 19
chart 27 Part of the R & D expenses after adding back net profit forecast .................................................. .................................................. ..................... 20
chart 28 The valuation of comparable companies (as of 2019.11.22 Closing) .................................................. .................................................. ......... 20
One, three hundred and sixty: "Great security" strategy firm practitioner
Three hundred and sixty is China's largest Internet and mobile security products and service providers . company was founded on 2005 , Is the initiator of the Internet free and secure, with
advanced technology and a good user experience, to develop and successfully accumulated a broad user base. 2011 The company listed on the NYSE, and in 2016
On completion of the privatization transaction, delisting from the NYSE, return to China. 2018 year 2 Month, the company changed its name to complete the restructuring, smooth landing A Share
market entered a new development journey.
chart 1 Three hundred sixty overview of the development process
Source: Company's official website, CRE securities finishing
Today, the company has successfully built the Internet ecosystem in order to drive the core technology to product system for the carrier and commercialization protection . The company
mainly engaged in Internet technology (especially the Internet security technology) research and development and network security product design, development, operation, and based on the
commercialization of the Internet advertising network security products and services, Internet value-added services, intelligent hardware business services. The company provides free Internet
security and mobile security products, to provide users with secure Internet access point activities and information content. As a result, the company has accumulated a large number of users, on this
basis, the company will expand its business to Internet advertising and business services, business Internet value-added services, intelligent hardware business.
chart 2 Three hundred sixty Internet ecosystem
Source: Company announcements, CRE securities
The actual controller is Hong Zhou Yi Mr. total control of the company 63.70% Shares . Zhou Yi Mr. direct holding company 12.14% Shares indirectly controlled by the odd letter Zhicheng Company 48.74%
Of the shares indirectly controlled by Tianjin Zhongxin Company 2.82% Of the shares.
chart 3 Three hundred sixty shareholding structure
Source: Company announcements, CRE securities finishing
(A) leading to the attitude, the layout of the "big security" strategy
Internet security company to ensure that the existing services and the orderly conduct of the main business at the same time, the accumulation of lead in network security technology,
successful experience and vast amounts of data widely used "big safe" areas, establish " 3 + 1 "Development strategy . among them" 3 "Including national security brain, brain urban safety,
home security brain." 1 "For the Internet strategy, including 360 Search, information flow, games, navigation and other services. Class III of the brain dedicated to the protection of national security,
urban security, home security a large security era, while the content of the Internet security technology innovation into business to provide strong support, help 360 Create a new era of growth pole
safety .
chart 4360 Security brain - Distributed Intelligent ecological security system
Source: China Computer Society " 360 Security brain - Distributed Intelligent ecological security system, "CRE securities
① National security field
National security brain based on a global vision of national construction, by building human resources, open platform technology, knowledge, data, and a number of joint security firm, and
co-operators, Internet companies, traditional manufacturing and government sectors to achieve large data security overall defense interoperability with cyber attacks, building large ecological safety,
the guardian of national security. At present, the company has become a major social forces in the country, defense, emergency management and network security safeguards. The company is
"National Security National Engineering Laboratory data collaboration technology" construction unit; for several years to provide combat-type attack and defense services to the national ministries and
key industry bodies to help test and improve the security of critical information infrastructure protection, emergency response and command and Control capability; in monitoring and responding to
international cyber threats, 360 Successful traceability, found 40 A (publicly) foreign advanced persistent threats ( APT )organization.
② Urban areas of security
360 City Safety is designed to protect the brain urban public facilities, security, public safety, public places, security, networking security, car safety networking, community safety, prevent network
attacks to the city residents to bring physical harm. 360 City Safety has brain failure prediction, trend analysis, fraud detection, risk assessment, analysis abnormal, relationship analysis, trajectory
analysis and other functions, can provide comprehensive management of urban operations, intelligence judgments, emergency management and other services, it can be widely used in public security
system, , help safe area, campus, community, park construction safety supervision systems, environmental systems, water systems and so on.
Tianjin successful emergency management information system project, the city realized the brain landing . 10 month 31 , The company announced the successful Tianjin Emergency
Management Agency Emergency Management Information (a) projects, bid amount 1.19 Billion. Project-based Tianjin Emergency Management Agency to comprehensively strengthen emergency
response work, establish organizational system, improve emergency prevention, early warning, disposal systems, strengthen the routine prevention, emergency preparedness, unified control, effectively
reducing the risk of disaster generated, to reduce losses , life-saving and other goals, the company will provide hardware and software integration services for its emergency command center. The
project is 360 City Safety provides the brain landing the country's first emergency response scenarios, creating a benchmark for national security emergency brain.
③ Home security field
360 Family Safety brain through the combination of hardware and software, artificial intelligence and big data connection, so that end cloud collaboration, integration into the edge computing,
intelligent linkage of various devices in the home scene, a "housekeeping, care of the elderly, child care" and other family core security guardian, predict risk and provide collaborative solutions. 360 Family
Safety is responsible for coordinating the brain 360 Home firewall, home camera, video doorbell, AI Speakers, cleaning robot, children's watches and other hardware products, through the operation,
coordination and memory, manage a variety of devices to achieve can read, hear clear, tangible, will communicate, in a synergistic interaction between multiple devices, comprehensive home security
guard.
(B) technology, data, brands and talent to build a development cornerstone
The company continued to work in the security field, the accumulation of technology, data, brands and talent is the cornerstone of the company to commercialize cash and carry "great security" st
Personnel : Network security technology, the company has more than ten branch team of security experts on behalf of the world's leading technology, including focus on APT Attack the source, 0day Vulnerability
threats and other senior day chase team and emergency response teams; the main vulnerability discovery and exploit the Vulcan team ( Vulcan Team ); For PC Frostsaber laboratory and mobile core
research and development ( AceSword Lab ); Committed to Android and mobile browser exploits mining and use of Alpha Team ( Alpha Team );focus on APT attack, 0day Vulnerability threats and other
senior day chase team and emergency response teams; in-depth study Andrews virus analysis, mobile threats warning 360 Flames laboratories. In addition, the company also has included intelligent
network linking automotive safety laboratory, laboratory network attack and defense, safety radio Research Institute, Institute of artificial intelligence security, IOT Security Research Institute, Institute
for multiple network security, including the Institute for hackers, as well as specialized services in the 360 Internal defense system and the construction of a national information security system
security.
2019 , The company held WCTF Hackers World Masters, invited top teams from Poland, France, Switzerland, Japan, the United States, Germany, Russia, South Korea and China in the field of
network security, the strength of competition in the form of offensive and defensive combat. The competition also provides the opportunity to compete against the top players for more than 10 domestic
universities, help the company tap the talents of network security, network security training new force. Microsoft's latest 2019MSRC World's most valuable security elite championship, three hundred
and sixty Vulcan team ( Vulcan Team ) Two members were swept "the most valuable security elite list," the first and second place, the Chinese people become ever received the highest ranking. The
global rankings, has a total of 10 Security experts into the list, which 7 Before everyone list 50 .
chart 52019 In Microsoft TOP100 Security contributions list
Source: Company's official website
Big Data Advantage : According to third party iResearch data, as of 2019 year 6 The end of the company PC Security products market penetration 96.63% The average number of monthly active
users remain steady in 5 Million or more, the security market continues to rank first; PC Browser market penetration 83.12% The average number of monthly active users
4.3 One hundred million; the average monthly number of active users of mobile security products 4.75 Billion. Broad user base for the three hundred and sixty provides continuous network security and
network behavior data sample data, help expand and update the company's real-time dynamic Big Data Resources .
" 360 Security brains "of the use of artificial intelligence technology to automatically analyze and deal with the behavior of the whole network security data more than ten million devices produced nearly
a trillion per year, the annual amount of new data sample more than 10 billion domestic security in the amount of data ranked first. as an important part of the construction of ecological safety of the
brain, the company has begun opening up a number of safety data resources, and actively support the national security agencies and security companies on the downstream use of the company to
carry out attacks open data analysis, fraud prevention, and other network security-related research.
Platform operational advantages : Companies adhere to the guiding ideology of value-driven to business needs as the core, actively carry out large operations midfield platform, big data, AI Capacity-building
projects, engineering and other cloud computing platform has achieved remarkable results, has constructed the fourth generation of big data infrastructure, distributed map database, machine learning
algorithms optimized for large-scale key-value store, BAAS Platform and other leading platform technology to further enhance the core competitiveness to promote the company.
Midfielder large platform operators also " 360 Safety brain "provided critical core support. By building a complete one-stop large data platform to play AI
The core capabilities of the technology, combined with the full collaboration between expert knowledge and algorithms to achieve a semi-automatic or even automated security analysis and intelligent
attack and defense. By enabling platform " 360 Safety brain "can further complete countries, cities, communities, families layered construction of open questions algorithms, data, and security
capabilities will also be addressed, and ultimately the construction of industrial ecology inclusive.
branded advantages : Users 360 Security high degree of trust and brand recognition will help the company establish a healthy business relations for the company to further expand the city government and enter
Field has created excellent conditions. The company will further strengthen " 360 "Brand management and maintenance, and enhance" 360 "Brand value, deepen the implementation of the company"
great security "brand strategy to lay the foundation.
(C) the ability to secure the core, to form a product and content-driven business closed
Companies with free and high-quality security services, access to information and content products, access to effective strong user base and traffic entrance . Based on massive user
base, three hundred and sixty were realized by commercial business, namely: Internet advertising and services, access to Internet services and advertising revenue, and with business partners to
achieve win-win situation; value-added services via the Internet, access to value-added services revenue; by intelligent hardware business, sales revenue, expand the flow inlet and expand border
security operations.
chart 6 Three hundred sixty business model
Source: Company websites, CRE securities
Access to information and content of the product realization: "User + commercial realization." . Since its establishment, the company has been implementing a policy of permanent free
personal end security products by providing free security products and services gathered a large number of users and has received a massive flow of resources. On this basis, the commercialization
realized through Internet advertising and Internet value-added services business, generate revenue and profits. Meanwhile, on the security services were financed by commercial business was
profitable, and ultimately the company's sustainable development.
• Internet advertising and services
Internet advertising and service content is the main way to achieve commercialization company realized. The company make full use of technology, the establishment of large data analysis system, to
learn user habits, user preferences, etc., to build user portrait system through continuous data accumulation, a deep understanding of user behavior and achieve precise recommendations for the user
requires information and application preferences . Advertising advanced technology and well-designed layout of the company's advanced intelligent recommendation system, allows users to use " 360 search
engine"," 360 navigation"," 360 When the browser "and other core products, access to business information of interest to the user. Mobile terminal, many mobile phone brands
And all 360 Search reached a cooperation; in PC end, 360 Retrieval of the average daily amount of more than search 8 Billion, China's second largest search engine. The company wide via the Internet
Sue and services business, commercial customers and efficient connections with potential clients in order to achieve cash flow .
chart 7 Three hundred sixty and Internet advertising services business
Source: Company websites, CRE securities finishing
• Internet value-added services
Game business is another important direction of the company realized the commercial content . 360 The game is set game publishers, operations, marketing and service as an integrated
resource platform game, with operations including the page travel, end travel, online gaming capability, distribution and other stand-alone game the whole category of mobile Internet gaming terminal,
formed a 360 Mobile Assistant, 360 Games hall and other mobile terminal platform as the core of the mobile game distribution platform operators to wan.360.cn , www.youxi.com Based web game
operating platform, and are actively engaged in exploration of the client game.
Responsive to the needs of business development, the company is actively ongoing business transformation game . On the one hand, companies rely on hand tour page tour market
advantages, expand to end travel market is expected to form a new driving force for the development of game business company. On the other hand, the company is to "transport + release" integrated
intermodal transition from platform to issue business breakthroughs, increase market share. Moreover, the company also actively adjust the organizational structure, introducing a wealth of experience
and high-end talent resources, enhance the brand influence and operational capabilities, to establish "support and services," positioning, streamlined platform sector.
chart 8 Three hundred sixty Internet value-added services business
• IoT Things security products and services
Three hundred sixty security technology products, to protect the user's personal information security and life safety, security products to create a system of ecological safety in the pan, including the
provision 360 Children smart watch, 360 Smart cameras, 360 Tachograph and 360 Security router and a series of intelligent hardware products, we are committed through IOT
Security products for users to solve personal safety, travel safety, home security and other issues. Meanwhile, the company ahead of the layout, actively involved in R & D resources, made a number
of breakthroughs in the field of intelligent hardware security, car safety networking, Internet security industry, wireless security, has accumulated rich experience, and lead the industry.
chart 9 Three hundred sixty IoT Things security products and services business
(Iv) to maintain revenue and net profit growth, excellent cash flow performance
Operating income and net profit remained stable growth for two consecutive years over the completion of performance commitment . 1 )from 2014-2018 , The company operating income from
78.2 Billion yuan to 131.2 Billion, CAGR for 13.8% ; Net profit from the parent company owned 11.8 Billion yuan to 35.3 Billion, CAGR for 31.5% . among them, 2017-2018
The company deducted non-normalized net profit of the parent 27.5 Million 34.2 Billion, exceeding the performance commitment for two consecutive years. 2 ) 2019 The first three quarters of operating
income for the 95.22 Billion, an increase of 0.77% ; His maternal net profit 51.76 Billion, an increase of 105.74% , Mainly due to the transfer of the company equity investment income Cian letter 29.86 Billion.
chart 10 Three hundred sixty revenue and Growth chart 11 Three hundred sixty and Growth of net profit
25% 51.76
122.38 131.21
95.22 20%
33.72 35.35 150%
78.20 93.57 99.04
15%
10%
11.83 13.40 18.72 100%
5%
050100150 0%
0204060 0% 50%
Owned by the parent company net profit Owned by the parent company net profit growth
Operating income (million) Year growth rate
source: Wind CRE Securities source: Wind CRE Securities
1 ) From a business structure, services and Internet advertising revenue is the company's most important source of revenue, continued to grow rapidly in recent years, . 2018 In Internet
advertising revenues and service revenues accounted for the proportion of 81.2% . 2019 In the first half, in the Internet advertising industry as a whole pressure of the market environment, the company
marketing strategy for positive change, to carry out intensive operations, and realize Internet advertising service revenue 46.97 Billion, up slightly 1.16% .
2 ) Affected by industry factors, the proportion of Internet value-added services revenue has declined in recent years . 2019 In the game version number gradually liberalized review, the market
has been warmer. In the first half, the company's mobile games business continued efforts to enhance the competitiveness of content, and will continue in force segments, hatching boutique IP Content,
quality products to accelerate the reserve. Page aspects of travel distribution business and prominent, star product after another, the exclusive agent to further improve the relevant income share.
3 ) IoT Intelligent hardware business gradually force, 2018 In accounting for revenues in 7.73% . 2019 In the first half, the company's intelligent hardware business strategy and organizational
structure to further clarify, continuous release a variety of star products, market share continue to break enhance related business revenue growth compared with the same period last year 22.57% .
chart 12 Three hundred sixty constituted the main business income
2.01%
5.58% 2.61% 2.06%
4.71%
100%
2.96% 8.97% 7.73%
8.12%
90%
8.98%
13.88%
80% 29.34%
45.19%
26.49%
70%
60%
50%
81.23%
40% 74.48%
62.98% 59.80%
30% 52.80%
20%
10%
0%
Year 2014 2015 2016 2017 2018
Internet advertising and Internet value-added services intelligence services of other hardware
source: Wind CRE Securities
By the external environment, the company's gross profit margin has declined in recent years, gradually improve operating efficiency . Specifically, Internet advertising and business services,
Internet value-added services gross margin declined, mainly due to increased content and traffic external procurement costs due. In addition, intelligent hardware gross margin rising, mainly due to the
company's business gradually entered a stable growth period from the pioneering period, with rich category, business growth, enhance the scale of intelligent hardware gross margin increase as a
result.
chart 13 Three hundred sixty margin changes chart 14 Expense ratio changes during the three hundred and sixty
80.0 80%
64.48% 69.36%
59.75%
60.0 60%
40.68% 38.64%
40.0 40%
20.0 20%
0.0 0%
2014 2015 2016 2017 2018
Costs (million) during the The proportion of total revenue
The company continued to expand the income scale, while maintaining a good - Days sales outstanding ability . The past five years, sales of goods and services received in cash accounted
for the proportion of revenue were 100% Above; the same time, net cash flow from operating activities was more than the same period the company achieved a net profit.
chart 15 Three hundred sixty sales of goods and services received in cash chart 16 Three hundred sixty Net cash flow from operating activities
400.0%
130.0%
296.5%
118.8%
255.4% 279.1% 300.0%
120.0%
112.4%
105.3% 104.3% 101.0% 110.0% 200.0%

122.9% 104.8%
100.0% 100.0%
050100150200 90.0% 0204060 0.0%

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
Sales of goods and services received in cash ($ billion) / Operating income

Net cash flow from operating activities ($ billion) / Net profit
Second, the policy and demand-wheel drive, network security space is about to open one hundred billion
(A) network security regulations, policies gradually fall to promote the development of the whole industry
Network security budget proportion of China is still low, huge market potential security . according to Gartner Correct 2011 Year to 2018 Global IT Expenses and expenditures made by Global
Information Security statistics show that the total information security spending IT The proportion of expenditure in higher and higher, 2018 Global Information Security expenditure IT The proportion of expenditure
3.05% . In contrast, Gartner Data show that in China 2019 Year IT Spending will reach about 2.9 One trillion yuan of scale, and the scale of the information security market 500
Or so billion yuan, accounting for China's information security spending IT Expenditure compared to just 1.7% , Relative to the global average there is a large gap. Assuming that the proportion of
Chinese information security spending to reach the global average 3% , Corresponding to the network security market will reach nearly $ 100 billion of the order.
chart 172011-2018 Global IT Expenditure and full Global Information Security expenditure
(One hundred million U.S.2011

dollars) 2012 2013 2014 2015 2016 2017 2018
global IT Expenditure
35230 36480 36730 37100 35170 33750 35210 37400
statistics
Information security spending 550 618 660 720 756 822 1018 1142
Information security accounting 1.56% 1.69% 1.80% 1.94% 2.15% 2.44% 2.88% 3.05%
Source: Bang Bang security "under a change of China's information security industry, from products to services" Gartner CRE Securities
Network security-related regulations and policies gradually fall to promote the development of the whole industry . 1 ) Compliance policies have been introduced to enhance network security produ
In "Network Security Act," introduced, the legal system will be designed from the top network security. 2019 year 5 month 13 Day, "information security technology to protect the basic level of network
security requirements", "information security technology assessment network security protection requirements", "information security technology designed to protect the safety level of network security
technical requirements" and other national standards officially released, will be 2019 year 12 month 1 Day began, marking the national information security technology and network security into the 2.0
era. Paul and other 2.0 Injecting another powerful catalyst for China's network security market, to further protect and enhance China several years leading global network security market in future
growth.
2 ) Promote regulations to further promote the industry to accelerate development . 2019 year 6 Month, "National Cyber Security Industry Development Plan" released, according to the plan,
2020 Years, relying on the industrial park in Beijing led the network security industry size of more than 1000 Billion, pulling GDP An increase of more than 3300 Billion yuan to build a lot 3 Annual
income of more than 100 Billion backbone enterprises. In addition, the local government network security industry programs have been introduced to provide substantive support for the development
of space, money, and human resources for the network security industry.
Care network intensified actions, highlighting the national importance of network security . from 2016 Since, Ministry of Public Security to carry out offensive and defensive combat maneuvers
each year for critical information infrastructure, known as the "protection of network operations." Along with Paul and other 2.0 Era, as well as to strengthen the founding of New China 70 Safety anniversary of the
In "protect the network action" to expand the scope of work involved in the letter, security, police, transport, railways, civil aviation, energy, news broadcasting, telecommunications operators and other
units and demonstrates the national importance of network security. Care network actions to increase the strength, but also greatly promoted the government and enterprise investment in network security, and pr
chart 18 Our network security industry development policy support
time department file content
Establish a legal form of the guiding role of the central and state leadership system and overall
"State Security Law of People's security of the national security concept, defined the tasks of safeguarding national security, the
2015 year NPC Standing Committee
meeting Republic of China." establishment of various systems to safeguard national security, for current and future periods and
safeguard national security the main tasks and measures to guarantee a comprehensive, global, fundamental arrangements
Guidance provinces, autonomous regions and municipalities Communications Authority and operators
"Internet information security of Internet data center (including Internet resources collaboration services), Internet access
2016 year Ministry management system and operation enterprises regulate the Internet access services, content delivery network services using the Internet
and maintenance management (tentative)"to do business in the Information Security Management System operation and maintenance
management; guarantee safe and reliable operation of the unit system, to play an effective role in the system.
To protect network security, safeguard cyberspace sovereignty and national security, public interest,
"Network Security Act People's
2016 year NPC Standing Committee the protection of citizens, legal persons and other organizations of the legitimate rights and interests,
meeting Republic of China."
and promote the healthy development of economic and social information to develop
Clear, current and future strategic task of national cyberspace security of a period is a staunch defender
of cyberspace sovereignty, resolutely safeguard national security, protection of critical information
2016 year National Internet Letter "Cyberspace Security Strategy" infrastructure, strengthening the cultural development, to combat cyber terror and crimes, improve
Information office
network management system, reinforce network security infrastructure, improve network space
protection, strengthening international cooperation in cyberspace 9 Aspects
time department file content
In order to improve the development of network security products and services to a manageable level
2017 year Central Information Office Network "Network security products and services
Full review (Trial) " and prevent the risk of supply chain security, safeguard national security and the public interest
"Critical Information Infrastructure State shall take measures, monitoring, prevention, disposal network security risks and threats from
2017 year National Internet Letter Security Protection Ordinance (draft)" inside and outside the People's Republic of China, the protection of critical information infrastructure
Information office
from attack, intrusion, interference and sabotage, network punish illegal and criminal activities according to law
For personal information security issues faced by those in the control specification personal
National Safety
"Information security of personal information collection, storage, use, share, transfer, publicly disclosed information processing aspects
2017 year Standardization
information security technology norms" of the relevant acts, aimed at curbing the illegal collection of personal information, misuse, leakage
Technical Committee for Information
and other chaos, maximize the protection of the legitimate rights and interests of individuals and the public interest
To enhance network security protection work to improve the capacity and level of network security,
"Network Security Protection
2018 year Ministry of public security maintenance of cyberspace sovereignty and national security, public interests, protect the legitimate
Ordinance (draft)"
rights and interests of citizens, legal persons and other organizations, to promote the healthy development of economic and social informatio
"Public safety video surveillance

Internet standard defined the structure of public safety video surveillance network information security
2018 year Ministry of public security network information security
system, the certificate and key requirements of the basic functional requirements, performance requirements and other four requirements
technical requirements"
"Information security technology to
protect the basic level of network
State Administration of security requirements", "information In the standard name, protected objects, part of the chapter structure and control measures have been
2019 year market regulation, the security technology assessment revised and updated, marking the network security level of protection of our country officially entered " 2.0
national standards committee network security protection era"
requirements", "information security
technology designed to protect the safety level of network security technical requirements"
To 2020 Years, relying on the industrial park in Beijing led the network security industry size of more than 1000
Billion, pulling GDP An increase of more than 3300 Billion yuan to build not less than 3 Annual income
"National Cyber Security Industry
2019 year Ministry of more than 100 Billion backbone enterprises. Accelerate the construction of "sophisticated" the
Development Plan"
economy, promoting the capital of the "four centers" building, to enhance the development of high-end
network security industry leading role to protect the national security interests of the Internet age
Source: company prospectus, government sites, CRE securities
Network security law, protection rating 2.0 Gradually fall relevant laws and regulations of the "Critical National Information Infrastructure Security Protection Ordinance" and so on,
regulatory supervision on the rise, China's network security-related hardware, software and services market will continue to maintain rapid growth. according to IDC prediction, 2019 The
overall expenditure in China's network security market will reach 73.5 Billion dollars to 2021 China's network security market will form a one hundred billion level. future 5 Years, China's network
security market overall spending growth is expected to compound 25.1% , Far higher than the 9.44% The global level. From the industry point of view, government, communications, finance will
continue to be China's network security market before spending three major industries, consistent with previous periods, the proportion of China's overall network security market about two-thirds of.
chart 192018-2023 In China IT Scale security spending forecast
source: IDC " IDC Semi-annual Global Network Security Guide 2018H2 "CRE securities
(B) the security industry is reshaping business models: from "product" to "product + service"
China's current network security products market is still . From a structural point of view, network security hardware products still accounted for nearly half of the market share, market size of
software products increased year by year, but the proportion is still low service, 2018 Was only 13.8% Far below the level of developed countries. The reason, we think it is mainly caused by two
factors: First, under budgeting system, security products more easily accounted for; the second is the enterprise security spending is more compliance-driven, active defense weak awareness.
chart 20 The proportion of the global network security market structure chart 212016-2021 China's network security market structure and forecast
9.40%
26.20%
64.40%
Hardware Software Service
Source: CCID Consulting " 2019 Network Security White Paper on China's development, "CRE securities Source: CCID Consulting " 2019 Network Security White Paper on China's development, "CRE securities
Security services will be the "next outlet." . In recent years, the risk of catastrophic attack shows that the Internet is a major threat, enterprises are starting to safety as an important
Business risk, and more attention to the persistence of network information security services. Especially with the rise of cloud computing, according to the subscription model the idea of paying for
services have gradually been accepted by the company. Security requirements have been from a single piece of hardware or software products, into a comprehensive professional services and
solutions. Each security vendors have put forward the concept of "security operations" in the security services as one of the focus of future development direction. For example, Venus and vigorously
promote the construction of urban security operations center, the Green League and Technology has put forward " P2SO "strategy.
(C) a strong national team incoming network security market and demonstrates optimistic about the prospects of network security
2019 So far this year, the national team have resorted to shares of the way distribution network security industry, on the one hand demonstrates its optimistic about the prospects of the
network security market, on the other hand is also expected through the provision of resources to support enterprise network security, and promote development of the industry.
First, China Electronic Information Industry Group ( CEC65 ) Strategic stake Cian letter . 2019 year 5 month, CEC Signed a strategic cooperation agreement with Cian letter to RMB 37.31 One
hundred million yuan holdings Cian letter 22.59% Shares, becoming the second largest shareholder letter Cian. The two sides will cooperate in technological innovation, integration of resources, major
projects, etc., to promote the central enterprises Network Security Response Center, a modern digital network security response center and the city "along the way" Network Security Response
Center.
Second, China Electronics Technology Group Corporation ( CETC66 ) Of share holdings, becoming the largest shareholder of the Green League and Technology . 2019 year 8 month, CETC Wholly
owned subsidiary of Electric Division Investment buying Green League and Technology through centralized auction trading 1.6292% Shares, Electric Division investment and concerted action among
the electric fund, Network Security funds together hold the Green League and Technology 15.5% Shares, becoming the largest shareholder.
Third, the country voted to change the actual control people Meiah Pico . 2019 year 4 Month, Meiah Pico controlling shareholder, actual controller Guo Yongfang, Tenda will be held by 4536.1 Million
shares of company shares (total share capital 5.71% ), Other shareholders will be held by Li Guolin, etc. 8011.42 Million shares (total share capital 10.08% ) To 15.49 Price yuan / share transfer to cast
intelligent country. 2 ) While shareholders Li Guolin, ANCIENT agreed to total 6.8% Equity corresponding to all of the voting rights, the right to nominate other than the exclusive property rights, free and
irrevocably authorizes the exercise of intelligence to vote. After the completion of the transfer, investment and intelligent country directly holds Meiah Pico 1.25
Million shares (total share capital 15.79% ),have 22.59% The right to vote, become Meiah Pico controlling shareholder, SASAC will be the actual controller.
Fourth CLP Section Nanyang shares shares . 2019 year 11 month 18 Day, Nanyang shares announcement, the controlling shareholder Zheng Zhongnan, holding 5% Alpha intends to shareholders
over its total capital held by Nanyang shares unlimited sale of shares outstanding 5800 Shares (total share capital 5.0065% ) To 13.77 Yuan / share at a price of about 7.99 One hundred million yuan
to the transfer agreement in the Electric Division (Tianjin) Information Technology Network partnership (limited partnership).
Third, actively promote the "great security" strategy, the depth of the layout of government and enterprise markets
(A) government-enterprise business has already started to become a new growth pole strategy
2019 The company is a crucial year for the implementation of the "big security" strategy, the company is also fully into the government and enterprise security business year . 2019 year 4 Month,
the company held by the transfer of the entire equity interest Cian letter, the transfer amounting to approximately RMB 37.31 Billion. After the completion of the transfer. " 360 "Brand integrity and uniqueness can
9 month 3 , The company and the third Institute of Ministry of Public Security signed a cooperation agreement, both sides will be based on 360 The security of the brain, in the network security
situational awareness, threat intelligence and other areas of in-depth cooperation. In addition, the company and Tianjin Hi-tech Zone has been kicked off. 9 month 17 Day, three hundred sixty
subsidiaries and Tianjin Hi-tech Zone government signed the National Cyber Security Awareness Week web site a letter industrial project agreement, not only opened a new chapter in cooperation
with the Tianjin Municipal Government in the development of network security, as well as government and enterprise companies to deepen layout another important measure of business.
chart twenty two Third Research Institute of Ministry of Public Security and 360 Group chart twenty three Network letter signing ceremony industrial projects
signed a cooperation agreement to build network security brain
Source: World Wide Web Source: China Economic Information Network
Chongqing collaborative innovation network security industrial base was officially launched, to build a successful business benchmarking . 2019 year 6 Month, the company's wholly-owned
subsidiary of Qihoo Technology won the bid for Hechuan District, Chongqing 360 Network Security Collaborative Innovation Industrial Park, a project that is Southwest secure base in the large
company security strategy and western nodes of a distributed national security brain. Winning projects amounted to approximately RMB 2.4 Billion, after the company fully into the government and enterprise secu
month 7 day, 360 Collaborative innovation network security industrial base was officially opened in the national network security industry layout has laid a solid foundation for the company.
chart twenty four Chongqing network security against al renderings
Source: Chongqing Hechuan district government website
Involved in the localization of ecological construction, security products support all domestic operating system . The company in the interactive platform, said the country has been actively
involved in the construction of ecological computer security products support all operating systems domestically, 360 a security guard, 360 Antivirus, 360 compression, 360 Secure browser and other
products on the basis of existing features on the realization of customer Kylin, Kylin, depth, and other operating systems end adapted to achieve the Godson, Katherine core, soar, etc. CPU Full
support, assistance and enhancing our government and enterprise IT system safe and controlled upgrade.
chart 25360 Security guards and Kylin completed compatibility testing
Source: Yin Set Network
(B) enabling emphasis on security, create a safe ecosystem
Layout "great security" ecology, government and enterprise companies to invest in the field of action frequently . The company intends through joint upstream and downstream, safety-related
enterprises in the industry chain, to assist the relevant departments work together to build "a national cybersecurity brain," State of the weighing build, defend cyberspace Homeland Security; the city
itself and by strengthening security-related network security industry chain enterprise strategic cooperation, in the form of security energized, jointly build a large ecological safety.
1 ) 2014 year 10 Month, a wholly owned subsidiary of Star world of science and technology capital of Wuhan deep, which currently holds 26.4% Equity. Deep degree of science and technology is based
on focused Linux Domestic operating system development and business services company, operating as a domestic ecological system of the building who not only formed a close partnership with the
chips, whole, middleware, database and other manufacturers, but also with 360 , Jinshan, Netease, search dogs and other companies jointly developed a variety of application software meet the needs
of Chinese users. Depth technology operating system products, has passed the Ministry of Public Security operating system certification, the Ministry of Domestic operating system adaptation
certification, the State Land finalists centralized procurement list, government, and military and domestic customers, finance, operators, education, etc. It has been widely used.
2 ) 2018 year 12 Month, the company invested 1.24 One hundred million yuan shares of Hillstone, stake 4% . Hillstone is the Chinese network security industry leader in technological innovation, focus
on innovation and cutting-edge technology in the field of network security, including providing border security, cloud security, data security, network security, including network security products and
services. Hillstone was 2019 year 10 End successfully landed Kechuang board.
3 ) 2019 year 7 Month, the company invested John Synopsys, Synopsys Han is the earliest advocates and promoters of "data-driven security" concept, is a global network security 500 Strong, China's
network security 50 Companies. The company through strategic investment in data security barricade and into the future ecological, government and enterprise customers to accelerate empowerment.
chart 26 Three hundred and sixty in "Daan Full "ecological situation in the field of investment condition
Investee Investment timing Investment Amount (million) Investment areas
Hillstone 2018/12/17 12427 Cloud computing security, border security,
network security, data security, intelligent
analysis and management
Beijing Digital Technology Co., Ltd. stargazing 2018/8/18 2250 Digital Asset Security Management Solution
The Shanghai Xun Information Technology Co., Ltd. 2018/9/15 2000 Government agencies to provide network
intelligence to get a class solutions (mainly
for public security, national security, military)
Nanjing Saining Information Technology Co., 2018/8/8 1800 Network security attack and defense business
John Sian letter (Beijing) Software 2019/6/18 1500 Big Data Security Platform
Technology Co., Ltd.
Chengdu sugar-free Information Technology Co., Ltd. 2018/12/21 800 Cyber crime intelligence analysis services
and solutions
Wuhan deep degree of Technology Co., Ltd. 2014/10/16 6000 Made in China Linux Operating system vendors
Source: Eye of Heaven investigation, the CRE securities
Fourth, investment advice
(A) core assumptions
Core assumptions 1 : 1 ) Expects consistent with the company's Internet advertising industry and service market trends, to maintain steady growth over the next few years; 2 ) Version of the game with
the number gradually liberalized audit, while companies in the page travel, end travel direction gradually force, the Internet value-added services is expected to return to growth. 3 ) Star product
launched, intelligent hardware business is expected to achieve rapid growth. 4 ) The company gradually government and enterprise security business is expected to contribute revenue, and maintain high growth i
Core assumptions 2 : Companies invest in the field of network security technology, big data and artificial intelligence continues to increase, expected research and development costs will continue to grow rapidly
Core assumptions 3 : As reflected in scale and business synergies, the company's overall cost of sales rate and management fee rate is expected to be flat to down.
(B) profit forecast
Company as a "big security" strategy firm practitioner, in national security, urban security, home security field overall layout. At the same time, the company's government and enterprise business has
been fully operational, is expected to become a new growth pole strategy. Based on core assumptions, we expect the company 2019-2021 On his maternal net profit 55.21 Million 39.35
Million 45.11 Billion, corresponding to PE for 26 Times, 36 Times, 32 Times.
(C) valuation analysis
Valuation: Consider using part of the R & D costs will be added back to net income manner valuation. According to the company's current business system can be divided into the security
business and commercial operations, including security services including Internet security and government and enterprise security business, and commercial business services including Internet
advertising and Internet value-added services, intelligent hardware business. The company's revenue and profits from the commercial business, and major R & D investment to invest in the security
business, which resulted in a certain departure from the company's actual profits and therefore only as the basis for the valuation underestimates the real value of the company, may be considered 30%
R & D expenses added back to net income manner valuation.
2016-2018 Years, the amount of R & D investment 22.72 Million 24.17 Million 25.24 Billion, the proportion of total revenue, respectively 22.94% , 19.75% , 19.39% . We forecast 2019-2021 R & D
investment in the company were 28.47 Million 31.1 Million 34.95 Million, operating income remained at 20% . Considering the 30% R & D expenses added back, the profit situation corresponding to the
following table:
chart 27 Part of the R & D expenses After adding back net profit forecast
Unit: 100 million 2018A 2019E 2020E 2021E
His maternal net profit 35.35 55.21 39.35 45.10
R & D expenses 25.24 28.47 31.1 34.95
The effective tax rate 15.9% 15.9% 15.9% 15.9%
Add back ratio 30% 30% 30% 30%
R & D expenses added back 7.56 8.54 9.33 10.49
After adding back to net profit 42.91 63.75 48.68 55.59
source: Wind CRE Securities estimates
We choose Tencent, Baidu, Netease, Kingsoft, People as a comparable company, refer to the valuation of comparable companies, giving the company 2020 year 35 Time PE , Corresponding to a
market capitalization of target 1703.8 Billion (calculated after adding back to net income portion of R & D expenses), the target price 25.19 Yuan, initiate coverage with a "recommended" rating.
chart 28 The valuation of comparable companies (as of 2019.11.22 Closing)
EPS PE
company name Current price
2019E 2020E 2021E 2019E 2020E 2021E
Tencent Holdings 333.60 HKD 10.04 11.87 14.26 30 25 twenty one
Baidu 117.99 USD 19.28 49.16 67.74 61 twenty four 17
Netease 310.40 USD 3.49 3.32 3.76 25 26 twenty three
Kingsoft 17.86 HKD - 0.62 0.33 0.50 - 48 32
People 19.04 CNY 0.28 0.36 0.45 69 53 42
average value - - - 46 35 27
Source: Wind (comparable earnings forecast from wind consensus expectations)
V. Risk Warning
New business development less than expected; Internet advertising market downturn; tighter supervision of the gaming industry; increased competition
Appendix: Financial prediction table
Balance Sheet Income Statement
Unit: RMB million 2018 2019E 2020E 2021E Unit: RMB million 2018 2019E 2020E 2021E
Money funds 14,977 20,728 24,579 29,884 Operating income 13,129 13,366 15,173 17,477
bill receivable 0 0 0 0 Operating cost 3,998 4,277 4,567 5,391
accounts receivable 2,346 2,366 2,686 2,747 Taxes and surcharges 236 240 272 314
Prepayments 92 98 105 124 sales expense 2,034 1,978 2,200 2,534
stock 123 132 141 166 Management fees 838 829 941 1,084
Other current assets 1,019 1,007 1,158 1,359 Financial expenses - 345 --75 --104 --123
Total current assets 18,557 24,331 28,669 34,280 Impairment losses 97 39 43 60

Other long-term investments 3,788 3,288 3,088 2,888 Changes in fair value gains 0 0 0 0
Long-term equity investment 4,427 2,927 2,927 2,927 Investment income 413 3,307 496 595
Fixed assets 482 432 398 553 Other income 31 34 41 45
Construction in progress 237 357 597 447 operating profit 4,174 6,576 4,684 5,367
Intangible assets 339 325 304 317 Non-operating income 19 twenty two 30 39
Other non-current assets 1,518 1,505 1,499 1,508 Operating expenses 7 12 19 25
Total non-current assets 10,791 8,834 8,813 8,640 The total profit 4,186 6,586 4,695 5,381
Total assets 29,348 33,165 37,482 42,920 Income tax 678 1,047 747 855
short-term loan 0 0 0 0 Net profit 3,508 5,539 3,948 4,526
Notes payable 0 0 0 0 Minority interests --27 18 13 15
accounts payable 2,350 2,728 3,005 3,654 Net profit attributable to parent company 3,535 5,521 3,935 4,511
Advances from customers 588 598 679 782 NOPLAT 3,219 5,476 3,861 4,422
Other payables 1,027 1,047 1,047 1,047 EPS ( Diluted) (yuan) 0.52 0.82 0.58 0.67
Due within one year of non-current liabilities 18 18 18 18
Other current liabilities 918 911 1,110 1,337 Key financial ratios
Total current liabilities 4,901 5,302 5,859 6,838 2018 2019E 2020E 2021E
Long term loan 0.00 0.00 0.00 0.00 Ability to grow
Bonds payable 0.00 0.00 0.00 0.00 Revenue growth 7.3% 1.8% 13.5% 15.2%
Other non-current liabilities 168 157 157 157 EBIT growth rate - 5.7% 69.5% - 29.5% 14.5%
Total non-current liabilities 168 157 157 157 His maternal net profit growth 4.8% 56.2% - 28.7% 14.6%
Total Liabilities 5,069 5,459 6,016 6,995 Profitability
Equity attributable to equity holders 23,982 27,390 31,137 35,581 Gross margin 69.6% 68.0% 69.9% 69.2%
Minority interests 297 316 329 344 Net profit margin 26.7% 41.4% 26.0 percent 25.9%
Total shareholders' equity 24,279 27,706 31,466 35,925 ROE 14.6% 19.9% 12.5% 12.6%
Liabilities and shareholders' equity 29,348 33,165 37,482 42,920 ROIC 23.1% 29.6% 17.6% 17.0%
Solvency
Cash Flow Assets and liabilities 17.3% 16.5% 16.1% 16.3%
Unit: RMB million 2018 2019E 2020E 2021E Debt-equity ratio 0.8% 0.6% 0.6% 0.5%
Cash flow from operating activities 9,253 2,962 3,628 4,662 Current Ratio 378.6% 458.9% 489.3% 501.3%
Cash earnings 3,544 5,848 4,193 4,725 Quick ratio 376.1% 456.4% 486.9% 498.9%
Inventories impact --20 -9 -9 --25 Operating capacity
The impact of operating receivables -1 --66 --369 - 140 Total asset turnover 0.4 0.4 0.4 0.4
Operating cope with the effects 335 409 357 753 Accounts receivable turnover days 66 63 60 56
Other effects 5,395 - 3,220 --544 --650 Accounts payable turnover days 201 214 226 222
Cash flow from investing activities - 4,042 1,573 --327 - 150 Inventory turnover days 10 11 11 10
Capital expenditures --651 --440 --533 --341
(yuan)
Indicators per share
Equity Investment 102 - 1,500 0 0 Earnings per share 0.52 0.82 0.58 0.67
Other long-term assets change - 3,493 3,513 206 191 Cash flow from operations per share 1.37 0.44 0.54 0.69
Cash flow from financing activities --247 1,216 550 793 Net assets per share 3.55 4.05 4.60 5.26
Borrowings 4 0 0 0 Valratio
Dividends and interest payments --18 - 189 - 67 --77 P/E 40 26 36 32
Shareholders financing 0 0 0 0 P/B 6 5 5 4
Other effects --233 1,405 617 870 EV / EBITDA 34 twenty one 29 26
Source: Company announcements, CRE Securities estimates
Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number twenty one
Computer Groups Team
Leader, principal analyst: Chenbao Jian
Computing Linguistics Master of Tsinghua University. He worked at Guotai Junan Securities, Essence Securities. 2017 He joined CRE Securities Research Institute. 2015 In the new wealth of the best
analysts 2 Team members, 2016 In the new wealth of the best analysts 6 Team members.
Analyst: DENG aryl Cheng
Master of Huazhong University of Science. He worked at Changjiang Securities. 2017 He joined CRE Securities Research Institute.
Research Assistant: Liu Happy
Renmin University of China Management Masters. 2018 He joined CRE Securities Research Institute.
Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number twenty two
CRE Securities Institutional Sales Contacts
area Full name Post Office Phone E-mail
Zhang Yu Jie Director of Sales agency Beijing 010-66500809 zhangyujie@hcyjs.com
Du Boya Senior Sales Manager 010-66500827 duboya@hcyjs.com
Zhang Feifei Senior Sales Manager 010-66500817 zhangfeifei@hcyjs.com
Hou Chun Yu Sales Manager 010-63214670 houchunyu@hcyjs.com

Beijing Institutional Sales
Hou Bin Sales Manager 010-63214683 houbin@hcyjs.com
Too Yunlong Sales Manager 010-63214683 guoyunlong@hcyjs.com
Liu Yi Sales Manager 010-66500867 liuyi@hcyjs.com
Dana Sales Assistant 010-63214683 dana@hcyjs.com
Juan Assistant director, sales director of the Guangzhou-Shenzhen institutions 0755-82828570 zhangjuan@hcyjs.com
Wang Liyan Senior Sales Manager 0755-83715428 wangliyan@hcyjs.com
Luo Ying Yin Senior Sales Manager 0755-83479862 luoyingyin@hcyjs.com
Guangshen Institutional Sales Good news segment Sales Manager 0755-82756805 duanjiayin@hcyjs.com
Zhu research Sales Manager 0755-83024576 zhuyan@hcyjs.com
Flower Jie Sales Manager 0755-82871425 huajie@hcyjs.com
Green package Sales Assistant 0755-82756805 baoqingqing@hcyjs.com
Lucy Stone East China Regional Sales Director 021-20572588 shilu@hcyjs.com
Panya Qi Senior Sales Manager 021-20572559 panyaqi@hcyjs.com
Zhang Jiani Senior Sales Manager 021-20572585 zhangjiani@hcyjs.com
He Yiyun Sales Manager 021-20572591 heyiyun@hcyjs.com
Ke either Sales Manager 021-20572590 keren@hcyjs.com
Jiang Yu Sales Manager 021-20572509 jiangyu@hcyjs.com

Shanghai Institutional Sales
Shen Ying Sales Manager 021-20572581 shenying@hcyjs.com
Wu Jun Sales Manager 021-20572506 wujun1@hcyjs.com
Bamboo Dong Xin Sales Manager 021-20572582 dongxinzhu@hcyjs.com
Wang Ziyang Sales Manager 021-20572559 wangziyang@hcyjs.com
Shi Jiawei Sales Assistant 021-20572548 shijiawei@hcyjs.com
Wang Liqiong Sales Assistant wangliqiong@hcyjs.com
Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number twenty three
CRE industry investment rating system (the benchmark index in Shanghai 300)
Company Investment Rating:
Strong push: expected future 6 Beyond the benchmark index within months 20% Above; Recommended:
expected future 6 Beyond the benchmark index within months 10% - 20% ; Neutral: Expected Future 6 Relative
change in the benchmark index within the range of months - 10% - 10% Between; avoid: expected future 6 Relative
benchmark index dropped within months 10% - 20% between.
Industry Investment Rating:
Recommended: expected future 3-6 The sector index rose more than the benchmark index within months 5% Above;
Neutral: Expected Future 3-6 Within months, the industry index fluctuation range relative to the reference index - 5% - 5% ;
Avoid: expected future 3-6 The industry index fell more than the benchmark index within months 5% the above.
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Any suggestions and opinions in this analyst report on the subject securities or issuers are published accurately reflect his or her individual securities or issuers opinions and judgments; any other brokerage analysts
issued all possible similar study does not assume any responsibility for possible direct or indirect.
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on the day of publication of this report. At different periods, the Company may issue the information contained in this report, opinions and estimates of the report. The Company fulfills its duty of disclosure within its sphere of knowled
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CRE Securities Research Institute
Beijing headquarters Guangshen Division Shanghai branch
Address: Xicheng District, Beijing Jin even Square Street 26 number Address: Futian District, Shenzhen Xiangmei Road 1061 number Address: Shanghai Pudong Yincheng Road 200 number
Hang Olympic Center C seat 3A CIC International Business Center A seat 19 House Bank of China Tower 3402 Zip
Zip Code: 100033 Zip Code: 518034 Code: 200120
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Audit Commission CRE securities investment consulting business qualification approval number: Commission license ( 2009 ) 1210 number twenty four

三六零（601360）深度研究报告：乘"大安全"之舰，展鸿鹄之志 zh-cN en

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三六零（601360）深度研究报告：乘"大安全"之舰，展鸿鹄之志 zh-cN en

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Company Research

Equity Research 2019 year 11 month twenty four day

Three hundred and sixty ( 601 360 ) Deep Research Report

Target price: 25.19 yuan

development. Securities analyst: Deng Fang Cheng

Key Financial Indicators

2018 2019E 2020E 2021E

Main income (in millions) 13,129 13,366 15,173 17,477

Fourth, investment advice .................................................. .................................................. .................................................. ..................... 19

(A) core assumptions .................................................. .................................................. .................................................. ......... 19

(B) profit forecast .................................................. .................................................. .................................................. ......... 19

(C) valuation analysis .................................................. .................................................. .................................................. ......... 19

V. Risk Warning .................................................. .................................................. .................................................. ..................... 20

chart 2 Three hundred sixty Internet ecosystem .................................................. .................................................. ......................................... 4

chart 3 Three hundred sixty shareholding structure .................................................. .................................................. ................................................. 5

chart 13 Three hundred sixty margin changes .................................................. .................................................. ..................................... 12

market entered a new development journey.

chart 1 Three hundred sixty overview of the development process

Source: Company's official website, CRE securities finishing

chart 2 Three hundred sixty Internet ecosystem

Source: Company announcements, CRE securities

chart 3 Three hundred sixty shareholding structure

Source: Company announcements, CRE securities finishing

chart 4360 Security brain - Distributed Intelligent ecological security system

① National security field

② Urban areas of security

③ Home security field

(B) technology, data, brands and talent to build a development cornerstone

chart 52019 In Microsoft TOP100 Security contributions list

Source: Company's official website

great security "brand strategy to lay the foundation.

chart 6 Three hundred sixty business model

Source: Company websites, CRE securities

profitable, and ultimately the company's sustainable development.

• Internet advertising and services

chart 7 Three hundred sixty and Internet advertising services business

Source: Company websites, CRE securities finishing

• Internet value-added services

chart 8 Three hundred sixty Internet value-added services business

Source: Company websites, CRE securities finishing

• IoT Things security products and services

Source: Company websites, CRE securities finishing

source: Wind CRE Securities source: Wind CRE Securities

chart 12 Three hundred sixty constituted the main business income

Year 2014 2015 2016 2017 2018

source: Wind CRE Securities

Costs (million) during the The proportion of total revenue

source: Wind CRE Securities source: Wind CRE Securities

105.3% 104.3% 101.0% 110.0% 200.0%

050100150200 90.0% 0204060 0.0%

Sales of goods and services received in cash ($ billion) / Operating income

source: Wind CRE Securities source: Wind CRE Securities

(One hundred million U.S.2011

chart 18 Our network security industry development policy support

time department file content

of cyberspace sovereignty, resolutely safeguard national security, protection of critical information

protection, strengthening international cooperation in cyberspace 9 Aspects

time department file content

"Public safety video surveillance

"Information security technology to

protect the basic level of network

national standards committee network security protection era"

requirements", "information security