on August 31, 2023, the mountain stone network department (688030) announced that the company would accept institutional research on August 29, 2023, CICC, Shanghai Bexiong Investment Management Co., Ltd., Ping An Securities Co., Ltd., Changjiang Securities, Anxin Fund Management Co., Ltd., Huabao Trust and Investment Co., Ltd., Shanghai Yingxiang Asset Management Co., Ltd.-Shanghai Yingxiang Zhongyouxiang No. 5 Private Equity Securities Investment Fund, Founder Securities Co., Ltd., Sequoia Capital, CCB Life Insurance Co., Ltd., CITIC Securities Co., Ltd., Guoxin Securities, Yinhua Fund Management Co., Ltd. Shanghai Dehui Group Co., Ltd., Moqi Investment, Shenzhen Shangcheng Asset Management Co., Ltd., Hongde Fund Management Co., Ltd., CITIC Construction Investment, Yuanhao Capital, Guanfu (Beijing) Asset Management Co., Ltd., Shenzhen Zhongtian Huifu Fund Management Co., Ltd., Haitong International, Industrial Securities, Zhongyuan Securities Co., Ltd., Shanghai Niuhu Asset Management Co., Ltd., Huaxia Jiuying Asset Management Co., Ltd., Xinhua Fund Management Co., Ltd. Company, Huitianfu Fund Management Co., Ltd., Beijing Hongdao Investment Management Co., Ltd. participated.

The details are as follows:

Q: The company's revenue and gross profit margin declined in the first half of the year. What are the main reasons? Will it pick up in the second half of the year?

A: during the reporting period, the company's operating performance decreased compared with the same period, mainly related to the pace of the company's strategic planning. In order to improve operational efficiency, the company focused on the structural adjustment and optimization of the sales system in the first half of the year, revised the relevant assessment system and formulated new channel policies. The adjustment of the marketing system structure will bring about a period of pain, which is within the expectations of the company's management, but in order to achieve quality growth, the company needs to make relevant adjustments. At present, the company's marketing system has basically formed a "four departments and one center" sales organization, the marketing system structure has been basically formed, and the follow-up will continue to be optimized.

In the first half of the year, the company has made breakthroughs in benchmarking projects in some key industries and users such as head banks, cloud manufacturers and rail transit. In order to narrow the competitive gap with friends and expand the revenue growth path, the company will gradually enrich the revenue structure, on the basis of the traditional product sales model, the scope of business to expand to security services, security consulting, integrated delivery and other diversified types to meet the diverse needs of downstream customers. Therefore, with the gradual enrichment of business types, the gross profit margin will be affected to a certain extent, but the overall scale effect of the company is expected to gradually appear.

In addition, the operating net cash flow in the first half of the year was positive, and the per capita output of sales increased compared with the same period last year. The improvement of these two key indicators confirms that the company's adjustment route is correct. In the short term, the adjustment will affect the current market development to a certain extent, but it will lay the foundation for sustained and healthy development in the medium and long term. As mentioned in the company's previous exchanges, the company is experiencing the process of management refinement, human efficiency improvement, and performance restoration. It needs a certain amount of time to adjust and run-in, mainly to lay a good foundation, prepare, and achieve quality growth.

To sum up, the adjustment period is over, and the cooperation between all parties tends to be mature. The company is confident that the annual revenue will achieve rapid growth in 2023. At the same time, it will continue to attach importance to the tracking and management of indicators such as payment and human efficiency, so as to achieve the healthy development goal of cost control and efficiency increase.

Q: Has the company completed the adjustment of the marketing system? What are the respective positioning of the "four departments and one center" and the business development goals of this year?

A: At present, the company's marketing system structure has basically taken shape. In the first half of the year, the company defined the business structure of "four departments and one center", which are

(1) the major customer department in China mainly focuses on the expansion of key head customers, such as finance and other fields, so as to further increase the market share in key areas;(2) China's regional sales department will highlight the coverage of key areas; at present, the mountain and stone network department has covered most of the domestic areas, and will strengthen the layout of key areas, such as Suzhou, Guangzhou, Shenzhen, etc.;(3) overseas business department, overseas business is the highlight of the company. At present, the company's planning for overseas business department is to further highlight its competitiveness in advantageous regions, such as Latin America. The second is to lay out the opportunities for credit creation in Hong Kong and Macao. The third is to adopt diversified business models, such as OEM, to reduce the cost of market development for other market gaps. (4) renewal business department, by providing end-users with post-renewal services, the company's product renewal rate will be gradually improved;(5) Solution marketing center, mainly to export the company's overall technical and solution capabilities to the front end, with priority currently focused on the expansion of the energy industry.

In addition, marketing structure is a process of continuous optimization. At present, the company has seen initial improvements in business opportunity management, payment, and sales effectiveness. Next, it will continue to build a marketing culture that unifies language, goals, and behaviors, and continuously optimizes production relations to improve internal productivity.

Q: The company currently attaches great importance to Xinchuang's strategy. What is the layout and sales scale in the first half of the year?

A: As stated in the company's semi-annual report, Xinchuang's strategy is one of the company's four tough battles this year. When Xinchuang showed a definite trend, Shanshi Netcom had already started its early investment and layout. Beginning in 2023, the company will invest more intensively in Xincheng. In terms of Xincheng products, the company has launched 7 Xincheng products in the first half of the year as planned, and the company plans to continue to launch 26 Xincheng products in 2023, involving 16 categories. In terms of Xinchuang ecology, the company has signed strategic cooperation agreements with domestic basic software and hardware manufacturers such as Tongxin, Godson and Haguang, and has launched cooperation with many upstream manufacturers in the field of Xinchuang in various aspects such as product solutions, compatibility adaptation, talent cooperation and safety protection cooperation, and strengthened the cooperation stickiness through the establishment of joint laboratories and adaptation centers. In the first half of the year, the company's sales revenue of Xinchuang increased by more than 60% year-on-year. The company's products and ecological layout in Xinchuang are confident to meet the market demand of Xinchuang. After the successful development and application of SIC chips, the company's domestic products will have more differentiated competitive advantages in Xinchuang market.

Q: How is the company's security chip progressing?

A: At present, the company's security chip strategy is progressing as planned. In 2022, the company completed the research and development of the FPG phase and launched FPG-related products, which received good market feedback. Based on the application of FPG chip technology, the company conducts research and development of SIC chip technology and plans 22 firewall products equipped with SIC chips. It is expected that by the end of 2023, the company will launch the first streaming of SIC chip technology, while the firewall platform for SIC chips will be developed simultaneously. If the first stream is successful, the company is expected to launch a firewall product containing self-developed SIC chip technology in 2024. Overall, the company's self-developed ISC chip-based firewall will provide greater port capacity and higher performance advantages, while the company's self-developed self-controlled security chip technology will further enhance the reliability of the company's supply chain.

Q: How does the company cooperate with Digital China's business at present and what changes have taken place in the original channel system?

Answer: At present, external macroeconomic pressures still exist; for Shanshi, it is in the stage of internal innovation, especially the in-depth optimization of the channel system. In the first half of the year, after many discussions with channel partners and learning from the excellent experience of friends, the company issued new channel management, assessment and incentive policies, and proposed a channel whitelist system. The new channel management policy reduces the order level, optimizes the reporting of business opportunities, and makes the responsibilities and rights of the channel equal. It is a standardized and systematic transformation of the channel system, and the company provides empowerment and support to the channel, thereby enhancing the channel's confidence and cooperation in the Mountain Stone Network Branch and mobilizing the productivity of the channel.

At present, the business cooperation between the company and Digital China mainly focuses on key industries and important regions, and gives full play to their respective resource advantages. For example, in the financial industry, it will further leverage the high-quality customer resources of both parties and increase the market share of Shanshi Netcom in the financial industry; for example, in Beijing, Northeast, Southwest and other regions, it will give full play to its complementary capabilities and release the product potential of Shanshi Netcom. Mobilize the business opportunities about network security business discovered by the Digital China regional sales team, and bring more business growth opportunities and market coverage to Shanshi.

q: is there any layout of the mountain network department regarding technologies such as AI and GPT large models?

Answer: Regarding I technology, for network security companies, from the perspective of attack, the development of I technology has brought more diversified attack methods and security threats; from the perspective of security protection, the application of I technology At present, it can be seen that it has an obvious promotion effect in replacing part of labor and improving the efficiency of security operation and maintenance. Security is the process of attack and defense game, the existing network security products of the Stone Network Branch have applied I and machine learning technology to continuously improve the security detection and threat analysis capabilities. With the introduction of ChatGPT and other IGC services and models at the beginning of this year, considering the huge investment in computing power and data, Shanshi Network will not generate LLM large models by itself for the time being, but will use the existing large models and apply the understanding and analysis capabilities of large models to the construction of product safety capabilities as soon as possible by means of "pre-training + fine-tuning" and "feedback learning. For example, in XDR-related systems, massive log information is directly analyzed to find potential threat behaviors. Through natural language interaction, alarms, details, solutions and mitigation measures are proposed to reduce the investment of experts, improve threat detection efficiency and provide users with sustainable security operation capabilities.

Mountain Network Branch (688030) main business: production and research and development of software and hardware products in the field of network security.

the company's main revenue was 0.373 billion yuan, down 2.94 percent from the same period last year, according to the 2023 report of Shanshi Network Branch. Net profit attributable to the parent -0.112 billion yuan, down 45.89 percent from the same period last year; Deduct non-net profit -0.118 billion yuan, down 38.55 percent from the same period last year; In the second quarter of 2023, the company's single-quarter main revenue was 0.229 billion yuan, down 4.65 percent from the same period last year; non-net profit was deducted in a single quarter -25.7541 million yuan, down 177.5 year on year. Debt ratio 36.54, investment income 665800 yuan, financial expenses 4.8665 million yuan, gross profit margin 60.96.

The stock has a total of 1 agency rating and 1 buy rating in the last 90 days; the average agency target price in the past 90 days is 28.92.

The following is detailed earnings forecast information:

Margin trading data show that the net outflow of financing of the stock in the past three months has 12.5405 million, and the financing balance has decreased; the net inflow of securities has 0.0, and the balance of securities has increased.

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