AsiaInfo Security: Inheriting the genes of network construction, fulfilling the responsibility of protecting the network, and escorting the interconnection of industries. 1) Since its establishment in 2014, AsiaInfo Security has focused on the field of network security, and has become an industry leader with the unique advantages of "understanding the network, understanding the cloud, and understanding security". In terms of business structure, identity security and cloud-network-edge security have built the company's core business. Through the acquisition of Trend Micro China and Xiamen Service Cloud Information, the company further strengthened its competitiveness in the field of cloud security and endpoint security, and promoted the growth of cloud security and identity security. 2) In terms of equity structure, the company's equity is stable, and the founding team maintains close cooperation with key enterprises in the industry. 3) In terms of finance, the company's revenue increased steadily from 2019 to 2023, the gross profit margin began to recover from 2023, and the performance in the first half of 2024 showed a significant recovery trend. The company continues to increase R&D investment in core technology fields, enhances market competitiveness, and gradually improves marketing efficiency through the promotion of standardized products and safety services, and its profitability is expected to be further enhanced in the future.

Network security: The cornerstone business space is broad, and the advantages of identity authentication + terminal security are obvious. 1) The improvement of laws and regulations has provided a solid foundation for the development of the cybersecurity industry, such as the Cybersecurity Law and the Data Security Law, and other policies have promoted the standardization and technological upgrading of the industry. 2) AsiaInfo Security has outstanding performance in cloud security, identity security, endpoint security and advanced threat detection, and has further expanded its technology and product capabilities in the cloud security and endpoint security markets through multiple mergers and acquisitions. The company has long occupied the first place in the identity security and digital trust market, and continues to improve its core competitiveness with the AISDSOP data security operation platform and AISIAM identity management system. At the same time, continuous investment in endpoint security and cloud security has enabled the company to maintain a leading position in the domestic market. With the rapid development of 5G, artificial intelligence, cloud computing and other technologies, AsiaInfo Security has contributed to the development of the digital economy through technological innovation and product upgrades.

Acquisition of AsiaInfo Technology: Joining forces to jointly cultivate the digital economy market. AsiaInfo Security announced the acquisition of a stake in AsiaInfo, and the two parties will carry out in-depth cooperation in the fields of cybersecurity, 5G, cloud computing, etc., and jointly provide comprehensive solutions for digital transformation and data security, so as to further enhance market competitiveness and promote long-term development.

Build a three-dimensional security network of sky net + ground network + terminal, and build a second growth curve. 1) Skynet security: Forward-looking layout of satellite Internet. As an application of the combination of space technology and communication technology, the satellite Internet has broad market prospects. With its advantages in the field of network security, AsiaInfo Security exclusively won the bid for the consulting service project of Shanghai Yuanxin Satellite Technology to help the implementation of the satellite Internet project. 2) Ground network security: Join hands with NWCD to escort the security of computing power network. NWCD provides AI computing clusters and launches the Danmo Intelligent Computing Platform to accelerate AsiaInfo Security's creation of AI security products and build a computing power ecosystem. 3) Terminal security: Escort the security of the Internet of Vehicles, and be selected into the pilot list. AsiaInfo Security participated in the pilot project of secure communication of the Internet of Vehicles and launched the "Zero Trust Strategy" to deal with the complex cyber security threats of the Internet of Vehicles.

Earnings Forecast, Valuation and Investment Rating: It is estimated that the company's net profit attributable to the parent company in 2024-2026 will be -1/111/213 million yuan respectively, and the corresponding PE in 2025-2026 will be 60.0x/31.2x respectively based on the closing price on October 15, 2024.

The company focuses on cyberspace security, covering many key industries such as telecommunications and finance, and actively explores the growth curve in the three-dimensional security network of sky net + ground network + terminal; In addition, the company is promoting a major asset restructuring with AsiaInfo, which is expected to bring revenue and profit improvement to the company after the completion of the asset restructuring. First coverage, with a "buy" rating.

Risk Warning: Macroeconomic fluctuations; policy change risk; market demand is less than expected; technology iteration and innovation; intensified competition in the market; There is a risk that publicly available information used in research reports may be delayed or not updated in a timely manner.