The market value of 360 has evaporated by 390 billion in four years. Can government and enterprise security save lives?

Source: Snowball App, Author: Master of Ming University, (https://xueqiu.com/8959134488/227213228)

#Monthly Research Reference##360周红玎##2022 Mid-Year InvestmentAlchemy Season#

360 Zhou Hongyi, known as the "red-clothed cannon", once again made a surprising statement, shouting "Microsoft steals and plagiarizes 360", which has attracted widespread attention in the industry.At the beginning of 360's return to A shares, investors were still full of confidence in it. Today, it released a performance forecast for the first semi-annual report estimated loss since returning to A shares.The company's stock price trend has broken the market value before the 360 ​​backdoor Jiangnan Jiajie, and the reasons are worth pondering.

Since the A-share listing in 2018, under the influence of "Internet anti-monopoly" and "rectification of pop-up advertisements", 360's "Internet advertising and services" and "Internet value-added services" businesses, which accounted for a large proportion of the original revenue, have appeared.declined to varying degrees.

After 2019, 360 shouted to embrace the B side.In recent years, domestic organs and units have carried out the work of "encore substitution", requiring computers, printers and other equipment terminals to be replaced by domestic brands.The official document circulation system is the top priority of "network security". Government agencies and units will prohibit the circulation of documents outside the office system, and the share of the official document sending and receiving system is gradually concentrated.360, which has seen weak growth in multiple business lines, seems to have seen an opportunity to switch tracks and start the All in G-end business.

$360(SH601360)$'s 2021 annual report shows that the company's customers cover 90% of central ministries and commissions and 80% of central enterprises.

There are as many as 2,000 new contracted customers from local governments and important industries.

From a purely statistical point of view: In 2019, the company's G-end business revenue was 473 million yuan.In 2021, the company's G-end business revenue will reach 1.381 billion, which seems to have a good growth momentum.

But it is worth noting that the company's net profit has fallen from 5.95 billion yuan in the same period in 2019 to 840 million yuan in 2021.On July 14, 360 announced again that the net profit attributable to the parent in the first half of 2022 will be about -518 million to -348 million.After deducting non-net profit, the loss was even more, ranging from -629 million to -454 million.Since a SaaS cloud security company needs to accumulate a certain amount of customers to make a profit, 360 needs to pay a higher price to overtake a corner in the case of late entry.We can see that the company's sales expenses have grown rapidly in recent years.At the same time, the company that takes the lead in the government and enterprise security business will also have the advantage of customer stickiness. At present, in the G-end business, 360 is still in a state of "unacceptable".

In the "Government and Enterprise Security and Other Revenue" business column, the revenue is 1.380 billion yuan, but the revenue of 360 Digital Security Technology Group, which belongs to the security business, is only 721 million yuan. In other words, the remainingThe revenue of more than 600 million yuan is classified as "other income", not in the income of the security business.Putting these two together, the reason for this is really doubtful.

（Data from $Sangfor(SZ300454)$ 2021 Annual Report)

And companies in the same industry will explain more clearly, $Qianxin-U(SH688561)$ In 2021, the operating income will be about 5.809 billion yuan, of which Information security industry accounts for 99.52%.Sangfor's network security business revenue in 2021 will be approximately 3.689 billion yuan; cloud computing and IT infrastructure business revenue will be approximately 2.379 billion yuan.Venity Star will achieve operating income of 4.386 billion yuan in 2021. Safety products are the main source of the company's operating income, accounting for 66.73% of the operating income in 2021. During the period, the operating income will be 2.927 billion yuan.Security operations and services achieved operating income of 1.432 billion yuan, accounting for 32.65% of operating income.

360 Compared with the above companies, the government and enterprise security business is relatively small in terms of revenue and proportion.Judging from the company's statement that it "covers 90% of central ministries and commissions and 80% of central enterprises", there is some suspicion of exaggeration.

Now, 360 has put forward the strategy of "going to the mountains and going to the sea" to support small, medium and micro enterprises, and is ready to open digital security capabilities to small, medium and micro enterprises for free.However, the biggest anxiety of small, medium and micro enterprises is "profit". During the free use period, the short-term growth rate of users may be good, but how to persuade small, medium and micro enterprises to pay in the long run is still a big mountain in front of 360's profitability.After all, Weimob and Youzan, which originally focused on SaaS service providers for small and medium-sized enterprises, have all started to take the "big customer" route after losing money for years!

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