Group 1 - The year 2025 is anticipated to be a turning point for AI application, driven by large models, leading to new creativity across various industries [1] - Despite the increasing total data production, the growth rate of the data security market has not been ideal, with a predicted surge in demand as the risks associated with data loss become more pronounced [1][5] - The report from the National Data Resource Survey (2024) indicates that the annual data production in China will reach 41.06 zettabytes (ZB), a 25% year-on-year increase [5] Group 2 - "Small data security" is emerging as a core focus in the digital economy, where AI models can refine large datasets into high-value, concentrated "small data" [3] - The integration of large models into critical sectors like smart cities and industrial control systems poses significant risks, as unprotected models can lead to widespread operational failures [4] - Over-reliance on AI for decision-making can create a "butterfly effect," where errors in model outputs can have cascading consequences [4] Group 3 - The current state of the data security market is characterized by a lack of urgency in investment, as companies often only react to data breaches rather than proactively securing their data [5][6] - The shift towards high-density "small data" will necessitate increased investment in data security, as the consequences of data loss become more severe [5][6] - The network security industry is expected to see new growth opportunities due to the complexities introduced by AI and emerging business scenarios [6] Group 4 - The "vehicle-road-cloud integration" development path is recognized as a key infrastructure for the future, with significant market potential as government policies support investment in this area [7] - Ensuring data security compliance in this sector is crucial for maintaining traffic order and public safety [7]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 176.60 [7][4]. Core Insights - The company achieved revenue of RMB 2.4 billion in Q1 2025, representing a year-over-year increase of 50.76% and a quarter-over-quarter decrease of 20.67%. The net profit attributable to the parent company was RMB 506 million, up 75.33% year-over-year and up 24.83% quarter-over-quarter [1][2]. - The overall gross margin remained stable at 61.19% in Q1 2025, with R&D expenses as a percentage of revenue decreasing by 9.44 percentage points year-over-year, indicating improved profitability [1][2]. - The company's contract liabilities increased significantly, reflecting strong demand for its products, with contract liabilities rising by RMB 2.334 billion to RMB 3.237 billion as of March 31 [2][3]. Summary by Sections Q1 2025 Review - The company reported a strong revenue growth driven by CPU and DCU products, with a gross margin of 61.19%, showing stability despite a slight year-over-year decline of 1.68 percentage points [2]. - The supply chain remained stable, with prepayments increasing to RMB 1.62 billion and inventory rising to RMB 5.794 billion compared to the end of 2024 [2]. - Cash flow from operating activities was RMB 2.522 billion, with total cash and cash equivalents reaching RMB 10.369 billion, indicating robust cash generation capabilities [2]. 2025 Outlook - The company is expected to achieve a revenue growth of 60% in 2025, driven by accelerated domestic substitution of foreign products and strong demand for AI chips [3]. - The new generation of DCU products is anticipated to perform well, with successful adaptations to mainstream models [3]. Investment Recommendations - The report projects revenues of RMB 14.663 billion, RMB 22.049 billion, and RMB 25.406 billion for 2025, 2026, and 2027 respectively, with net profit estimates of RMB 3.624 billion, RMB 5.700 billion, and RMB 6.576 billion [4][6]. - The target price of RMB 176.60 is based on a 28x price-to-sales ratio for 2025, reflecting the company's strong market position and growth potential [4].