Core Viewpoint - The report outlines the ongoing supervision of Sanwei Xinan Technology Co., Ltd. by Guotai Haitong Securities Co., Ltd. as the sponsor, highlighting the company's financial performance, risks, and competitive advantages in the commercial password industry [1][2]. Continuous Supervision Work - Guotai Haitong Securities is responsible for the continuous supervision of Sanwei Xinan post-listing, with no significant issues reported [2]. Major Risk Factors - **Technological Upgrade Risk**: The company faces risks related to the rapid evolution of cryptographic technologies, including quantum computing, which could impact its competitive edge if it fails to keep pace with industry developments [3]. - **Core Technology Leakage Risk**: Despite confidentiality agreements with key personnel, there remains a risk of core technology leakage due to potential mismanagement or collaboration with suppliers and clients [4]. - **Intensified Market Competition Risk**: The commercial password industry in China has over 1,200 companies, leading to increased competition as the market grows due to government support [5]. - **Market Space Squeeze Risk**: Some downstream partners may expand into the upstream password board card market, potentially reducing the company's market share [6]. - **Seasonal Business Fluctuation Risk**: The company's revenue and profit are unevenly distributed throughout the year, with a significant portion occurring in the second half, particularly in Q4 [7]. Major Financial Indicators - In the first half of 2025, the company's revenue was CNY 195 million, a year-on-year increase of 15.19%, attributed to the consolidation of Jiangnan Tianan and growth in the energy and transportation sectors [9]. - The total profit and net profit attributable to shareholders saw significant declines, with decreases of 555.34% and 314.35% respectively, primarily due to increased R&D investments and project delays [10]. - R&D expenses accounted for 40.34% of revenue, up from 31.27% the previous year, reflecting the company's commitment to innovation [11]. Core Competitiveness - **Leading Technology and Personnel Advantage**: The company has developed several industry-leading products and holds numerous patents, with a strong R&D team comprising 43.15% of its workforce [12]. - **Comprehensive Product System**: The company has established a complete product system for commercial password technology, including self-developed chips and various product lines [13]. - **Quality Customer Base**: The company has built a strong reputation across multiple sectors, including government and finance, ensuring robust market presence [14]. - **First-Mover Advantage in New Fields**: The company is a pioneer in applying password technology in emerging fields like cloud computing and blockchain, actively participating in standard-setting [15][16]. R&D Expenditure and Progress - R&D expenses increased by 48.61% year-on-year, driven by talent acquisition and the acquisition of Jiangnan Tianan [18]. - The company applied for 60 intellectual property rights in the first half of 2025, including 16 invention patents, demonstrating its ongoing commitment to innovation [18]. Use of Raised Funds - As of June 30, 2025, the company has complied with regulations regarding the use of raised funds, with no violations reported [19][20].

Investment Rating - The investment rating for the company is "Buy-A" with a target price of 57.83 CNY over the next six months [5]. Core Insights - The recent release of the "Key Information Infrastructure Commercial Password Usage Management Regulations" is expected to significantly promote the password industry, clarifying regulatory responsibilities, establishing reporting timelines, and ensuring funding for security assessments [2][3]. - The company has a comprehensive range of password products from chips to complete systems, positioning it to benefit from the anticipated growth in industry demand driven by new regulations [3]. - The company is actively developing quantum-resistant password products and engaging in stablecoin-related businesses, which are seen as critical areas for future growth [4][10]. Summary by Sections Regulatory Impact - The new regulations clarify the roles of various regulatory bodies, which is expected to accelerate the development and penetration of the password industry [2]. - A specific reporting deadline for operators to report on the use and security assessments of commercial passwords is established, promoting regular evaluations and driving product sales [2]. - Financial support for security assessments is mandated, which is crucial for enhancing demand for related products [2]. Company Positioning - The company has launched several pioneering products in the password security space, including the first domestic security level three password card and machine, as well as the "SansecHSM" [3]. - The successful mass production of the self-developed password security chip XS100 and the certification of various IoT-specific chips indicate the company's strong product pipeline [3]. Future Growth Areas - The company has developed a full suite of quantum-resistant password products and is involved in pilot applications across various sectors, including finance and telecommunications [4][9]. - The company is also focusing on stablecoin applications, recognizing the importance of password technology in supporting digital currencies for cross-border payments [9][10]. - Revenue projections for the company indicate significant growth, with expected revenues of 6.65 billion CNY in 2025, increasing to 9.05 billion CNY by 2027 [10].