Key takeaway

In 1Q26, the company recorded revenue of RMB1.627bn (+28.91% YoY). This was mainly due to smooth price transmission in the cloud computing business. While upstream prices continued to rise, the company effectively mitigated the pressure from higher server hardware costs. The share of revenue from the cloud business further increased. Net profit attributable to shareholders of the parent company reached -RMB65mn, a significant loss reduction of RMB185mn compared with the same period last year (+74.16% YoY). As a leading domestic provider of cybersecurity and cloud computing, the company is accelerating the development of its AI and Agent business expansion These new businesses will continue to drive future revenue growth. The company’s operating revenue for 2026–2028 is forecast to reach RMB9.221bn/RMB10.631bn/RMB12.239bn, representing YoY growth of 14.65%/15.29%/15.13%. Net profit attributable to shareholders of the parent company is expected to reach RMB534mn/RMB789mn/RMB1.121bn, representing YoY growth of 36.03%/47.70%/41.99%. Corresponding PE is 96x/65x/46x. We maintain “buy” rating on the company.

Event

The company releases the 1Q26 report. In 1Q26, the company achieved total operating revenue of RMB1.627bn (+28.91% YoY); net profit attributable to shareholders of the parent company of -RMB65mn (+74.16% YoY); and net profit attributable to shareholders of the parent company after deducting non-recurring items of -RMB81mn (+69.11% YoY).

Quick take

Revenue achieves high growth, and losses narrow significantly, marking the best first-quarter performance in the past five years. In 1Q26, the company recorded revenue of RMB1.627bn (+28.91% YoY). This was mainly driven by smooth price transmission in the cloud computing business. While upstream prices continued to rise, the company effectively offset the pressure from rising server hardware costs. The revenue share of the cloud business further increased; meanwhile, cybersecurity, basic network, and IoT businesses have all returned to a growth trajectory. Net profit attributable to shareholders of the parent company was -RMB65mn, a substantial loss reduction of RMB185mn compared with the same period last year (+74.16% YoY). The company demonstrated strong cost control and improvement in workforce efficiency. The ratios of selling expense/administrative expense/R&D expense declined significantly by 8.50/1.84/7.94pcts respectively. The scale effect of operating revenue has begun to materialize, and profit elasticity has started to emerge.

Excellent cash collection quality: Over RMB10bn cash reserves support the implementation of the AI strategy. In Q1, sales cash collection reached RMB2.155bn (+42.43% YoY). The growth rate of cash collection far exceeded revenue growth. The increase in advance receipts highlights strong downstream demand and highquality orders. Net operating cash flow was -RMB1.18bn. This was mainly due to strategic inventory stocking to ensure supply chain security (cash paid for goods purchased reached RMB1.711bn, +120% YoY) and the payment of 2025 annual bonuses. The company’s overall cash reserves currently exceed RMB10bn, which will provide the most solid underlying support for the company to ride through cycles and to position itself in the new AI and Agent tracks.

Major launch of production-grade AI products, building a full-lifecycle moat for Agent covering “build– host–protect”. In response to the explosive growth of Agents and the trend of enterprise self-build, the company launched a series of new products: 1) build layer: launched the low-code Agent development platform SF-FastGPT and the commercial version of the AI Coding platform CoStrict; 2) hosting layer: released an AI computing power gateway and an Agent hosting solution, enabling efficient scheduling of multiple models and computing power. Meanwhile, addressing security pain points in enterprise AI implementation, the company innovatively launched the AgentSpace invisible sandbox and an AI application security solution, enabling refined management of Agent permissions and prevention of data leakage, ensuring AI assets are “visible, controllable, and manageable”.

Investment strategy:As a leading domestic vendor in cybersecurity and cloud computing, the company is accelerating the improvement of its AI and Agent business expansion, and the new businesses will continue to drive future revenue growth. The company’s operating revenue for 2026–2028 is forecast to reach RMB9.221bn/RMB10.631bn/RMB12.239bn, representing YoY growth of 14.65%/15.29%/15.13%. Net profit attributable to shareholders of the parent company is expected to reach RMB534mn/RMB789mn/RMB1.121bn, representing YoY growth of 36.03%/47.70%/41.99%. Corresponding PE is 96x/65x/46x. We maintain “buy” rating on the company.

Risks

(1) Risk of slower-than-expected recovery in cybersecurity demand and government and enterprise IT spending: The cybersecurity business has been under continuous pressure. If budgets of government and enterprise clients continue to tighten or the localization innovation initiative progresses more slowly than expected, the recovery of cybersecurity revenue will be dragged down; (2) Risk of pressure on the gross margin of the cloud computing business: The cloud business has surpassed cybersecurity to become the largest revenue source, but the hardware proportion is relatively high. If server prices fluctuate significantly or large clients increase self -build efforts, gross margin may decline; (3) Risk that commercialization of AI products falls short of expectations: The company continues to invest in the AICP computing power platform and Security GPT. If enterprise-side penetration rises slowly or competitors move ahead with earlier deployment, growth of new businesses will be affected; (4) Risk that high expenses lead to slower-than-expected profit recovery: R&D and selling expense ratios remain high. If cost reduction and efficiency improvement progress slower than expected, the annual overall profitability target may fail to be achieved.