September 14, 2019

Three hundred and sixty (601360.SH)

The layout of government and enterprise security market, is expected to bring new growth point

- - Three hundred and sixty (601360.SH) Initial Coverage Report

Company News

◆ Free Internet security pioneer, technology, brand and data have obvious advantages:
Overweight (first)
Three hundred sixty founded in 2005 , Is the initiator of free Internet security. The company has launched
Current price / TP: 25.88 / 28.16 yuan
360 a security guard, 360 Phone security guards, 360 Antivirus and other security products, and free of charge to hundreds of

millions of Internet users, has accumulated a broad user base. Up 2018 year 12 Month, the company PC
Analyst
Security products market penetration 96.98% , Ranked first in the security market for many years, leading entrenched. The
IN TRADITIONAL ( Practicing Certificate Number: S0930514080007)

company focuses on the core strengths of the brand, technical data and three blocks. the company PC Security products, 021-52523857

PC The browser and the average monthly number of active users of mobile security products are more than 4 Million higher brand
jianggp@ebscn.com

awareness, in addition to a broad user base for the company also provides continuous network security and network behavior data
WAN Yi-lin ( Practicing Certificate Number: S0930519080001)
sample, the company now has the world's largest security database. And the company now has the largest Eastern Hemisphere 021-52523859
wanyilin@ebscn.com
"white hat" Legion, technical strength lead. the company 2018 Annual revenue 131.29 Billion, an increase of 7.3% Net profit 35.35 Billion,

an increase of 4.83% .
Rong hole ( Practicing Certificate Number: S0930517120002)

◆ The layout of government and enterprise security market, is expected to bring new growth points: 021-52523837
kongrong@ebscn.com
The company actively expanding security business, based on the protection of personal user security, to further deepen

the layout of government and corporate security business, to further expand the urban space security based on the existing Wei Shu-gen ( Practicing Certificate Number: S0930517090002)

network security business on the physical space community safety and other safety scenarios. 2019 year 6 Month, the company 021-52523858
weishugen@ebscn.com
announced the successful Chongqing Hechuan District 360 Network Security Collaborative Innovation Industrial Park, a project ( EPC

Mode), the winning bid amount 2.395 Billion, is by far the largest amount of projects in the field, also played a very good role model
market data

for future expansion of government and enterprise markets. Considering the company has multiple advantages in the field of
The total share capital (million shares): 67.64

security technology, brand and data base and a wealth of experience in the field of country, city and social security, the future of
The total market value (million): 1750.54

government and enterprise security field is expected to become an important strategic direction and new business growth of three hundred and sixty.
Year minimum / maximum (yuan): 16.95 / 29.52

◆ Valuation and rating near 3 Month turnover: 9.81%

considering 2019 The company sold equity investment income Cian letter will bring, the company expects
Share price performance (one year)
19-21 Annual net profit 67.90 , 43.05 with 49.52 Billion, corresponding to EPS Respectively 1.00 ,

0.64 with 0.73 Yuan / share. Taking into account comparable companies 20 year PE Mean 45 Times, giving the company 20
40%
year 44 Valuation times, corresponding to TP 28.16 yuan. Promising to bring the income elasticity of government and enterprise 23%
5%
markets force companies, covering first, give an "overweight" rating.
--13%

◆ risk warning: Government and enterprises to promote the market less than expected; Internet advertising increased - 30%
0818 1018 1118 0119 0319 0419 0619 0819
competition; the company's products can not meet the market demand in a timely manner; decline in the overall market valuation.

Three hundred sixty CSI 300

Earnings forecasts and valuation metrics

index 2017 2018 2019E 2020E 2021E Earnings performance

Operating income ($ million) 12,238 13,129 15,113 17,430 19,944

% 1 month 3 months relative to twelve months 41.92
Revenue growth 406.28% 7.28% 15.11% 15.33% 14.43%
15.85 -29.50
Net profit ($ million) 3,372 3,535 6,790 4,305 4,952 absolute 51.24 22.65 -6.30
Net profit growth 2014.79% 4.83% 92.10% -36.60% 15.01% source: Wind
EPS (yuan) 0.50 0.52 1.00 0.64 0.73
ROE (Attributable to equity) (diluted) 21.01% 14.74% 22.07% 12.27% 12.37% Related research report

P/E 52 50 26 41 35 Determine the marginal improvement, the industry is expected to

accelerate development - information security industry tracking report

P/B 10.9 7.3 5.7 5.0 4.4
· · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · 2019-07-24
source: Wind Everbright Securities Research Institute predicted that the stock time 2019 year 09 month 12 day

Please refer to the last page special statement - 1- Equity Research

2019-09-14 three hundred sixty

1 , Free Internet security pioneer

1.1 ,Company Overview

360 Founded in 2005 , Is a free Internet security pioneer, from 2007 In the beginning, the company has launched 360 a

security guard, 360 Antivirus & 360 Mobile security guards and a series of security products. In addition, relying on the accumulation of

advanced technologies in the field of security and extensive customer base, the company launched the transverse 360

search for, 360 Navigation and gaming products into the class access to information, content and gaming areas and so on. The

company has gradually formed from information security to obtain information, complete security information content aggregation,

content services chain. With the arrival of artificial intelligence and interconnection of all things, 2013 In the beginning, 360 The

company launched, including mobile phones, children watch, smart cameras, tachograph and family, including a series of intelligent

hardware firewall products, committed to address information security through intelligent products, travel safety, home security and

other network security issues.

Map 1 : 360 Company History

2005 year , 2007 year 9 month , 2008 year 7 month , 2009 year 9 month , 2011 year 3 month , 2012 year 8 month , 2013 year 10 month , 2016 year 7 month , 360 2018 year 2 month , 360 2019 year , Cian letter

360 Founded 360 Security guards 360 The company 360 roll out 360 Mobile 360 In the formal traded on360 Search on line, it 360
has The company It announced the The company changed its stake sale

users exceeds Rising, introduced the world's Guardian, officially the NYSE; become second only to
released the first completion of the privatization transaction. announcement,
name to complete the restructuring, smooth landing A

Kingsoft has become first free antivirus entered the field of Baidu's second largest
intelligent hardware Share market. declared a government and enterprise markets.

one of the largest users software free --360 mobile security. search engine products, 360 Children's 2018 year 5 month ,

of security software. Antivirus Guardian, officially Released the world's

entered the field of intelligent hardware. largest distributed intelligent

security system - 360 Safety brain

2005 2007 2008 2009 2011 2012 2013 2016 2018 2019

Source: Company's official website, Everbright Securities Research Institute

Three hundred sixty mainly engaged in Internet technology (especially the Internet security technology) research and

development and network security product design, development, operations, and network-based security products, Internet

advertising and services, Internet value-added services, intelligent hardware business and other commercial services. Three

hundred sixty provide free Internet security and mobile security products, to provide users with secure Internet access point

activities and information content. As a result, three hundred and sixty accumulated a large number of users, on the basis of three

hundred and sixty expand the business to the Internet advertising and business services, business Internet value-added services,

intelligent hardware business. Three hundred sixty build Internet ecosystem in order to drive the core technology to product system for the carrier

According to the company 2018 Annual report, the company's Internet advertising business accounted for total revenue

81.18% , Is the company's main source of revenue and profits; Internet value-added services (mainly from the company's gaming

revenue) accounted for total revenue 8.97% ; Develop new intelligent hardware business accounted for a total revenue 7.73% .

Please refer to the last page special statement - 2- Equity Research

2019-09-14 three hundred sixty

Map 2 : Three hundred sixty schematic diagram of the operational framework

Source: Company Announcement

Map 3 : Company revenue structure over the years

Source: Company, Everbright Securities Research Institute

1.2 Revenue steady growth, steady improvement in profitability

The company grew steadily in recent years, income from 2014 Year 78.2 One hundred million yuan has risen steadily 2018 Year

131.29 Billion, 4 CAGR 13.83% . Net profit attributable to the parent company from 2014 Year 11.83

Billion yuan to 2018 Year 35.35 Billion, 4 CAGR 31.49% . Profit growth faster than revenue growth was driven by scale

brought expense ratio decreased.

Please refer to the last page special statement --3- Equity Research
2019-09-14 three hundred sixty

Considering the company's expenses from staff salaries, an increase of nearly three years, the number of company

personnel is not obvious, the corresponding increase in administrative expenses is not very clear, as the company continues to

grow revenue, expense rate during recent years 2014 Year 64.5% Decreased to 2018 Year 38.6% . Benefit expense ratio gradually

decreased, net profit margin of the company 2014 Year 15.2% improve to 2018 Year twenty three% Profitability steadily. By the first

half of this year to sell part of the shares Cian letter brought investment income growth, substantial growth in first-half profit.

Map 4 : Three hundred and sixty years income Map 5 : Three hundred and sixty years Net profit

source: wind Everbright Securities Research Institute source: wind Everbright Securities Research Institute

Map 6 : In recent years, the Company's expense ratio Map 7 : Company profitability in recent years

Source: Company, Everbright Securities Research Institute Source: Company, Everbright Securities Research Institute

1.3 High, the controlling shareholder stake

Up 2019 In the first quarter, Tianjin odd letter Zhicheng Technology Co., Ltd. holding company 48.74% Of the shares, is the

controlling shareholder. The higher the controlling shareholder equity ratio, stable ownership structure. Odd letter Zhicheng and Mr.

Zhou Department of Tianjin CITIC control of the enterprise, Mr. Zhou Hongyi, odd letter Zhicheng and Tianjin Zhongxin is acting in

person, Mr. Zhou is the actual controller.

Please refer to the last page special statement --4- Equity Research
2019-09-14 three hundred sixty

Map 8 : 360 Ownership structure (as of 2019 year 3 month 31 day)

Source: Company, Everbright Securities Research Institute

2 Internet advertising solid growth

Solid growth in online advertising, mobile advertising accounted for further improvement. According to iResearch 2018

Annual Chinese Internet advertising core data show that China's online advertising market reached 4844.0 Billion, an increase of 29.2%

. In absolute terms, the vitality of Chinese online advertising industry is still strong, it is expected to 2021 The market size will reach

nearly trillion. among them 2018 On the scale of China mobile advertising market reach 3663 Billion, an increase of 43.67% The

overall market growth rate higher than the growth rate of online advertising market, the proportion of online advertising reached 75.6%

, To benefit from the accelerated development of mobile Internet, the proportion of mobile advertising will further enhance the

expected future 2021 Mobile advertising accounted for in the proportion of online advertising will exceed 85% .

Map 9 : 2015-2021 China's online advertising market size and forecast

Source: iResearch forecasts, China Everbright Securities Research Institute

Please refer to the last page special statement --5- Equity Research
2019-09-14 three hundred sixty

Map 10 : 2015-2021 China's mobile Internet advertising market size and forecast

Source: iResearch, China Everbright Securities Research Institute

Electricity supplier and a short video of the rapid growth in recent years, electricity providers and information flow gradually en

2018 Years, the Chinese online advertising market share in the segments of change continues, continue to reduce the share of

traditional search advertising; Advertising and electricity supplier 2017 Compared has increased, the share accounted for 33.6% It

can be expected that the high-traffic business platform will still attract a large number of advertising; but in the long term, along with

many other forms of advertising to the conversion of information flow, information flow advertising there is still much room for growth.

While search advertising share has decreased, but the future will maintain a certain growth rate. Affected by the

impact of the mobile Internet in recent years, the proportion of search advertising accounted for by online advertising 2015 Year 32.3%

decrease to 2018 Year 24.3% . 2018 In search advertising market reached 957.7 Billion, an increase of reach 12.4% ,versus 2017 In

comparison, the growth rate has increased. from 2017 In search advertising growth is bottoming out, it has entered a stage of

steady growth. From the client perspective, the search service user in the case of higher utilization of the existing, still maintain a

certain growth. From the product end, the head of search products are actively layout information flow and short video in two

forms, the future, intelligent search plus the flow of information, the next short video multi-engine drive, users can be more accurate

coverage, and promote the search advertising market stability increase.

Map 11 : 2015-2021 China's online advertising search advertising market size and forecast

Source: iResearch forecasts, China Everbright Securities Research Institute

The rapid development of artificial intelligence will further enhance the precision level of advertising. In recent years, artificial

Please refer to the last page special statement --6- Equity Research
2019-09-14 three hundred sixty

Intelligent rapid development of information technology and Internet advertising as a relatively high degree of digital industry, will

greatly benefit from the application of artificial intelligence and other emerging technologies. 1 ) Future, the media will remain

intelligent advantage of and used, including information gathering, intelligence processing, intelligent integration, verification and

judgment, intelligent distribution areas will be corresponding improvement and enhancement in the intelligent push. 2 ) Meanwhile,

in the face of conflict intelligent and user privacy, as well as bring a personalized recommendation algorithm information cocoon

housing problem, the media will do on the intelligent use some restraint, which will be in production on the algorithm ethics,

man-machine boundary, several aspects of the data and make appropriate adjustments as claimed constraint.

3 , Determine the marginal improvement, information security is expected to accelerate de

According to our recent visits to research this year, regardless of the scope or terms of the intensity of care to a large

network operations than in previous years, the industry is expected to directly stimulate short-term demand growth. In addition, this year 5 Releas

2.0 "And the previously released" Network Security Act "is expected to enhance long-term government and enterprise information

security awareness needs to be done to increase the number of security systems, increase investment in information security,

bring marginal improvement of the information security industry needs. Benefit from the level of protection 2.0 And other relevant

laws and regulations to gradually fall, IDC We raised the growth rate of the information security industry as a whole, the marginal improvement in

3.1 , "Protect the network action" and other short-term stimulating industry growth

from 2016 Since, Ministry of Public Security to carry out combat offensive and defensive drills for critical information

infrastructure each year, known as " Care network actions " The main objective of this action is an important trade and industrial

enterprises industry. For particularly important areas of government affairs, energy, finance, telecommunications, transportation,

aviation, utilities, etc., is superimposed on the implementation of attack test turns on stage, in order to promote anti-attack, they may

say, the maximum troubleshoot. For this reason, companies or units are actively preparing for the program, testing network security

risks exist, and to seek the support of the major security vendors.

According to our recent visits to research, protect network operations this year in advancing the scope and intensity much

larger than before, significantly increase the number of systems involved in offensive and defensive drills. In addition, provinces

and cities to test the critical information infrastructure sites and key network security defense capability and comprehensive level,

the local Public Security Bureau have also organized special care network operations, and some provinces and cities have a great

time and scope of increase (Guangdong Province 2019 In time protection network operations increased 4 Months). Promote the

patron of network operations, government and enterprises to significantly improve network security awareness, information security

industry needs also increase significantly. According to the data display Maxima bidding website, 18 In no action related to the

tender care network, 19 In bidding on government action significantly increased care network.

3.2 , And other insurance 2.0 Policy Network and Security Act and other industries to

promote the long-term needs improvement

This year, the top network security policy intensive introduction is expected to improve overall community awareness of

network security, information security and long-term growth in demand pull.

2017 year 6 Month, National People's Congress issued the "People's Republic of China Network Security Act" Since then, Network

security increased from the original departmental regulations to the legal system, binding strong. The law is the legal basis for the

Ministry of Public Security, Network Information Office, the Ministry of Industry and other regulatory authorities to develop Internet

safety work, related work will go into the law, enforce the implementation stage, is expected to raise overall awareness of network security comm

Please refer to the last page special statement --7- Equity Research
2019-09-14 three hundred sixty

2019 year 4 month 18 Day, SASAC issued the "central business person in charge of management assessment approach"

(hereinafter referred to as the "Rules"), approaches For the first time included in the scope of examination of network security

incidents And depending on the circumstances to give the person in charge appropriate sanctions. Prior to that, because information

security investment is not directly bring revenue growth, concern about government-enterprise information security investment is

relatively low, released this way will significantly enhance the degree of importance of information security the central enterprises is expected to s

2019 year 5 month 10 , The State Administration of Work Market, Standardization Administration of China issued the

"Information Security Technology Network Security Protection basic requirements ", marking the level of protection entered a new

stage - such as Paul 2.0 era. According to regulations, insurance, etc. 2.0 From 2019 year 12 month 1 Day began. Paul and other 2.0

Impact on the industry several fronts: 1 , Insurance and other institutional rise to the legal level, which will greatly improve the

enterprise customer safety awareness; 2 , Significantly expanded the scope of regulation, into a network of important information

from the original system, a variety of technical application of information systems, cloud platforms, networking, industrial control

systems, big data, mobile Internet and other full coverage; 3 , And other security requirements for safety has improved significantly,

the lowest score has increased from 60 Points to improve 70 Minute. 4 , The new active defense needs. Taking into account the

new security standards such as the year 12 January started, is expected to pull the information security industry and long-term

growth in demand.

2019 year 6 month 30 Japan, the Chinese software industry in the development of the press conference, "National Cyber

​Security Industry Development Plan," the official release, the Ministry of Industry and Information Technology and the Beijing

Municipal Government decided to build the National Cyber ​Security Industry Park. According to the plan, 2020 Years, relying on the

industrial park in Beijing led the network security industry size of more than 1000 Billion, pulling GDP An increase of more than 3300

Billion yuan to build not less than 3 Annual income of more than 100 Billion backbone enterprises. To 2025 Years, relying on the

industrial park will be built our network security industry, "five base." The plan is the second and so on Paul 2.0 After another

top-level network security national planning policy, information security status of a national strategy to further affirmed, the

information security industry as a whole will benefit from policies to promote. Industrial park planning industry is huge, the relevant

part of the industry's support and investment will increase, part of the information security companies in Beijing and North China

business income accounted for a higher priority will benefit.

3.3 Benefit from policies to accelerate floor, third parties raised the industry growth

forecast

Benefit from the "Critical National Information Infrastructure Security Protection Ordinance", data security, protection rating

2.0 And other relevant laws and regulations to gradually fall, IDC We raised the growth rate of the information security industry as a

whole, according to IDC in 2019 year 4 Month released a report, 2018 China's overall expenditures for security solutions 55

Billion US dollars, while expected 2018-2022 Compound annual growth rate of China's overall expenditure during the period of

security solutions in ( CAGR )for 25.6% Growth rate compared to 17 Forecast a significant increase ( 2017 year 11

month 14 day, IDC Forecast 2016-2021 China's network security market compound annual growth rate ( CAGR ) Is twenty three% , And

showed a slight overall downward trend year after year).

Please refer to the last page special statement - 8- Equity Research

2019-09-14 three hundred sixty

Map 12 : The size of China's network security market forecast ( 2017.11 ) Map 13 : The size of China's network security market forecast ( 2019.4 )

source: IDC Forecast, Everbright Securities Research Institute source: 17-18 Years IDC Statistical data, 19-22 Years IDC Forecast data

4 , The layout of government and enterprise business market, worth looking forward to the

The company actively expanding security business, based on the protection of personal user security, to further deepen

the layout of government and corporate security business, to further expand the urban space security based on the existing

network security business on the physical space community safety and other safety scenarios. Considering the company has

multiple advantages in the field of security technology, brand and data base and a wealth of experience in the field of country, city

and social security, the future of government and enterprise security field is expected to become an important strategic direction

and new business growth of three hundred and sixty.

4.1 , Brand, technology and data have obvious advantages

" 360 "Network security is the well-known leading brand. Three hundred sixty's 360 a security guard, 360 Mobile guards, 360

Mobile Assistant, 360 Antivirus, 360 Cleanup master, 360 Browser and other products highly recognized by the market. According to

iResearch data, as of 2018 year 12 Month, three hundred sixty PC Security products market penetration 96.98% The average number

of monthly active users remain steady in 5 Million or more, PC Security market continues to rank first; PC Secure browser market

penetration

82.11% The average number of monthly active users 4.3 One hundred million; the average monthly number of active users of mobile security pro

4.63 Billion. " 360 "China is already well-known Internet security brands, well-known brand in the Internet field, with a

wide range of brand and user trust.

Map 14 : Corporate R & D investment over the years the situation

source: wind Everbright Securities Research Institute

Please refer to the last page special statement - 9- Equity Research

2019-09-14 three hundred sixty

The strength of technology, providing a powerful guarantee for business development. The company is a

technology-driven high-tech Internet companies, R & D expenditure in the year 20 More than a billion, it is the largest investment in

the field of security companies, research and development staff of more than 70% . In the field of network security technology, the

company has 17 Technical support on behalf of the world's top level team of security experts, 3 Large security research laboratory, 3 Large secu

11 Large security sector. 2018 year 8 Month, Microsoft released the world Top100 Security contribution list, 360 Total company 13 People

honored glory, is the largest number of people enrolled, the highest ranking security vendor, and the company now has the largest

Eastern Hemisphere "white hat" legion 1 , A leading technology strength.

The company has the largest safety database. " 360 Security brains "of the use of artificial intelligence technology to

automatically analyze and deal with the behavior of the whole network security data more than ten million devices produced nearly a

trillion per year, the annual amount of new data sample more than 10 billion domestic security in the amount of data ranked first. in

addition, the company continued through the accumulation of safety data and analysis, the huge amount of data across PC Big Data

systems and mobile sides of the current 360 The company already has a leading real-time network security database, including the

world's largest library of sample files ( 200 One hundred million) and survival URL libraries (every day 800 One hundred million) as

well as the world's most comprehensive library of program behavior log ( twenty two One trillion) and the global domain information base ( 80 Mill

4.2 , Cohesion breakthrough, large security force field

Previously, network security threats mainly for personal computers or personal cell phone, after several years of

development, government and enterprises against cyber attacks is also increasing. Government, enterprises pay more attention to

network security, have increased investment in security building. In addition, with innovative technology, security requirements also

extend from physical space to cyberspace, cities, communities safe investment increasing, China has entered the "great security"

era. Future, government and enterprise security field will become an important strategic direction for three hundred sixty and new

business growth, the company will implement further by including self-built limited to, investment, mergers and acquisitions.

2017 year 9 month , 360 the company CEO Zhou Hongyi Internet security conference in China, China made full access to

the Internet, "the era of big security.". 2018 year Full implementation of the "big security" strategy. 2018 year 5 month , 360 Pioneering

released the world's largest distributed intelligent safety system -

- " 360 Security brains ", and thus the overall defense strategy to build a large security system of the times, actively participate in the

construction of national security, internal security boost eco further improved. " 360 Safety brain " It is designed to provide integrated

network against threats and attacks at the national level for the solution. Three hundred and sixty five core has the ability to

perceive, reason, early warning platform, and the situation derived from the perception, attack monitoring, network security

command and other specific platforms and operating systems, widely used in major national events security reserve to protect the

process. 2018 Years, three hundred sixty as an important security unit actively participated in the two sessions, network security

work of major events Boao Forum, China-Africa Forum, the World Internet Conference, Cyber ​Security Awareness Week, the SCO

summit in Qingdao and so on. Company as a leader in the field of security technology and outstanding performance in a number of

international security events, is expected to benefit from the international situation is complicated.

Offensive and defensive capabilities, vulnerabilities mining capabilities and a strong team of security experts is the

company's core security capabilities. Relying on companies in the data base and the ability of Internet security endpoint security

accumulation, the company has been a major breakthrough in the field of country, city and social security.

1 White hat hacker described positive. He can identify a computer system or network security vulnerabilities in the system, but not malicious to

take advantage of, but announced its vulnerability. Such systems can be exploited fix vulnerabilities before others (for example, black hat).

Please refer to the last page special statement --10- Equity Research
2019-09-14 three hundred sixty

In terms of national security : In addition to participating in more major national security activities, and the company 2018

More than ten years as national ministries, regulators and central state-owned enterprises to provide network services offensive

and defensive combat training, exercises an unprecedented scale.

In the city in social security : The company has built dozens inside " 360 City Safety brain " AI Design model, the basic

completion of product development related to the development of business systems and big data platform for future product and

service solutions to optimize and adjust the pilot put the situation in each region. 2018 Years, the company has launched a strategic

cooperation with the male An District, Tianjin, Xi'an, Chengdu, Nanjing and other regions. 2019 year 6 Month, the company

announced the successful Chongqing Hechuan District 360 Network Security Collaborative Innovation Industrial Park, a project ( EPC

Mode), the winning bid amount 2.395 Billion, is by far the largest project in the field amount.

4.3 , Cian letter stake sale, the overall layout of the large safety

2019 year 4 month 13 , The company announced will 37.31 Billion price sold their holdings Cian letter 22.58% Of the shares,

after the completion of the sale of shares, the two sides will sign a "termination agreement", from the date of signing the agreement,

the letter will not be used Cian 360 Brand publicity, the two sides will also cancel the license on technology and data. After

completion of the transaction, 360 Announced that the focus of future government and enterprises to enter the field of security,

without being bound by the original agreement to further deepen the "great security" strategy, by including the self are not limited to,

investment, mergers and acquisitions further implemented. Up 2019 year 6 month 30 Japan, the equity transfer transaction has been

completed, the transaction in the first half investment income recognized 29.86 Billion, the company will 2019 Annual profit has

thickened. 360 Brand has many advantages, data, technology and capital in the field of information security, is expected to expand

the company's future government and enterprise markets will provide a good foundation.

5 ,profit prediction

5.1 The key assumptions and earnings forecasts

Make predictions based on the following assumptions:

1 , Taking into account the company's Internet ads to search-based advertising and the company has continued to

strengthen information flow and layout of the mobile end products, the company expects Internet advertising and services

business 19-21 Annual revenue growth respectively 13% , 13% with 13% ;

2 ,because 18 In the game version number suspend approval, industry growth is slow, 19 In the new version number being

issued, industry growth picked up, taking into account the company's business from a low base, the company expects Internet

value-added services business 19-21 Annual revenue growth respectively 30% , 30% with 20% ;

3 ,along with 5G And other rapid development of new technologies and new applications in recent years, the rapid

development of the networking industry, the company's intelligent hardware business will benefit from the overall development

of the industry. The company expects business 19-21 Annual revenue growth respectively 20% , 20% with 20% ;

4 , The company's gross margin and the business 18 In keeping.

table 1 : Three hundred sixty revenue forecast

Unit: RMB million 2018A 2019E 2020E 2021E

Main income 13,129 15,113 17,430 19,944

growth rate 7% 15% 15% 14%

gross profit 9,132 10,501 12,081 13,779

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2019-09-14 three hundred sixty

Main gross margin 70% 69% 69% 69%

Internet advertising and services

income 10,658 12,044 13,610 15,379

growth rate 17% 13% 13% 13%

gross profit 7,864 8,912 10,071 11,380

Gross margin 74% 74% 74% 74%

Internet value-added services ( Games and other)

income 1,178 1,531 1,991 2,389

growth rate - 31% 30% 30% 20%

gross profit 889 1,149 1,493 1,792

Gross margin 75% 75% 75% 75%

Intelligent

hardware revenue 1,015 1,218 1,461 1,753

growth rate - 8% 20% 20% 20%

gross profit 180 213 256 307

Gross margin 18% 18% 18% 18%

Other main business

income 270 311 357 411

growth rate - 16% 15% 15% 15%

gross profit 191 218 250 288

Gross margin 71% 70% 70% 70%

Other

operating income 8.1 9.3 10.7 12.3

growth rate twenty three% 15% 15% 15%

gross profit 8.1 9.3 10.7 12.3

Gross margin 100% 100% 100% 100%

source: wind Everbright Securities Research Institute forecast

In summary, we expect the company 2019-2021 Annual income, respectively 151.11 , 174.30 with 199.40

Billion. considering 2019 The company sold equity investment income Cian letter will bring, the company expects

19-21 Annual net profit 67.90 , 43.05 with 49.52 Billion, corresponding to EPS Respectively 1.00 ,

0.64 with 0.73 Yuan / share.

5.2 Valuation

The current location information of listed companies in the same security are Venus, the Green League and Technology,

Westone, Blue Shield shares and deeply convinced, taking into account fluctuations Westone performance, integration and Blue

Shield of shares in order to secure electricity supplier based business, we will study Venus (main business: sales UTM , IDS / IPS And

other security products), the Green League and Technology (main business: sales WAF Leakage and other security sweep products)

and deep conviction (main business: selling online behavior management, VPN And other security products) valuation of the

company, which provides data for the three hundred and sixty valuation.

Currently A Shares information security companies, the average valuation for the 19 year 57 Times, 20 year 45 Times, twenty one

year 35 Times, 3 Net profit CAGR 24% ~ 35% , PEG in 2.3 to 3.3 .

As the three hundred and sixty 19 In the presence of the performance of large non-recurring items, select 20 year PE As a

reference index to value. Comprehensive comparison and consideration of three hundred and sixty 2019-2021 Net profit CAGR

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2019-09-14 three hundred sixty

12% Internet security and leading position, giving the company 20 year 44 Time PE , The corresponding share price 28.16

yuan.

table 2 : Comparable companies PE Compare

Closing price EPS (yuan) PE ( X ) CAGR PEG Market cap

company name
09.12 18 19E 20E 21E 18 19E 20E 21E - 3/2018 --2018 One hundred million yu

Venus 34.40 0.63 0.79 0.97 54 1.20 43 36 29 twenty four% 2.3 308
Green League and Technology 17.90 0.21 0.29 0.39 85 0.51 61 46 35 35% 2.4 143
SINFOR 114.65 1.50 1.68 2.15 77 2.83 68 53 40 twenty four% 3.2 462
average 72 57 45 35 27% 2.7

Three hundred sixty 25.88 0.52 1.00 0.64 50 0.73 26 41 35 12% 4.2 1751
source: wind Consensus expectations, three hundred sixty EPS Everbright Securities Research Institute forecast data

5.3 Valuation and investment rating conclusions

considering 2019 The company sold equity investment income Cian letter will bring, the company expects 19-21

Annual net profit 67.90 , 43.05 with 49.52 Billion, corresponding to EPS Respectively 1.00 , 0.64

with 0.73 Yuan / share. We use the relative valuation method for company valuation, taking into account the comparable companies 20

year PE Mean 45 Times, giving the company 20 year 44 Valuation times, corresponding to TP 28.16 yuan. Promising to bring the

income elasticity of government and enterprise markets force companies, covering first, give an "overweight" rating.

6 ,Risk Analysis

Government and enterprises to promote the market is less than expected : Prior to the company's business 2C Based, 2B

Cian mainly relying on the letter before subsidiaries conduct business. Government and enterprise market business models and

consumer end markets have some differences, in the process open up government and enterprise markets, the company has its own obvious ad

Internet advertising competition : Internet advertising is the company's main source of income in recent years, along with

the impact of mobile Internet traffic costs increased competition and other factors, the company has the possibility of developing

the business less than expected.

The company's products can not meet the market demand in a timely manner. Information security industry is a

relatively high technical threshold industry, and rapid change of technology and products, each product requires a lot of research

and development, the company has not timely replacement of the product risks to meet the market demand.

The overall decline in market valuation : Investor risk appetite by many factors, the risk of future decline in the overall

market valuation.

Please refer to the last page special statement --13- Equity Research
2019-09-14 three hundred sixty

Income Statement ($ million) 2017 2018 2019E 2020E 2021E

80%
Profit margin
Operating income 12,238 13,129 15,113 17,430 19,944
60% Operating cost 3,296 3,998 4,612 5,349 6,166
Depreciation and amortization 701 381 523 578 640
40%
Sales taxes 252 236 242 312 299
sales expense 1,907 2,034 2,297 2,702 3,087
20%
Management fees 3,118 838 3,793 4,619 5,186
Financial expenses - 46 - 345 --399 --356 --364
0%
Changes in fair value gains and losses 0 0 0 0 0
2017 2018 2019E 2020E 2021E
Gross margin EBIT rate Sales margin Investment income 522 413 3,500 300 300
operating profit 4,050 4,174 8,062 5,100 5,866
The total profit 4,119 4,186 8,084 5,125 5,895
Minority interests 50 --27 0 0 0
Net profit attributable to parent company 3,372 3,535 6,790 4,305 4,952
Net profit growth rate _
2500% Balance Sheet ($ million) 2017 2018 2019E 2020E 2021E
2000%
Total assets 21,050 29,348 36,638 41,675 47,459
1500%
Current assets 13,305 18,557 25,587 30,501 36,125
1000%
Money funds 10,013 14,977 21,817 26,222 31,292
500%
8000
Transactional financial assets 0 0 0 0 0
0%
Accounts Receivable 2,438 2,346 2,698 3,111 3,560
0200040006000 - 500%
bill receivable 0 0 0 0 0
2017 2018 2019E 2020E 2021E
Other receivables 76 249 287 331 379
Net profit growth rate
stock 104 123 163 193 225
Available for sale investments 1,350 3,788 3,788 3,788 3,788
Financial assets held to maturity 0 0 0 0 0
Long-term investment 4,431 4,427 4,427 4,427 4,427

The growth rate of sales revenue _

Fixed assets 356 482 636 819 1,027
500%
Intangible assets 314 339 322 306 291
400% total liability 4,734 5,069 5,568 6,299 7,132

300% Non-interest bearing liabilities 4,721 5,051 5,550 6,281 7,114

Interest-bearing liabilities 14 18 18 18 18
200%
Shareholders' equity 16,315 24,279 31,070 35,375 40,327
150,002,000,025,000 100% Capital stock 2,000 6,764 6,764 6,764 6,764
Provident Fund 9,910 7,341 8,020 8,451 8,946
0500010000 0%
undistributed profit 4,393 7,765 13,876 17,751 22,207
2017 2018 2019E 2020E 2021E
Minority interests 267 297 297 297 297
Sales revenue growth rate

Cash Flow ($ million) 2017 2018 2019E 2020E 2021E

Cash flow from operating activities 4,143 3,748 3,684 4,403 5,131
Net profit 3,372 3,535 6,790 4,305 4,952
Depreciation and amortization 701 381 523 578 640
Net working capital increase 8,320 652 1,714 --474 2,932
other -8,250 --820 -5,343 --7 -3,393
Cash flow from investing activities 9,046 -4,042 2,718 - 400 - 500
Net capital expenditures --268 --495 - 600 - 700 - 800
Changes in long-term investments 4,431 4,427 0 0 0
Other changes in assets 4,882 -7,975 3,318 300 300
Cash flow from financing activities - 11,981 --247 439 403 439
Capital Changes 1,603 4,764 0 0 0
Net debt change 14 4 0 0 0
Changes in non-interest bearing liabilities 3,658 330 499 732 833
Net cash flow 1,162 --501 6,840 4,405 5,070
source: Wind Everbright Securities Research Institute forecast

Please refer to the last page special statement --14- Equity Research
2019-09-14 three hundred sixty

Key indicators 2017 2018 2019E 2020E 2021E

The ability to grow (% YoY )

Revenue growth 406.28% 7.28% 15.11% 15.33% 14.43%

Net profit growth 2014.79% 4.83% 92.10% -36.60% 15.01%

EBITDA growth rate 1753.00% 58.52% -25.73% 7.18% 16.34%

EBIT growth rate 1949.04% 79.39% -29.76% 6.75% 17.06%

Valuation measures

PE 52 50 26 41 35

PB 11 7 6 5 4

EV / EBITDA 12 26 34 31 26

EV / EBIT 14 28 39 35 30

EV / NOPLAT 17 33 46 42 35

EV / Sales 4 13 11 9 8

EV / IC 4 12 10 10 8

Profitability (%)

Gross margin 73.07% 69.55% 69.48% 69.31% 69.09%

EBITDA rate 34.30% 50.68% 31.00% 28.81% 29.29%

EBIT rate 28.57% 47.77% 27.55% 25.50% 26.08%

Pre-tax net profit margin 33.66% 31.89% 53.49% 29.41% 29.56%

Net profit margin after tax (attributable to parent) 27.55% 26.92% 44.93% 24.70% 24.83%

ROA 16.26% 11.95% 18.53% 10.33% 10.43%

ROE (Attributable to equity) (diluted) 21.01% 14.74% 22.07% 12.27% 12.37%

Operating ROIC 22.44% 34.89% 21.63% 23.67% 23.26%

Solvency

Current Ratio 3.05 3.79 4.77 5.05 5.31

Quick ratio 3.02 3.76 4.74 5.01 5.28

Equity attributable to parent / interest-bearing debt 1172.16 1332.64 1709.97 1949.22 2224.37

Tangible assets / interest-bearing debt 1430.31 1542.35 1948.32 2229.08 2551.31

Indicators per share (calculated according to the latest forecast annual capital stock of historical data)

EPS 0.50 0.52 1.00 0.64 0.73

Dividend per share 0.00 0.00 0.00 0.00 0.00

Cash flow from operations per share 0.61 0.55 0.54 0.65 0.76

Free cash flow per share ( FCFF) -0.71 0.64 0.25 0.60 0.19

Net assets per share 2.37 3.55 4.55 5.19 5.92

Sales revenue per share 1.81 1.94 2.23 2.58 2.95

source: Wind Everbright Securities Research Institute forecast

Please refer to the last page special statement

UBS SDIC --15- Equity Research
2019-09-14 three hundred sixty

Industry and company rating system

Ratings Definitions

Industry Buy Future 6-12 Month return on investment leading market benchmark index 15% ; Overweight future 6-12 Month return on investment

and leading market benchmark index 5% to 15% ; Neutral future 6-12 The fluctuation range of investment yield and market-month benchmark

company index difference - 5% to 5% ; Reduction of future 6-12 Months behind the market rate of return on investment benchmark index 5% to 15% ;

rating Sell future 6-12 Months behind the market rate of return on investment benchmark index 15% the above;

No rating due to inability to obtain the necessary information, or the company faces major uncertainties result of unforeseen events, or for other reasons, makes it impossible to give a clear
Investment rating.

Benchmark Description: A Share benchmark for the Shanghai and Shenzhen main board 300 Index; reference small cap is small plate means; GEM GEM reference means; new board reference index for the

new board; HK benchmark of HSI.

Description limitations analysis, valuation methods

Analysis contained in this report is based on numerous assumptions. Different assumptions could result in materially different results. Various valuation methods and models used in this report has its limitations,

does not guarantee the results of the valuation of securities can be traded on the price involved.

Analyst Certification

The report signed by analyst with investment consulting qualification granted by the Securities Association of China and registered as a securities analyst to professional ethics, professional careful research

methods, the use of information legal compliance, independence, objectivity issued this report , and responsible for the content and views expressed in this report. All the researchers responsible for preparing and writing

this report hereby certify, in this research report or any information about issuers of securities views expressed are accurately reflect the personal views of researchers. The researchers get paid the judgment factors

include the quality and accuracy of research, client feedback, competitive factors, and overall earnings Everbright Securities Co., Ltd.. All the researchers to ensure that they pay any part was, is and also will not have

direct or indirect links with this report specific recommendations or views.

Special statement

Everbright Securities Co., Ltd. (hereinafter referred to as the "Company") was founded in 1996 Years, invested by China Everbright (Group) Company holding the national comprehensive securities joint-stock

company, is one of China Securities Regulatory Commission approved the first batch of three innovative pilot companies. According to China Securities Regulatory Commission issued the securities and futures business

operating license, the company's business scope includes securities investment consulting business.

The Company Business: securities brokerage; securities investment consulting; related to the securities trading, securities investment activities of the financial adviser; securities underwriting and sponsorship;

securities dealers; provide intermediary business for the futures companies; securities investment fund distribution; margin trading business ; other business approved by China Securities Regulatory Commission. In

addition, the company also carried out through wholly owned or holding subsidiaries asset management, direct investment, futures, fund management and securities business in Hong Kong.

This report was prepared by the Institute of Everbright Securities Co., Ltd. (hereinafter referred to as "Everbright Securities Research Institute"), in order to legally acquired we believe to be reliable, accurate and

complete information-based, but does not guarantee that the original information we have obtained, and reporting accuracy and completeness of the information contained in it. Everbright Securities Research Institute

may be supplemented from time to time, revise or update the information, but does not guarantee the timely release of such updates.

Information in this report, advices and forecasts reflect the judgment of initial publication of the Institute of Securities big time, you may need to be adjusted at any time and without notice. In any case, in this report

the information or opinions expressed herein does not constitute investment advice to any person. Customers should make independent investment decisions and bear the investment risk. The information in this report

or the opinions expressed herein does not take into account the specific investment objectives, financial situation and the particular needs of individual investors. Investors should take full account of their specific

situation, and to understand and use the full contents of this report, this report should not be considered as the sole factor in making investment decisions. Basis or for any consequences caused by use of this report, the

Company and the author assumes no liability.

Different periods, you may write and publish the information contained in this report, recommendations and to predict inconsistent reports. The company's salespeople, traders and other professionals may provide

in this report different point of view oral or written commentary or trading strategies to our customers. The company's asset management subsidiary, proprietary trading desks and other investment business segments

could make independent opinions or recommendations in this report are not consistent investment decisions. We remind investors and understand the risks of investment securities and investment products, before

making investment decisions, we recommend investors to always consult the professionals and prudent choice.

In the case permitted by law, the Company and its affiliates may hold positions in companies mentioned in the report of the securities issued and traded, or may provide or being sought for these companies to

provide investment banking, financial advisers or financial products Related Services. Investors should take full account of the subsidiary bodies of the Company and the Company will report the contents of a conflict of

interest may exist, do not trust this report as the sole basis for investment decisions.

The report circulated within the territory of People's Republic of China under the laws of People's Republic of China, transferred only to a specific customer. Copyright of this report is only owned by the company,

without the written permission of any institution or individual in any form, for any purpose be reproduced, copied, reproduced, published, publication, modification or reference. As a result of infringement have any direct or

indirect losses to the Company, the Company reserves the right to pursue all legal responsibilities. All trademarks used in this report, service marks and logos are the company's trademarks, service marks and logos.

Everbright Securities Co., Ltd. 2019 all rights reserved.

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Please refer to the last page special statement --16- Equity Research