On October 17, the concept of cybersecurity led the gains throughout the day, with stocks like Zhongcheng Technology, Renzihang, China Great Wall, Guohua Network Security, Changshan Beiming, Chuanda Zhisheng, and Runhe Software soaring.

In terms of news, the China Cyberspace Security Association (CCSA) issued a statement yesterday recommending the initiation of cybersecurity reviews for Intel products sold in China to effectively safeguard China's national security and the legitimate rights and interests of Chinese consumers.

Industry risks coexist with opportunities

Cybersecurity is a critically important industry, especially in an era where the internet, digitization, and artificial intelligence continue to penetrate and transform society. It can be said that without cybersecurity, there is no national security.

The CCSA stated that Intel products frequently exhibit security vulnerabilities; have poor reliability and disregard user complaints; conduct monitoring under the guise of remote management; and have hidden backdoors that pose risks to network and information security.

According to reports, Intel generates nearly a quarter of its global annual revenue of over $50 billion from the Chinese market. In 2021, Intel CPUs accounted for approximately 77% of the domestic desktop market and 81% of the notebook market. In 2022, Intel held approximately 91% of the x86 server market share in China. It can be said that Intel has made substantial profits in China, yet the company continues to engage in activities that harm China's interests and threaten its national security.

The CCSA recommends the initiation of cybersecurity reviews for Intel products sold in China to effectively safeguard China's national security and the legitimate rights and interests of Chinese consumers.

From an overall industry development perspective, the cybersecurity market faced both opportunities and challenges in the first half of this year. On the one hand, due to macroeconomic fluctuations, fiscal austerity, and other factors, the information technology and informatization industries were significantly impacted, and the cybersecurity industry was also affected, with market growth slowing down.

On the other hand, as international competition intensifies and AI-driven digitization and intelligentization accelerate, the relationship between cybersecurity and national, government, social, and corporate security has become closer, and market demand has become more urgent, driving market growth.

According to industry observers, four new trends have emerged in the cybersecurity market this year: First, key areas related to national security, such as the military and defense, have increased investment in cyberspace confrontation capabilities. Second, critical infrastructure industries vital to the national economy and people's livelihoods have increased investment in cybersecurity as digitization progresses. Third, economically developed provinces and cities have increased investment in digitization across various economic and social sectors, leading to concurrent increases in cybersecurity investment. Fourth, significant investments have been made in building national cybersecurity capabilities in friendly countries and protecting the overseas interests of Chinese-funded enterprises.

Huaxi Securities points out that in the era of digital economy and technological innovations such as AIGC, the importance of network and information security continues to increase. At the same time, due to geopolitical uncertainties, related cybersecurity expenditures are expected to maintain a high growth rate.

Searching for the next potential double-digit gainer

According to iFinD data, there are currently 171 listed companies in the cybersecurity concept in A-shares. Geographically, Guangdong Province and Beijing lead with 40 and 47 companies, respectively.

From an industry perspective, 12 industries are covered under the Shenzhen Stock Exchange's first-level classification. Among them, the computer industry involves 109 listed companies, accounting for over 60% and ranking first; communications and machinery equipment rank second and third, respectively.

Additionally, there are four companies each in the electrical equipment and national defense military industries; and one company each in the non-bank financial, construction and decoration, automotive, social services, and pharmaceutical and biological industries.

In terms of performance, 10 companies have seen gains exceeding 100% in the past month, including Runhe Software, Changshan Beiming, Rongke Technology, Guomin Technology, Kelan Software, Qitian Technology, Zhuolang Technology, Huijin Technology, Zhaori Technology, and Eton Century Technology.

So, who is likely to be the next double-digit gainer?

In terms of financial performance, 83 of the 171 listed companies in the cybersecurity concept achieved positive net profit attributable to shareholders in the first half of this year. Among them, only 13 companies achieved net profit attributable to shareholders exceeding 100 million yuan, with both revenue and net profit growing year-on-year. These companies include Dahao Technology, Shenzhou Taiyue, CEC-CEDA, Hengtong Optic-Electric, Dongfang Electronics, Digital China, StarChip Technology, Ruijie Networks, ZTE, Sugon, CTS, CETC Digital, and SUPCON Automation.

It is worth noting that Dahao Technology's net profit attributable to shareholders grew by over 70% year-on-year in the first half of this year. In terms of its main business, Dahao Technology benefited from increased demand for textile and garment processing, including traditional and new Chinese-style clothing, and the market for special sewing equipment remained robust, strengthening the company's market position.

At the same time, significant progress has been made in the field of cybersecurity products. The subsidiary Xinghan Network's business primarily involves the cybersecurity hardware market and cloud-edge market, with products including network security hosts and modules, network access and edge communication white boxes, domestically controllable information technology innovation platforms, and reinforced communication equipment for special industries. These products are widely used in various network and industrial security products such as firewalls, IDS, IPS, UTM, WAF, VPN, and network gateways, as well as cloud network access scenarios like MEC edge computing, lightweight 5G UPF, SD-WAN, and white box uCPE.

Judging from today's market performance, China Great Wall reached the daily limit, marking its second daily limit in the past year. The company's Phytium chips are characterized by a comprehensive product line, high performance, a well-established ecosystem, and a high degree of autonomy. Its main products include high-performance server CPUs (Phytium Tengyun S series), high-efficiency desktop CPUs (Phytium Tengrui D series), high-end embedded CPUs (Phytium Tenglong E series), and Phytium chipsets. These products provide core computing power support for various devices from end to cloud.

Zheda Netnew reached the daily limit today, marking its fourth daily limit in the past year. The company adheres to the strategic orientation of "intelligence leading" and integrates technologies such as artificial intelligence, blockchain, cloud computing, big data, the Internet of Things, AR/VR, digital twins, and privacy computing to empower industries. It continuously builds support systems for the digital and intelligent transformation needs of government and enterprise customers based on intelligent cloud services.

Renzihang reached the daily limit today, marking its sixth daily limit in the past year. Since its inception, the company has focused on the field of network information security, with its main business involving the research and development, production, and sales of network content and behavior audit and monitoring products, as well as providing security integration and security audit-related services.

Chuanda Zhisheng reached the daily limit today. Its subsidiary, Chuanda Zhisheng Integrated Company, is a major force in information security services, cyberspace security, domestic technology application migration, integration, and product research and development in Sichuan Province.