Venustech (002439) Report Interpretation

Overview

This earnings review assesses Venustech’s 1H26 recovery and the potential for AI-security products to become a growth driver. Nomura expects improving demand and China Mobile collaboration to lift revenue, but retains Neutral because margins remain exposed to competition and lower-margin China Mobile projects.

Core views

Venustech reported a modest top-line recovery in 1H26: revenue increased 9% year on year to CNY1.2bn and earnings rose 133% to CNY31mn. In 2Q26, revenue and earnings grew 15% and 81% year on year, respectively. Nomura attributes the improvement to better collaboration with parent and controlling shareholder China Mobile Group and to stronger demand for AI-powered offerings. China Mobile contributed 31% of total 1H26 sales. By segment, security products declined 5% year on year in 1H26, while security services grew 28%, illustrating that the recovery remains uneven across the business. The report’s main growth thesis is that AI deployment in government and enterprise markets should gradually revive cybersecurity demand and partly offset pressure on traditional security products. Venustech’s Agentic SOC intelligent security-operation platform has achieved large-scale deployment in government, telecom-operator and financial-industry applications; its 1H26 revenue rose 32.0% year on year. Revenue from the LLM application firewall increased 238.2%, while the new Data Oasis product grew 125.5%. Nomura believes Venustech is applying its AI capabilities across security products and services, although penetration of AI-related business will take time. It forecasts FY26–FY28 revenue CAGRs of 8% for security products and 25% for security services, with services expected to become 56% of revenue by FY28F versus 44% for products. Nomura introduces FY26F–FY28F revenue forecasts of CNY2.621bn, CNY3.031bn and CNY3.583bn, representing growth of 12%, 16% and 18%. It expects FY26F earnings to turn positive, followed by 2,301% earnings growth in FY27F and 83% in FY28F from a low base. Forecast normalized net profit is CNY5mn in FY26F, CNY127mn in FY27F and CNY232mn in FY28F. Nomura is nevertheless more cautious than WiND consensus on near-term growth and profitability: its revenue forecasts are 4% below consensus in FY26F and FY27F and 1% below in FY28F, while FY26F net profit is 77% below consensus because of expected short-term margin dilution. Its FY27F and FY28F net-profit forecasts are 11% and 1% above consensus, respectively. Margin remains the key offset to the growth narrative. Nomura expects gross-margin dilution to persist because of intense competition and low-margin projects with China Mobile. Operating cash flow provided a counterpoint, turning positive and increasing 143.0% year on year in 1H26 as the company managed accounts receivable more effectively. The forecast model nevertheless assumes gross margin rises from 58.3% in FY25 to 61.9% in FY26F, 63.5% in FY27F and 64.1% in FY28F as the revenue mix and profitability recover. Nomura maintains its Neutral rating but lowers the target price to CNY13.37 from CNY20, implying 0.4% downside against the CNY13.42 closing price on 27 August 2026. The unchanged DCF methodology uses a 10.7% WACC and 3% terminal growth rate, with cash flows discounted to end-2026F. The target implies 127.7x FY27F EPS of CNY0.10, compared with the stock trading at 128.2x FY27F EPS.

Analysis framework

Nomura reviews 1H26 and 2Q26 financial results, separates performance by security-product and security-service segments, and links the recovery to China Mobile collaboration and AI-security product adoption. It then sets FY26F–FY28F revenue and earnings forecasts, compares them with WiND consensus, evaluates margin and cash-flow trends, and derives the target price through a DCF valuation.

Methodology notes

• Valuation methodsDCF (Discounted Cash Flow)

  Discounted cash flow valuation

  Nomura values Venustech by discounting forecast cash flows back to end-2026F using a 10.7% WACC and a 3% terminal growth rate to derive its CNY13.37 target price.

• Industry AnalysisVolume-price decomposition

  Segment-level revenue and margin analysis

  The report distinguishes security products from security services to assess differing growth rates, mix shifts and their implications for margins and earnings recovery.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Venustech (002439.SZ)

  Primary covered company; expected to benefit from AI-security demand and China Mobile collaboration.

  Strengths

  AI-security products are growing rapidly, China Mobile contributed 31% of 1H26 sales, and operating cash flow improved.

  Weaknesses

  Security-product revenue fell 5% year on year in 1H26 and margins face dilution from competition and low-margin projects.

  Comparison

  Nomura’s FY26F–FY28F revenue forecasts are 4%, 4% and 1% below WiND consensus; FY26F net profit is 77% below consensus, while FY27F–FY28F net profit is 11% and 1% above.

  Risks

  Slower cybersecurity-spending recovery, fiercer domestic competition, slower China Mobile product and market development, and geopolitical risks.

• China Mobile Group

  Venustech’s parent, actual controller and largest shareholder; collaboration is a key sales and product-development driver.

  Strengths

  Contributed 31% of Venustech’s 1H26 sales.

  Weaknesses

  Associated projects are described as low margin for Venustech.

  Risks

  Slower-than-expected product and market development could weaken the anticipated synergy.

Key data

• 1H26 revenueCNY1.2bnUp 9% year on year.
• 1H26 earningsCNY31mnUp 133% year on year.
• 2Q26 revenue and earnings growth+15% / +81%Year-on-year growth.
• China Mobile sales contribution31%Share of Venustech’s total sales in 1H26.
• AI-security product growthAgentic SOC +32.0%; LLM application firewall +238.2%; Data Oasis +125.5%Year-on-year revenue growth in 1H26.
• FY26F–FY28F revenue growth12% / 16% / 18%Nomura forecasts.
• FY26F–FY28F normalized net profitCNY5mn / CNY127mn / CNY232mnFY26F turns positive; FY27F and FY28F growth forecast at 2,301% and 83% year on year.
• Operating cash flow+143.0% year on yearTurned positive in 1H26, supported by receivables management.
• DCF assumptions10.7% WACC; 3% terminal growth rateCash flows discounted to end-2026F.

Impact & implications

Nomura expects AI-security demand and China Mobile collaboration to support a gradual revenue and earnings recovery, particularly through faster-growing security services. However, it believes intense competition and lower-margin China Mobile projects limit near-term profitability and leave the valuation without meaningful upside.

Risks

• IT-security spending in key downstream sectors, including government and finance, may recover more slowly than expected.
• Competition from other IT-security companies in China may intensify.
• Product and market development with China Mobile Group may progress more slowly than expected.
• Geopolitical risks may worsen.

What to watch

• Recovery in IT-security spending among government, financial and other key customers.
• Adoption and revenue growth of Agentic SOC, LLM application firewall and Data Oasis products.
• The pace of China Mobile-related product ramp-up and sales contribution.
• Margin effects from project mix and competitive intensity.
• Receivables management and operating-cash-flow improvement.