Increase in expense made the company poor in profits
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Software and information technology company Sangfor Technology released its semi-annual results on August 24. Although revenue increased 11.9% on a year-on-year basis, reaching CNY 1.7 billion, the company’s net profit turned from CNY 66.8 million in the first half of 2019 to minus 1.3 billion in 1H 2020. This means that profit dropped incredibly by 288%.
Sangfor is a global vendor of IT infrastructure solutions. The company specializes in cloud computing, network security and network optimization. Internet access management, NGAF hardware solution, virtual desktop infrastructure are all products or services of Sangfor. Since starting distributing cloud services in 2012, Sangfor has provided solutions for banking, education, manufacturing industries and government.
In a board meeting held on July 20, a proposal was passed directing that Sangfor will invest CNY 10 million to establish a wholly controlled subsidiary in Qingdao. Currently, the subsidiary, Qingdao Sangfor Technology （Chinese: 青岛深信服科技有限公司) has already registered and acquired a business license. On August 10, Sangfor announced another decision that it will merge with its subsidiary, Sangfor Networks (Shenzhen) Company (Chinese: 深信服网络科技（深圳）有限公司), in order to optimize the management structure and improve the operating efficiency.
In 2020, the market size of the Chinese public cloud is almost CNY 100 billion and that of private cloud is around CNY 75 billion. The size of the public cloud is expected to double in 2023 and at that time, the private cloud may have a size larger than CNY 140 billion. The epidemic boosted the demand for remote working and online meetings and thereby expenditure on cloud infrastructure increased in the 1Q 2020.
The stock price reduced by 2.17% on August 26 after Sangfor’s semi-annual results were released.