Event: the company released its semi-annual report for 2021, with 2021H1 revenue of 251 million yuan, an increase of 26.54% over the same period last year, and net profit of 41.38 million yuan, an increase of 12.15% over the same period last year.

The overall performance has increased steadily, the layout of the automobile intelligent controller has achieved initial results, and the steady growth of the company's overall performance is mainly due to: 1) the intelligent enhanced driving system: including the front intelligent driving recorder and the front installation of Tmurboxbox 21H1, the operating income reached 156.8448 million yuan, an increase of 17.95% over the same period last year. It is mainly due to the increase in the sales of heavy trucks in the front-loading vehicle factory in 21H1, which led to the increase in the sales of intelligent driving recorders, and the gradual increase in T-BOX penetration during the transition period of the sixth national policy. 2) Vehicular networking terminal: refers to the rear-loaded environmental protection OBD business. The main product form is the rear-loaded OBD with a business income of 5.2282 million yuan in the first half of 2021, a decrease of 29.23% compared with the same period last year. As the environmental protection terminal business is mainly bidding projects by government departments, there is some uncertainty, and the new increment in the 21H1 has decreased compared with the same period last year. 3) Human-computer interaction terminal: including the pre-installed intelligent central control screen, 21H1 achieved business income of 16.932 million yuan, down 18.60% from the same period last year, mainly due to the iterative upgrade of major customer models in 21H1 and the adjustment of the original product structure. 4) Advanced auxiliary driving system: including the front and rear advanced auxiliary driving systems, the business income in the first half of 2021 was 51.1694 million yuan, an increase of 103.54% compared with the same period last year. The growth of the front equipment is mainly due to the increased requirements of the mainframe factory customers for the intelligence of commercial vehicles, the increase in the coverage of the advanced auxiliary driving system, the increase in product categories, and the great expansion of installed customers and models. The main reason for the increase in afterloading is that the slag truck business is gradually getting rid of the influence of the epidemic, the original project is carried out smoothly, and the 21H1 has newly entered many cities and started to supply goods. 5) Smart City Business: the main products are various government management platforms and related operation and maintenance services developed by subsidiary Chengsheng Technology. 21H1 achieved a business income of 14.4771 million yuan, an increase of 53.74% over the same period last year, mainly due to the accelerated pace of business expansion within 21H1 and the increase in the product types of smart city government management platform.

The revenue of 21H1-connected business reached 179.0049 million yuan, an increase of 11.07% over the same period last year; the revenue of intelligent business reached 51.1694 million yuan, an increase of 103.54% over the same period last year, with a significant increase in growth rate, indicating that the demand of pre-and post-loading customers for intelligent commercial vehicles is gradually increasing.

In a single quarter, the growth rate of vehicle sales of downstream customers began to decline since the second quarter of 2021, causing greater pressure on the company's business; secondly, in the first half of 21, the tight supply of some raw materials and rising prices were more prominent, which had a certain impact on the company's supply and cost side, so the business was restricted to a certain extent in the second quarter, resulting in a slight slowdown in revenue growth.

In addition, in the first half of 21 years, the company established Beijing Yubo Automotive Control system Co., Ltd., which is mainly engaged in the research, development, production and sales of automobile intelligent controllers. Since its establishment in February, Beijing Weibo has continuously signed technical development agreements with a number of mainframe factories, and BCM (body controller) products have been shipped in small batches to a large mainframe factory, which is expected to be supplied in bulk in the second half of the year. In the future, Beijing Weibo will focus on the field of intelligent controllers for commercial vehicles, and strive to cover a full range of controllers and domain controller products.

Adhere to research and development, grasp high-quality customer resources, diversified product layout is expected to further open space 1) the company maintains high-intensity R & D investment for a long time, 21H1 invested a total of 48.015 million yuan in R & D expenses, accounting for 19.14% of business income; by the end of June 21, the company had 78 patents, including 25 invention patents and 160 software copyrights. 2) after years of accumulation, the company has formed a good long-term cooperative relationship with many high-quality customers. At present, it has become the main supplier of Shaanxi Automobile, BAIC Futian, Anhui Valin, Suzhou Jinlong, BeiBen, Sany heavy Industry, Sinotruk, Dongfeng Group, Dayun Group, Xugong Automobile, Xiaokang Group, Scania and other large vehicle factories. 3) in addition to the existing products, the company carries out diversified product layout: in addition to controllers, the company has product layout in new technology fields such as 5G-V2X, high-precision positioning, AEB, low-speed unmanned vehicles, etc., enriching the product line of the commercial vehicle market and forming a differentiated competitive advantage, which is expected to further open up space for the company.

Profit forecast and investment advice: benefit from the rapid penetration of commercial vehicle intelligent network connection, the value of bicycle intelligent network connection has also been greatly increased, the company is in a leading position in the industry and is expected to fully enjoy the industry dividend, at the same time, the company's smooth expansion of new products and new customers will drive the company's sustained high growth after entering the harvest period. Taking into account the output decline of the downstream mainframe factory and the risk of delay in the arrival of the new national standard for driving recorders, the company's 21-23 net profit is adjusted to 114 million yuan, 175 million yuan and 255 million yuan (the original value is 133 million yuan, 197 million yuan and 260 million yuan), corresponding to 23 times PE in 22 years, maintaining the "buy" rating.

Risk tips: downstream mainframe factory output decline; raw material shortage and price rise; policy implementation is not as expected, etc.