Event: according to the company's annual report for 2021, the company achieved a total operating income of 10.28 billion yuan, an increase of 9.2% over the same period last year, and a net profit of 720 million yuan, down 33.0% from the same period last year. This is mainly due to the decline in the fair value of Hongquan Wulian caused by market fluctuations, superimposed sales and increased investment in research and development.

With the steady development of intelligent transportation, the advantage of Yunbian integration is highlighted. During the reporting period, the company's intelligent transportation business (excluding the contribution of video products from subsidiaries) achieved a total revenue of 4.23 billion yuan. After deducting the impact of ETC products and the demolition of provincial toll stations, revenue increased by 19.5% compared with the same period last year, maintaining a steady growth trend. 1) in terms of urban transportation, the company continues to promote the "cloud-edge-to-end" integrated business architecture, Omni-T global transportation solutions have achieved good results, and the management and control efficiency of many projects has been significantly improved. 2) in the aspect of intercity transportation, the business of highway informatization and digital upgrading develops steadily, and the intelligent road network service promotes the industrial reform and realizes the landing application in many places. 3) in the aspect of vehicle-road coordination, road test perception and communication equipment have been deployed as needed, and several projects have been implemented on the ground, leading the construction of a number of self-driving demonstration zones, and the benchmarking effect has gradually emerged.

With the rapid development of smart things, the market at home and abroad continues to open up. During the reporting period, the company actively faced the challenges of chip supply shortage and recurrent epidemic situation, and the revenue of smart things business reached 6.07 billion yuan, an increase of 15.1% over the same period last year.

1) domestic market: on the one hand, closely follow the national standards, vigorously develop the business market of customized products, and create high-end cases in the industry; on the other hand, fully implement the sinking strategy of prefectures and cities, strengthen the business expansion of standard products, and set up more than 80 secondary offices. Re-comb the product matrix, and create a people-friendly brand "A Yu", and maintain a leading market share. 2) overseas market: the company achieved overseas income of 2.02 billion yuan, an increase of 27.9% over the same period last year, and the proportion of revenue increased to 19.7%. At the same time, it completed the establishment of multiple branches, further improved the overseas channel network, and effectively enhanced the influence of the brand.

Artificial intelligence rises abruptly based on accumulated strength, and automotive electronics are precisely cut in. 1) artificial intelligence: the subsidiary company makes comprehensive efforts to achieve large-scale expansion while enabling the high-quality development of internal intelligent IoT and intelligent transportation business. in intelligent power plants, intelligent coal mines, intelligent manufacturing and other fields to achieve in-depth cooperation with well-known enterprises, make phased breakthroughs, is expected to become a new growth point of the company's business. 2) Automotive electronics field: the company invests in Lianlu Intelligence to open the complete closed loop of "road network connection" and "vehicle end network connection". During the reporting period, the company launched ETC OBU in line with the Autosar standard, which has been supplied in bulk for the head vehicle factory; launched a new generation of intelligent entry products based on UWB, and continued research and development to explore the application and expansion of UWB in live inspection, short-range radar mode and other scenarios. Successfully delivered hundreds of thousands of 4G T-Box products, jointly developed the 5GV-Box module solution with Continental Group, and upgraded independently on this basis, has obtained two designated projects and plans to start mass production in 2022, the follow-up synergy with Continental Group is worth looking forward to.

Profit forecast and investment advice. It is estimated that the compound growth rate of homed net profit will be 29.7% from 2022 to 2024. The company benefits from the digital transformation of the transportation industry, the intelligent transportation business maintains steady growth, and the follow-up orders are expected to show a slow and then fast growth trend with the planning and implementation of capital construction projects; the market development of intelligent things service at home and abroad is smooth, at the same time, artificial intelligence business is booming, further enabling intelligent transportation and intelligent things business to achieve the landing of multi-domain projects and open up new growth space. In addition, in 2021, the company's profit end is temporarily under pressure by non-recurrent profits and losses, the follow-up supply chain and raw material price disturbance is expected to slow down, gross profit margin may gradually pick up, profit elasticity is worth looking forward to. To sum up, give the company 22 times PE in 2022, corresponding to the target price of 13.42 yuan, covering for the first time and giving a "buy" rating.

Risk hint: the speed of intelligent transportation projects is not as fast as expected; the competition in the smart things industry is intensified; the price of raw materials is rising.