This report is read as follows:

Relying on the R & D strength of Datang Group, Gao Hong focuses on the research and development and promotion of LTE-V vehicle networking standards, and is expected to become the maker of domestic vehicle networking communication standards and take the lead in the 5G era for the Internet of everything.

Main points of investment:

For the first time, it covers the rating of "overweight", with a target price of 20 yuan. Relying on the R & D strength of Datang Group, the company focuses on the research and development and promotion of LTE-V vehicle networking standards, and is expected to become the maker of domestic vehicle networking communication standards and seize the opportunity in the 5G era for the Internet of everything. In addition, the company, which is affiliated to the Institute of Telecommunications Science and Technology (14%), is also expected to be the beneficiary of the reform of state-owned enterprises. We predict that the company's EPS forecast for 2016-2018 will reach 0.18 PE 0.2111 0.27 yuan. With reference to the valuation of the car networking industry, we will give it 50 times the price in 2017, with a target price of 20 yuan, about 35% of the current space, and a "overweight" rating.

Relying on Datang Innovation Center, it has become a LTE-V standard setter. The market locates the company's business in system integration and Internet value-added services, and does not have enough understanding of its expansion of LTE-V business.

The company said on the interactive platform a few days ago that the LTE-V equipment jointly developed and produced by Datang Telecom Group Innovation Center will be tested in Beijing, Shanghai and other places. As a subsidiary of Datang Telecom Group, Gao Hong is expected to make efforts in the field of vehicle networking relying on the accumulation in the field of cloud computing and data communications. Reasons: 1) the arrival of 5G will promote the Internet of everything, vehicle networking will be an important application scenario, and reliable communication network is the foundation of self-driving; 2) domestic communication enterprises have global competitiveness after the baptism of 3G and 4G. In the era of car networking, it is expected to seek more voice by promoting the formulation of standards. 3) based on the existing cellular technology, LTE-V realizes the communication between vehicle and vehicle and between vehicle and roadside equipment. It has the characteristics of low delay, high reliability and self-organization, and can meet the needs of vehicle collision warning, automatic braking, information sharing and so on. 4) Datang has played the role of "national team" since 3G, while Gao Hong has been gaining momentum in trusted cloud and data communications for a long time.

Catalysts: 1) LTE-V standard freeze; 2) major cities start the construction of test bureaus.

Risk hint: LTE-V standards advance later than expected.