The company released its 2019 performance KuaiBao, with an operating income of 2.86 billion yuan, an increase of 373.48% over the same period last year, and a net profit of 881 million yuan, an increase of 3971.65% over the same period last year.

The ETC policy promotes the rapid growth of operating income. The state vigorously promotes the cancellation of provincial toll station construction of highways across the country, as well as the promotion of the universal application of ETC tags, roadside antenna and electronic tags and other ETC-related equipment market demand increased significantly over the same period last year, the company's ETC-related product sales increased significantly year-on-year, leading to a substantial increase in full-year business income.

The future development of the company is driven by the demand of vehicle and road coordination in 5G era. The company signed the Strategic Cooperation Framework Agreement with Tencent Technology (Shenzhen) Co., Ltd. in August 2019. Taking advantage of their respective advantages, the two sides will conduct in-depth cooperation in V2X, multi-sensor fusion, vehicle-road coordination and self-driving, and in-vehicle terminal services based on intelligent networking system cloud in the future. Facing the 5G era, the company stores a number of product technologies in the fields of road test, intelligent vehicle terminal and management platform, which will become an important new growth point in the future.

Investment suggestion: the company's EPS from 2019 to 2020 is expected to be 7.32yuan and 6.66yuan respectively, with a buy-A rating and a six-month target price of 100yuan.

Risk hint: the promotion of ETC policy is weaker than expected; the competition in the industry intensifies.