The semi-annual report continues to grow rapidly. The company's revenue for the first half of this year was 796 million yuan, an increase of 138.89% over the previous year, net profit of 363 million yuan, an increase of 706.11% over the previous year, net profit of 354 million yuan after deducting net profit of non-Gimu was 354 million yuan, an increase of 913.72% over the previous year, and net operating cash flow was 13 million yuan, a year-on-year correction. The gross profit margin for the first half of the year was 62.78%, an increase of 19.51 pct over the previous year, contract debt was 352 million yuan, and inventory was 457 million yuan.

Vehicle areas, road areas, fields, and urban areas are promoted collaboratively. Relying on technology accumulation and long-term cultivation in ETC and smart transportation, the company's products and services have thoroughly covered four types of transportation application scenarios and customer groups in vehicle areas, road areas, fields, and urban areas. We provide front-mounted ETC OBUs, front-mounted ETC integrated other technologies/products, road-side products, ETC+ rearview mirrors, and driving recorders in the vehicle area; provide traditional OBUs and roadside collaborative roadside products in the road area; provide ETC identification/payment solutions in the field; and provide closed test sites, test roads, smart roads, and smart buses in urban areas. The company's main customers include highway operators, system integrators, banks, mobile communication operators, property operators, automobile manufacturers, etc.

Equipment updates and front-loading have led to stable demand. In 2019, the country implemented the abolition of provincial toll gate projects and vigorously promoted the application of electronic no-stop express tolls on highways. The annual ETC user growth reached 120 million, the ETC loading rate reached more than 80%, and the company's ETC product sales achieved explosive growth. By the end of 2019, the total number of ETC users nationwide reached 200 million. In the long run, although demand for rear-mounted ETC tags has passed its peak in 2019, demand will not be reduced on a large scale. Future market demand will enter a stable stage. There are still more than 60 million vehicles without ETC tags in stock, more than 200 million vehicles with ETC tags installed in stock, and demand for equipment updates will remain on a large scale every year. Starting January 1, 2021, models newly applying for product approval should be equipped with an ETC on-board device using a direct power supply system as an option.

ETC front-loading is an industry trend. Since front-loading ETC labels need to meet vehicle standards, OEMs have high requirements for the quality and qualifications of suppliers, the market will be more favorable to large manufacturers.

High penetration rate helps urban ETC application scenarios gradually open up. Urban ETC is mainly used in parking lots, gas stations, and other scenarios involving vehicle identification and electronic payment. With the popularity of ETC labels, the release of demand for ETC in cities will be a long-term definite trend. In the first half of this year, large parking lot integrators, operators, and gas station operators already installed ETC equipment at some outlets to test and test market feedback. Overall, market acceptance was good. In the second half of 2020, it is expected that the urban ETC equipment market will grow at an accelerated pace. According to the Ministry of Transport, “By the end of December 2020, full coverage of ETC services for parking scenarios at major transportation stations such as airports, railway stations, passenger terminals, and port terminals will be achieved. According to the requirement to “promote the application of ETC in parking scenarios such as residential areas and tourist attractions, etc., various regions are expected to concentrate on promoting ETC upgrades in parking lots in the second half of the year.

V2X is poised to be the engine for a new round of growth. Vehicle road collaboration pilot demonstration projects based on 5G and C-V2X have increased significantly. In February 2020, 11 ministries and commissions including the National Development and Reform Commission, the Ministry of Industry and Information Technology, and the Ministry of Science and Technology jointly issued the “Smart Vehicle Innovation and Development Strategy”, which proposed the goal of achieving regional coverage of automotive wireless communication networks (LTE-V2X, etc.) by 2025, and the gradual application of next-generation automotive wireless communication networks (5G-V2X) in some cities and highways. In March, the NDRC and the Ministry of Industry and Information Technology issued the “Notice on Organizing and Implementing 2020 New Infrastructure Construction Projects (Broadband Networks and 5G Fields)”. In the first half of the year, a large number of new pilot demonstration projects appeared across the country, and existing pilot demonstration projects generally expanded the construction scale to the city level. In the first half of the year, Jinyi Technology participated in pilot demonstration projects such as the Futian Central Area Bus Road Collaborative Demonstration Project and the Bao'an Convention and Exhibition Center Bus Road Collaborative Demonstration Project; participated in the formulation and approval of standards related to V2X and intelligent driving in the international standard ISO TC204. This year, Jinyi Technology signed a “Strategic Cooperation Agreement” with Shenzhen Major Industry Investment Group Co., Ltd., which will cooperate on matters such as wide-area vehicle collaborative innovation research, intelligent connectivity operation, and the establishment of an intelligent networking special industry fund. In the second half of the year, the company will rely on heavy investment resources to increase investment in the V2X business, promote the implementation of intelligent connectivity industry cooperation projects, and promote pilot demonstration construction of intelligent connectivity.

Profit forecasts and investment recommendations. Vigorously explore the OBU front-end market, the urban ETC market, and actively promote the V2X business, actively participate in national smart highway construction and other projects, bringing steady growth and momentum transition to the company. As of June 30, the company's net inventory was 457 million yuan, accounting for 12.94% of total assets at the end of the period. We forecast that the company's revenue for the year 2020 to 2022 will be 2,99/31.31/3.420 billion yuan respectively, net profit of the mother will be 885/996/992 million yuan respectively, and the corresponding EPS will be 4.90/5.02/5.49 yuan respectively. Referring to comparable companies, the 2020 dynamic PE10-12 was given times, and the six-month reasonable value range was 49.0-58.8 yuan. For the first time, it covered a “superior market” rating.

Risk warning: OBU demand is falling precipitously; V2X is advancing slowly; holdings are being reduced, etc.