Big video track leader, 2023 is expected to usher in a reversal of difficulties. The company has been deeply engaged in the video field for more than 20 years, focusing on the three major areas of media culture, pan-security and intelligent cockpit to provide complete video solutions.

In 2022, the company's pan-security business was affected by the epidemic, customer demand declined, some projects were cancelled or suspended, and the newly launched edge computing products did not form a large-scale landing, at the same time, the company continued to invest in research and development, resulting in pressure on the profit side in 2022, resulting in a net profit loss of 98.8 million yuan. However, considering the elimination of the impact of the epidemic in 2023 and the opening of new product markets, it is expected to usher in a reversal of difficulties.

The "video + AI" ability takes the lead, and the cockpit opens the second growth curve. 1) the company develops the next generation UHD video coding and transcoding technology, takes the lead in the industry for a long time, and participates in the formulation of each generation of domestic video coding standards to complete a comprehensive domestic adaptation. The company has a deep accumulation in computer vision, video structure, abnormal behavior detection, portrait recognition and other algorithms are in the domestic leading level. 2) Media culture: the company provides "live broadcast and content production" and "release and operation" products and services, customers cover CCTV, Internet video manufacturers, three major operators, etc., and participate in benchmarking projects such as ultra-high-definition video industry park, hundred cities and thousands of screens. 3) Pan-security: the company focuses on digital government and edge terminals, and digital government provides platform products in China. By forming a standardized scheme to improve gross profit, edge terminals can save up to 90% of bandwidth and 90% of transmission costs. Multi-industry landing has been achieved, and volume is expected to be released in 2023. 3) Intelligent cockpit: the company provides intelligent cockpit multi-screen interaction, cockpit immersive atmosphere and other solutions, cooperation with mainframe factory through direct visa, cooperation with car companies in part through Tier1 and other partners, charging mode for technology development fees, License charges, etc., has completed a number of fixed points, covering high, medium and low models. Considering the continuous increase in the number of new energy vehicles in China and the gradual mental development of intelligent cockpit users, the company is expected to open a new growth curve by virtue of its early card position.

Multimode is the next stop for ChatGPT, benefiting from video compression and AIGC core. 1) under GPT multimodal deduction, video becomes the form of input and output, and the amount of data may far exceed that of text, bringing about the following changes: first, the model training uses the volume of data to expand, resulting in an increase in storage costs; second, the surge in network traffic requires more bandwidth, resulting in higher bandwidth costs. The above changes will greatly stimulate the demand for video compression, the company is the leader in the core of video codec, has significant advantages in cutting-edge UHD codec technology, and is expected to benefit deeply. 2) around AIGC preprocessing, the company has multiple reserves, mature landing in media studios, virtual anchors, intelligent media assets, rapid content production and other scenarios, and a large number of scenes and video data also provide support for the acceleration of AI training. In the future, the company is expected to achieve clamping in the video field.

Maintain a "buy" rating. Considering the company's entry into the field of smart cars, the standardization of edge terminals is improved, the gross margin space is improved, and media culture benefits from 4K/8K promotion. In 2023, the epidemic and other repressive factors gradually eliminate, and demand improvement, is expected to usher in a rebound. It is estimated that the company's 2022-2024 net profit from homing will be-0.99pm 1.30max RMB 184m, eps-1.23pm 1.61max 2.30RMB, maintaining the "buy" rating.

Risk tips: research and development is not as expected, the progress of policy implementation is lower than expected, and the risk of bad debts of accounts receivable is intensified.