[In the National TA, Blji, Hye-su, refers to MM as a leading company in solutions for the entire industry chain]. When the company was founded in 1995, it started with a railway traffic system. Since then, it has continued to expand its business scope through endogenous extension, and now it has service capabilities for the entire industry chain. Focusing on the core “+5G” strategy, the company has independently developed various basic platforms and application platforms such as the big data platform - “Feihong Digital” platform, the intelligent vision platform - the “Feihong Security” platform, the private cloud platform - the “Feihong Cloud” platform, the Internet of Things platform - the “Feihong IoT” platform, etc., forming a series of products and solutions with intelligent sensing, intelligent transmission, intelligent decision-making, and intelligent analysis capabilities. It can provide a series of product solutions and services, including intelligent integrated dispatch communication systems, military communication network communication equipment, emergency communication systems, and integrated video surveillance systems to help customers in various industries such as railways, national defense, rail transit, civil aviation, energy, government enterprises, customs and other industries achieve intelligent operation/operation/maintenance/management.

The Ministry of Industry and Information Technology approved the 5G-R test frequency, and the prospects for railway 5G private network construction entering the 0-1 stage are broad, and the company has benefited deeply as a leading manufacturer in the industry. On October 9, 2023, the Ministry of Industry and Information Technology approved the test frequency of the railway next-generation mobile communication system (5GR) based on 5G technology to China National Railway Group Co., Ltd. and supported it in carrying out field technology tests for the 5G-R system, marking the entry of China's railway 5GR private network construction from stage 0 to 1. Since 2008, almost all of China's new (reformed) railways have adopted the GSM-R scheme, and there is a huge demand for 5G-R stock replacement. According to company announcements and public data estimates, from 2023 to 2025, China will continue to build about 10,000 kilometers of railways, with an average of 3,333 kilometers per year, including about 8000 kilometers of high-speed railways, an average of 2,667 kilometers per year; in 2025-2035, China will build 35,000 kilometers of railways, with an average of 3,500 kilometers per year, including 20,000 kilometers of high-speed railways, with an average of 2,000 kilometers per year. The company occupies a large market share in the field of railway transportation. Relevant products have covered 18 railway stations, and has led technological development and participated in industry standard setting for a long time. The approval of the 5G-R test frequency will help the company accelerate the 5G-R product testing and subsequent commercial mass production process, and future performance is expected to achieve explosive growth.

Fields such as military communications and customs energy are expected to build momentum for the company's new performance growth. In the context of the construction of national defense informatization, there is still plenty of room for improvement in the technical level and application fields of China's military communication equipment.

Smart customs, smart energy and other fields have also continued to advance under policy promotion. The company is one of the main suppliers of communication equipment for our military communication network, and the customs and energy fields also have competitive advantages. The development of these segments is expected to drive related business to become a new driving force for the company's performance growth.

Profit forecast and investment advice: The company is a leading manufacturer of intelligent railway command and dispatch systems in China, and is expected to gradually increase its performance with the construction of 5G-R. The company is expected to achieve operating income of 1,267/13.93/1,511 billion yuan and net profit of 0.87/1.19/156 million yuan in 2023-2025. The corresponding EPS is 0.15/0.20/0.26 yuan/share, covering the first time, giving it a “buy” rating.

Risk warning: the pace of 5G-R progress falls short of expectations, R&D and competitive risks, and fluctuations in raw material prices