The layout of the three major businesses is becoming more and more clear, and we are optimistic about revenue recovery in 24

Danghong Technology continues to be deeply involved in the field of big video, and continues to build ultra-high-definition, intelligent, microservice, meta-cosmopolized, and localized video applications and solutions around video carriers. Over the past 22 years, the company has gradually clarified the three major business layout directions of media culture, pan-security, and intelligent connected vehicles, and the business strategy has become increasingly clear. In 23 years, the company continued to adjust its business focus to reduce the share of low-profit businesses such as security integration, while gradually expanding products such as 5G edge computing terminals and smart entertainment cockpits. We believe that thanks to the recovery in downstream demand and the expansion of new business, the company's 24-year revenue recovery is expected to accelerate. We expect revenue for 23-25 to be 3.73/463/602 million yuan, respectively. Comparable to the company's average valuation (Wind) of 24E 10.1xPS, the company is given 24E 10.1x PS, corresponding to a target price of 41.72 yuan, maintaining a “buy” rating.

Media and culture business: Video localization is progressing steadily, operator business development is accelerating. The company's media and culture business involves various businesses such as radio and television media, Internet video and telecom operators, and 100 cities and 1,000 screens. 1) Radio and television media: Localization of ultra-high-definition video and video is progressing steadily. As of March '23, the high-definition rate of prefecture-level channels exceeded 80%. According to the requirements of the State Administration of Radio and Television, all are expected to be completed by the end of 25; 2) Internet video and telecom operators: the company's cooperation with content platforms such as Migu Video and Tencent Video gradually deepened. In March '23, the company and Migu Video released the “Cross-modal Volume Video AIGC” product; 3) Hundred Cities and 1000 Screens: The company actively participated in the formulation of UHD standards in 100 cities to help Beijing Yishang City and Hangzhou Yishangcheng and Hangzhou Digital Media Waiting for customers to build 100 cities and 1000 screens A second-level broadcast control distribution and operation platform.

Pan-security business: 5G edge computing terminals accelerate industry expansion

The company's pan-security business is gradually reducing the proportion of traditional integration projects. Currently, it mainly lays out 5G edge computing terminals and digital government. 1) 5G edge computing terminals: With video sensing compression and AI capabilities as the core, the company actively promoted the implementation of 5G edge computing video compression terminal products in the industry, and accelerated the expansion of key industries such as satellite Internet, ocean shipping, petroleum and petrochemicals in 23 years. We believe that with the increase in demand for video transmission and storage in the downstream industry, this business is expected to accelerate growth; 2) Digital government:

The company is deeply involved in the construction of the “One Network Management” platform and completed business implementation in Nanjing, Guangdong, Beijing and other places in 23 years. We believe that the digital government business is expected to advance steadily with the construction of smart cities.

Intelligent connected vehicle business: Smart cockpit products have been successfully implemented. It is expected that the company's intelligent connected vehicle business will continue to expand in 24 years to anchor the intelligent automobile market. The business is progressing smoothly, and it is expected to create the company's second growth curve. The company focuses on in-vehicle intelligent entertainment cockpit software products, providing a more all-round, more immersive, and smarter smart cockpit experience based on leading technology and product capabilities that are pure localization. In '22, the company completed product pilot promotion, and the business achieved revenue of 1.04 million yuan. In the first half of '23, the company accelerated cooperation with domestic and foreign car companies such as BYD, Geely, Mercedes-Benz, Porsche, NIO, and SAIC Motor, and the business began to expand. 23H1 achieved revenue of 5.04 million yuan, and revenue growth accelerated. We believe that with the mass production of models by partner car companies and the increase in bike value, the smart cockpit business is expected to become the company's second growth curve.

Risk warning: The commercialization of R&D results falls short of expectations, and the expansion of business scenarios falls short of expectations.