1. Jiaxun Feihong is deeply involved in command and dispatch. Its products cover the entire industry chain Jiaxun Feihong is a leading domestic provider of command and dispatch communication systems. Established for more than 20 years, it is deeply involved in traditional advantageous industries such as transportation, national defense, customs, etc., and provides them with advanced customized products and system solutions. The products cover the entire intelligent command and dispatch industry chain. It independently developed the big data platform — the “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., to form a series of products and solutions for the “Smart Command and Dispatch Whole Industry Chain”.

2. Integrated development of railway construction. 5G-R accelerates digital and intelligent intercity high-speed railways and rail transit, which is one of the seven key areas of “new infrastructure” construction. Under high macroeconomic pressure, investment in railway construction has become an important driver for infrastructure.

With the continuous increase in railway mileage, higher requirements have also been placed on the degree of informatization of railway communication systems. The Ministry of Industry and Information Technology approved the 5G-R test frequency, and the introduction of a new communication system is expected to promote the overall upgrading of railway informatization.

3. The core standard of the railway rail transit information circuit

As the core target of the railway information technology circuit, the company continues to develop a high proportion of research and development. Relying on the “National and Local Joint Engineering Laboratory for Advanced Rail Transit Intelligent Command and Dispatch Technology” and the Intelligent Research Institute certified by the National Development and Reform Commission, the company is deeply involved in intelligent informatization of railway rail transit.

The company is deeply involved in state-owned railways, is committed to the application of solutions in the transportation field, actively lays out 5G railways, and lays out intelligent and digitally empowering products in the industry ahead of schedule. The prospects are broad.

Considering Jiaxun Feihong's years of accumulation in the field of traffic scheduling and the development progress of new technologies, we are optimistic about the future potential of the company's new products and solutions.

4. Implement equity incentives to motivate employees

An equity incentive plan was announced in April 2023, with a price of 2.95 yuan/share. The assessment target is that net profit to mother for the 2023-2024 fiscal year will not be less than 15% and 30% growth rates compared to 2022, respectively. The company implements equity incentive plans at critical stages of the business, which is expected to further improve the long-term incentive mechanism, retain outstanding talents, and motivate employees.

5. Profit prediction

We believe that the company is deeply involved in command and dispatch communication systems, and is expected to benefit from 5G-R and intelligent railway transformation, opening up a new round of growth space. It is estimated that 2024-2026 revenue will be 12.4/14.0/1.62 billion yuan respectively, net profit due to mother will be 0.886/1.10/144 million yuan, and earnings per share will be 0.14/0.19/0.24 yuan, respectively, corresponding to the closing price of 6.07 yuan on April 23, 2024, and PE will be 41.95/32.63/25.07 times, respectively. Considering the different positions of comparable companies in railway information technology systems, based on prudential principles, the first coverage was given an “increase in wealth” rating.

Risk warning

Railway construction falls short of expectations; promotion of railway informatization falls short of expectations; upstream industry budgets fall short of expectations; systemic risks. In December 2021, due to inflated 2019 revenue, the company was supervised by the Beijing Securities Regulatory Bureau by issuing a warning letter.