Incidents:
The company released its 2023 annual report. The company achieved operating income of 901 million yuan in 2023, +4.11% year-on-year, and achieved a net loss of 390 million yuan to mother, a year-on-year decrease of 1,229.96%, which is basically in line with our previous expectations.
Intelligent connectivity continues to grow at a high rate, and ETC is growing steadily. (1) In 2023, Wanji's intelligent connectivity business revenue was +23.80% year-on-year, ETC increased 23.62% year-on-year, and lidar business increased 9.16% over the same period last year. (2) The main reasons for the year-on-year decline in the company's net profit in 2023 are as follows: the company adheres to a long-term strategy, maintains investment in innovation, and continues to increase investment in the market and R&D of new products such as lidar and intelligent networking, with R&D expenses of 336 million yuan, a significant year-on-year increase; at the same time, the prices of some of the company's products declined in 2023, affecting the overall gross profit margin.
ETC is expected to usher in a new round of upgrades. On March 13, 2024, the State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In”. The “Action Plan” proposes that by 2027, the scale of equipment investment in the fields of industry, agriculture, construction, transportation, education, cultural tourism, medical care, etc. will increase by more than 25% compared to 2023; the focus is on supporting the renewal of transportation equipment. As a core manufacturer in the ETC field, the company is expected to benefit the core of industry dividends.
V2X is being implemented at an accelerated pace, and the company is expected to continue its dominant position in the ETC field, benefit from industry dividends, and create a second growth curve. Five ministries and commissions jointly issued the “Notice on Launching Pilot Work on the Application of Intelligent Connected Vehicles “Vehicle-Road Cloud Integration” to organize and launch a pilot “Vehicle-Road Cloud Integration” application to further promote the commercial application of intelligent connected vehicles. This application pilot carried out more in-depth road tests and demonstration applications from the two dimensions of “vehicle road cloud integration” technology implementation and large-scale application of intelligent connected vehicles. Through city-level large-scale application pilot projects, intelligent connected vehicles are being promoted to accelerate the evolution of intelligent connected vehicles from demonstration applications to commercialization. 2024 is expected to be the year V2X will be implemented. V2X is dominated by the G side. Considering product accumulation and resource barriers, we believe Wanji is expected to continue its competitive advantage in the ETC field.
Profit forecast: The implementation of the V2X policy is expected to accelerate growth. We estimate that the company's net profit for 2024-2026 will be 0.7/4.3 billion yuan, and the operating income for 2024-2026 will be 11.52/40.9/4.44 billion yuan, respectively, and the corresponding PS will be 5.15/1.45/1.34 times, respectively.
Risk warning: V2X progress falls short of expectations, profit forecasts and valuation judgments fall short of expectations