The Internet of Vehicles business boosts the company's profit level, and Internet of Vehicles + intelligent computing is expected to expand the company's profit boundaries. Since the ODN and cabinet business, the company has continued to expand the medical and vehicle networking fields. In 2019, it began to benefit from 5G and data center construction, and revenue quality grew steadily; in 2021, the company expanded the Internet of Vehicles business, and it is expected that with the rapid expansion of the Internet of Vehicles business, the company will achieve continuous growth in revenue. In terms of profit, we believe that the main logic of growth is that the high-margin connected car business is expected to expand rapidly. The company's connected car business has strong outreach development capabilities. It is expected that with the upgrading of traditional cars to intelligent connected vehicles, the demand for intelligence will gradually increase. The company will join forces with car companies such as Fusheng Auto and Geely Automobile to provide software and computing power level support, and sign a “Strategic Cooperation Framework Agreement” with Langke Technology to provide a total computing power of not less than 6000P for the next three years. The first stage has at least 2000P of support capacity. The continuous expansion of the business brings room for development.

The company has a first-mover advantage in the self-developed smart driving tool chain. Increased in-vehicle traffic is compounded by increased networking rate, and the company is expected to benefit first. In terms of passenger car sales, China's passenger car sales gradually rebounded steadily after 2021, and also showed an upward trend from January to April 2024. In terms of vehicle network connection management platforms, according to IHS Markit data, as of 2020, the penetration rate of connected functions in China's passenger car market was about 48%, and the number of connected cars was about 9.48 million; China's intelligent connected vehicle market will continue to grow to 20 million, and the penetration rate will exceed 75%; at the same time, in the future, single-vehicle network data traffic will usher in an order of magnitude. Data traffic is basically flat; smart cockpit infotainment/FOTA will increase from the current 10GB to 30-60GB, and intelligent driving data will increase significantly to about 200-300GB. The company's subsidiary, Youka Technology, is a leading segment in the vehicle networking connection management industry, and has a pioneering trend.

Investment suggestion: With its own scarcity of smart driving tool chain service providers and the role of a proprietary cloud platform service provider, the company's leading position in the domestic segment is stable, and the integration of intelligent computing+vehicle networking is expected to become the focus of future revenue and profit growth. We expect the company to achieve revenue of 6.09/8.31/1,318 billion yuan in 2024-2026, an increase of 17.04%/36.41%/58.58%, EPS is 0.96/1.51/2.34 yuan respectively, corresponding PE is 37.55x/24.04x/ 15.48x, first coverage, gives a “recommended” rating.

Risk warning: risk of loss of technical talent; risk of price fluctuations in materials and products; risk of substitution of competitors in the same industry; risk of reduced profit margins in related businesses, etc.