Revenue grew rapidly in the first quarter of 2024, which is expected to fully benefit from smart transportation construction. In 2023, the company achieved revenue of 909 million yuan, an increase of 4.11% over the previous year; net profit to mother was 386 million yuan, compared to -29 million yuan in the same period last year. In the first quarter of 2024, the company achieved operating income of 159 million yuan, an increase of 50.64% year on year; net profit to mother - 79 million yuan, an increase of 12.78% year on year. The company's dedicated short-range communication, intelligent networking and lidar business revenue grew steadily, and overseas regions achieved revenue of 2013.71 million yuan, an increase of 237.17% over the same period last year. At the same time, the company continued to increase its market and R&D investment in intelligent connectivity and lidar, preparing for bad debts on accounts receivable and preparing for impairment of assets such as inventory. Due to the combined effects of these factors, the company's net profit declined year-on-year.

Comprehensive layout of the vehicle-road collaborative ecosystem. The vehicle-road collaboration is ecologically constructed from the three main aspects of the vehicle, road, and cloud. The vehicle side has built sensing and communication equipment such as in-vehicle lidar and vehicle-mounted V2X communication terminals for connected vehicles to build capacity for autonomous vehicles and related algorithms; the road side has built a roadside intelligent sensing system with lidar as the main body, auxiliary AI video cameras, millimeter wave radar, edge computing units, etc., which can provide vehicle sensing services through roadside RSU; on the cloud side, the intelligent network cloud control platform is based on high-precision maps, three-dimensional modeling, and multi-source data sensing It realizes functions such as digital twins, intelligent networking, and vehicle-road collaboration, mainly constructs visualization services and data services for vehicle-road collaboration scenarios, verifies the viability of vehicle-road collaboration scenarios through simulation capabilities, and provides remote data and operation services for vehicles and roads through the cloud. In terms of epitaxial expansion and progress, Shanghai Xuehu, which is a shareholder, mainly provides the company with computing power support for edge computing in terms of computing power. Shanghai Jida relies on self-developed traffic simulation software to provide the company with simulation capabilities in terms of vehicle-road collaboration and autonomous driving application scenarios.

A leader in the smart high-speed field, with rich project experience. Build four types of intelligent digital facilities for holographic sensing, control and guidance, collaborative computing, and integrated communication to meet the requirements of “full coverage, full scene, and full touch”, use GIS, high-precision maps, BIM models, and Beidou timing to build real-time dynamic road dynamic digital twin models to form an intelligent high-speed visual management and control system, and use data centers and business centers to analyze, mine, and discover massive amounts of information data in real time and non-real time to build a smart highway brain. Typical intelligent construction projects include the following: China's first smart highway with continuous trajectory tracking across the entire road section - Chongqing Yuxiang Expressway informatization construction project, a digital tunnel practice case for high-traffic city sinking - Fuchunwan Avenue digital tunnel project, Zhejiang Digital Twin Tunnel construction verification key pilot project - Hangzhou-Jinqu Expressway Zhejiang Xinling Tunnel, the first smart toll demonstration station in Shandong Province - Gushan toll gate, etc.

Released a vehicle-road collaborative safety improvement and information service plan based on the ETC system — “Traffic Watcher”. The company has deployed a full range of vehicle-road collaboration OBU products in advance, including expandable partner OBU, voice broadcast single-chip OBU, voice broadcast dual-chip OBU, smart OBU all-in-one, etc., and are sold nationwide through Internet online channels and offline highway channels such as Alipay, Douyin, JD, and Tmall. The company's OBU products are iteratively upgraded to actively lead new changes in the ETC industry and customer needs. In terms of roadside products, while maintaining the traditional RSU market share, the company has developed an ETC vehicle-road collaborative roadside unit with a larger communication area and more accurate positioning to achieve accurate information collection and publication. In terms of expanding urban applications, the company launched more market projects with ETC parking hardware, ETC management platforms, and city-level smart parking overall solutions. In terms of highway solutions, standardized toll gate systems, intelligent gantry inspection systems, and work order inspection robot series products are used in batches in Henan, Sichuan, Guizhou, Anhui and other provinces.

Smart transportation and intelligent connected vehicle policies have been released intensively, and the two departments have issued notices to support and guide the digital transformation and upgrading of highway and waterway traffic infrastructure. The pace of the industry is accelerating. On November 17, 2023, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Housing and Urban-Rural Development, and the Ministry of Transport issued the “Notice on Launching Pilot Work on Intelligent Connected Vehicle Access and Road Traffic”, which proposes to launch an entry pilot for intelligent connected vehicle products equipped with autonomous driving functions and carry out road traffic pilot projects within a limited area. The development of L4+ autonomous driving technology has promoted collaborative progress between vehicles, roads and cloud computing, put forward new requirements for road construction, and brought new development opportunities for intelligent connected urban applications. On January 17, 2024, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Natural Resources, the Ministry of Housing and Urban-Rural Development, and the Ministry of Transport issued the “Notice on Launching Pilot Work on the Application of “Vehicle Road Cloud Integration” for Intelligent Connected Vehicles to organize and launch a pilot “Vehicle-Road Cloud Integration” application. On May 1, 2024, the Ministry of Finance and the Ministry of Transport issued the “Notice on Supporting and Guiding the Digital Transformation and Upgrading of Highway and Waterway Transport Infrastructure”, which clearly states the implementation goal: starting in 2024, to support about 30 demonstration areas over a period of about 3 years, build a number of demonstration channels and networks with integrated cable networks, and strive to promote the digital transformation and upgrading of about 85% of busy national highways, about 25% of busy ordinary national highways, and about 70% of important national high-grade waterways. Demonstration channel traffic efficiency has been increased by about 20% in terms of smart capacity expansion; emergency response efficiency has been increased by about 30% in terms of safety and efficiency; a number of vehicle road cloud, shipshore cloud application scenarios and key technologies and standards with high promotion value in terms of integrated innovation; and promote the cultivation of a number of new business formats and models such as personalized customization, networked collaboration, and industrial integration in terms of institutional mechanism innovation.

Profit forecasts and investment recommendations. We believe that the company will continue to increase investment in R&D, lay out an intelligent connected ecosystem, improve its product matrix, and have strong competitiveness. Currently, smart transportation and intelligent connectivity policies have been introduced intensively, and the pace of the industry is accelerating. The company is expected to seize this opportunity to fully benefit. The company's main revenue sources are dedicated short-range communication products and dynamic weighing products. We expect the policy to be implemented quickly, as reflected in the continuous implementation and deployment of related projects. The company's product matrix is complete and rich project experience will be fully benefited. The company's sales of corresponding products are expected to grow rapidly in 2024, and the company's product sales will grow rapidly in 2025-2026.

In 2024-2026, revenue growth rates for dedicated short range communication products were 40%, 35%, and 32%; revenue growth rates for dynamic weighing products were 40%, 38%, and 35%; revenue growth rates for laser inspection products were 20%, 19%, and 18%; and revenue growth rates for intelligent connected electronic products were 35%, 36%, and 37%. As product shipments increase, various costs are expected to decline. We assume that the gross margin of each product will rise slightly.

We expect the company's revenue for 2024-2026 to be 1,247/16.72/2.03 billion yuan, net profit to mother of -0.95/0.27/212 million yuan, EPS of -0.44/0.12/1.00 yuan respectively, and SPS of 5.85/7.84/10.34 yuan respectively. Based on the degree of compatibility between future large-scale investment in smart transportation such as vehicle road clouds and Wanji technology business products, the 2024 PS was 7 times higher, and the target price was 40.96 yuan. For the first time, coverage was given a “superior to the market” rating.

Risk warning. The company's business progress falls short of expectations, and industry policy risks.