The company's revenue grew steadily in the first half of the year, and the continued implementation of new product lines drove a high growth in the smart traffic operation management system business. Policies related to smart traffic road survey construction are frequent, and the superposition of intelligent driving technology and commercial monetization is gradually maturing, which is expected to further open up the company's smart transportation cloud business space.

Event: The company released the 2024 semi-annual results report. In the first half of '24, the company achieved revenue of 0.328 billion yuan, an increase of 18.18% year on year; realized net profit to mother of 0.106 billion yuan, an increase of 8.01% year on year; realized deducted non-net profit of 0.097 billion yuan, an increase of 8.01% year on year. Among them, in the 24Q2 single quarter, the company achieved revenue of 0.175 billion yuan, an increase of 21.32% year on year; realized net profit of 61.2315 million yuan, an increase of 6.83% year on year; realized deducted non-net profit of 51.8122 million yuan, an increase of 6.70% year on year.

New products drive high growth in smart traffic operation management system business. On the revenue side, in the first half of '24, the company's smart traffic operation and management system business achieved revenue of 0.126 billion yuan, a year-on-year increase of 38.86%. The continuous implementation of new products such as AI video analysis cloud control platforms and toll robots was the main driving force for business growth; the company's smart transportation electronic billing business achieved revenue of 0.183 billion yuan, an increase of 5.31% year on year; the smart transportation derivative business achieved revenue of 19.0038 million yuan, an increase of 45.56% year on year, mainly Supply chain collaboration services and scenario service business growth. On the profit side, the company's profit growth rate is slower than revenue. The main reason is that capital income decreased by 11.6058 million yuan compared to the same period last year due to the decline in market capital interest rates.

Policy and technology two-wheel drive, focusing on smart transportation roadside construction opportunities, are expected to further open up the company's smart transportation cloud business space. In January '24, five departments jointly issued the “Notice on Launching the “Vehicle Road Cloud Integration” Application Pilot Project for Intelligent Connected Vehicles, focusing on 9 areas, including building intelligent roadside infrastructure, improving the assembly rate of vehicle terminals, and carrying out large-scale demonstration applications. On July 3, the first batch of 20 application pilot cities was announced. On July 3, the first batch of 20 application pilot cities was announced. Three cities in Jiangsu Province entered the list. On April 29, the Ministry of Finance and the Ministry of Transport jointly issued the “Notice on Supporting and Guiding the Digital Transformation and Upgrading of Highway and Waterway Transport Infrastructure”. Starting in 2024, the goal is to support about 30 demonstration areas in 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, 25% of busy ordinary national highways, and about 70% of important national high-grade waterways. Intelligent transportation roadside construction policies are frequent. Combined with the continuous development of intelligent driving technology and commercial implementation, the industry is booming, which is conducive to the further promotion and application of the company's smart transportation cloud business.

Maintain a “Highly Recommended” investment rating. The company's performance has grown steadily, and new smart traffic operation management system products continue to be launched; smart traffic roadside construction opportunities are expected to further open up the company's business space and expand the development and application boundaries of traffic data elements. The company's net profit for 2024-2026 is expected to be 0.23/0.269/0.311 billion yuan, corresponding to 35/30/26 times PE in 2024-2026. Maintain a “Highly Recommended” investment rating.

Risk warning: Policy progress falls short of expectations; smart transportation operation management system business development falls short of expectations; downstream demand fluctuates.