It is the only listed platform owned by China Electronics 28. Rice Information, the leading information system leader in domestic civil aviation, was founded in 1988. Its predecessor was Rice's major electronic system engineering company invested and established in 1988 by the 28th Research Institute of the former Ministry of Electronics Industry (now the 28th Research Institute of China Electronics Technology Group Corporation). The company is developing derivative applications around military C3I theory (combination of command, control, communication, and intelligence) in the civilian field. Through continuous internal and external mergers, the company has now formed three major businesses: traffic management, urban road traffic management, and urban governance in civil aviation. All three businesses are leading market share in the industry. In 2023, the company's revenue was 1.675 billion yuan, net profit to mother was 0.131 billion yuan, and the 5-year CAGR was 37.93%, maintaining a relatively rapid growth rate.

The expansion of civil aviation zone management welcomes new volume, and low-altitude air traffic control opens up market space 1) In terms of civil aviation management: The expansion of civil aviation management has ushered in additional volume. On the basis of the existing 8 large-scale regional control centers, the country will expand new zone management areas and open up market space for air traffic control system construction.

As a leading civil aviation management leader, the company is expected to benefit from the expansion of regional management. The civil aviation control system has license barriers. The company is the only manufacturer that also has a license for small to medium and large civil aviation control automation systems. According to Sansheng Consulting statistics, Rice's information market share reached 42% in '22 (main systems accounted for 63.64%). In addition, the company is further expanding overseas markets such as Asia, Africa, Latin America and Eastern Europe, smart airports and other products to open up room for long-term growth. 2) Low-altitude air control: The supply side of the low-altitude economy ushered in an inflection point, with frequent policies. As the foundation for low-altitude operation, the air traffic control system began construction first, opening up the 10 billion market. We believe that the company has great advantages in the low-altitude field, mainly due to ① the company's high system maturity: ② the company has rich experience in project implementation. At present, the company won the bid for the Anhui Low-Altitude Flight Service Platform Project in January of this year. It is expected that it will form a first-mover advantage in the field of card space low-altitude air control.

Smart transportation and urban governance businesses are expected to benefit from vehicle-to-land clouds and trillion-dollar treasury bonds 1) Smart transportation: In January 2024, the five ministries and commissions jointly issued the “Notice on Launching Pilot Work on the “Vehicle Road Cloud Integration” application. The pilot content includes carrying out networking transformation such as traffic signals and traffic signs to achieve a networking rate of 90% or more, and simultaneously deploying roadside sensing devices and edge computing systems at key intersections and road sections. At present, tenders at the 10 billion level have been launched in Beijing, Wuhan, etc. The company has many locations on both the road and the cloud side. The traffic signal control equipment system products are advanced, and the overall market share is leading, and it is expected to benefit from the integrated construction of vehicles and clouds. 2) Urban governance: According to Sansheng Consulting statistics, the company's public credit platform/emergency command system ranked first and second respectively, with a market share of 3.89%/8.37%. Recently, trillion treasury bonds were issued. Among them, natural disaster response capabilities and emergency command and early warning systems are one of the key investment directions. As a leader in the industry, the company is expected to benefit from the construction of trillion yuan treasury bonds.

Investment advice:

The company is a leading domestic civil aviation management leader. The fundamentals are steady. The construction of an expanded air traffic control area opens up room for long-term growth. It is expected to be a leader in the card slot industry in the low-altitude air traffic control era, which is expected to bring great flexibility in performance growth. We expect the company's revenue for 2024-2026 to be 2.041/2.479/2.908 billion yuan, and net profit to mother 0.162/0.219/0.276 billion yuan, respectively. The first coverage gave an investment rating of -A for increasing holdings. The target price for 6 months was 64.35 yuan, which is equivalent to a dynamic price-earnings ratio of 65 times in 2024.

Risk warning: The pace of policy implementation falls short of expectations, industry competition intensifies, macroeconomic fluctuations, and industrial development falls short of expectations.