The company released its 2024 interim report. Traditional business revenue grew steadily, but increased industry competition affected the company's overall gross margin level. In the second half of the year, the company will focus on vehicle-road cloud integration and highway business development. The intelligent connectivity business is expected to create a new round of growth curve and maintain an “increase” investment rating.

The company released its 2024 interim report. Revenue continued to grow, and losses increased year-on-year. The company's 24H1 revenue was 0.378 billion yuan, up 17.28% year on year: net profit to mother -0.15 billion yuan, year-on-year loss increased 17.33%; net profit after deducting -0.158 billion yuan, year-on-year loss increased 13.85%. The company's 24Q2 revenue of 0.219 billion yuan increased 1.00% year on year: net profit to mother - 0.07 billion yuan, year-on-year loss increased 91.97%; net profit after deduction - 0.075 billion yuan, year-on-year loss increased by 67.22%.

Revenue from traditional businesses has been growing steadily. By product, dedicated short-range communication revenue was 0.239 billion yuan, up 38.06% year on year; dynamic weighing revenue was 0.083 billion yuan, up 2.80% year on year; lidar revenue was 0.038 billion yuan, down 4.52% year on year: smart connectivity revenue was 0.017 billion yuan, down 35.93% year on year. During the reporting period, the company vigorously promoted the ETC vehicle-road collaboration series of products and related solutions to meet the needs of digital transformation and upgrading of transportation infrastructure and optimization and upgrading of highway network toll systems.

Increased competition in the industry affects the profitability of companies. The company's gross profit margin during the reporting period was 28.08%: down 11.38 percentage points from the previous year, down 5.55 percentage points from the full year of 2023. Mainly due to increased competition in the dedicated short-range communications business market environment, the decline in the price of some products affected the decline in gross margin and overall gross margin. By product, the gross margins of dedicated short-range communication, dynamic weighing, lidar, and intelligent networking services were 24.65%, 34.59%, 31.92%, and 36.26%, respectively, down 6.54, 12.51, 10.48, and 27.20 percentage points from the previous year, respectively.

The intelligent connectivity business is expected to create a new round of growth curve for the company. After years of continuous investment and implementation in technological innovation, product transformation, solution application, etc., the company has “comprehensive technical capabilities for vehicles, roads, cloud networks, and maps, and has established a complete vehicle road cloud ecosystem chain of “planning - construction - application - technological innovation - standard specification”. On July 3, 2024, the five ministries and commissions jointly issued the “Notice on Announcing the List of Pilot Cities for Intelligent Connected Vehicles “Vehicle Road Cloud Integration” application. The construction of a new type of intelligent connected infrastructure was officially launched. In response to the development of vehicle-road cloud integration and highway business in the second half of the year, the company increased the market during the reporting period Expansion efforts have increased year-on-year investment in sales expenses.

Maintaining the “incremental” investment rating, the company's revenue from 2024 to 2026 is estimated to be 12.51, 19.56, 2.949 billion yuan, respectively, and adjusted net profit of 0.009, 0.195, and 0.307 billion yuan. The corresponding PE is 679.3, 31.8, and 20.1 times, respectively, to maintain the “increase in holdings” investment rating.

Risk warning: market competition risk, risk that the development of intelligent connectivity falls short of expectations,