Incidents:

According to the company's latest announcement, Jin Yi is the leading unit of the Ministry of Transport's Intelligent Vehicle Road Collaboration Key Technology and Equipment Industry R&D Center. Together with five organizations, including the Ministry of Transport Highway Research Institute and Guangdong Communications Group, they have jointly built an innovative cooperation platform to promote the development of V2X in China.

ETC grew steadily, and the company's OBU sales increased 30% year over year in 2023. (1) The ETC charging market concentration is high. The company has a certain leading edge in the industry. It operates in 30 provinces and cities across the country, and has obvious competitive advantages in terms of customer channels, program professionalism and practicality, and after-sales service. (2) Jinyi's OBU sales reached 6.996 million units in 2023, +45.62%. On the basis of traditional issuer sales growth, the company actively expanded third-party distribution channels and achieved significant OBU sales growth during the reporting period. The trend of unmanned, less manned, and intelligent upgrading of traditional manual charging scenarios at smart high-speed toll gates drove the company's new toll system series equipment sales. (3) The company extended the layout of the new charging system on the basis of traditional ETC, and sold 786 units in 2023, which is expected to form the second growth curve of ETC in the future.

The company has a forward-looking layout of the V2X business and is cooperating with Huawei. (1) The company is the leading unit of the Ministry of Transport's Intelligent Vehicle Road Collaboration Key Technology and Equipment Industry Research and Development Center. The company cooperates with many car companies to jointly explore intelligent networking, vehicle-road collaboration, and autonomous driving applications, from low-level communication modules to terminal products to application protocol stacks, independent research and development of the entire chain. (2) The company is a partner in the smart transportation field of the Huawei Hongmeng ecosystem. It implements technological innovation and application improvement of “OpenHarmony+ smart transportation” to promote the digital upgrading of smart transportation in an interconnected environment. The company is developing products such as Hongmeng controllers, based on the Huawei Hongmeng open source system. (3) The company sold 5,049 sets of V2X products in 2023, +1463.16% year-on-year.

The V2X policy is being implemented at an accelerated pace, and the company is expected to continue its dominant position in the ETC field, and the performance will enter the implementation period. (1) On May 31, the Beijing Public Resources Exchange Service Platform issued a tender notice for the Beijing Vehicle Road Cloud Integrated New Infrastructure Construction Project, with a total investment amount of 9.939 billion yuan.

(2) Earlier, the Ministry of Finance and the Ministry of Transport issued a document to promote the digital transformation and upgrading of highway and waterway transport infrastructure. Starting in 2024, over a period of about 3 years, about 30 demonstration areas will be supported to build a number of demonstration channels and networks with integrated cable networks. (3) The V2X 100 billion market has entered the performance realization period. Considering customer stickiness and product barriers, we expect the core benefits of Jinyi.

Profit forecast: The implementation of the V2X policy is expected to benefit the core. We expect the company's revenue for 2024-2026 to be 6.15/7.99/ 1.159 billion yuan, respectively, and the net profit for 2024-2026 will be 0.82/ 1.44/ 0.229 billion yuan, respectively. The corresponding PE will be 51/29/ 18 times, respectively. The 2024E EPS will be assessed 65 times PE, corresponding to a target price of 29.67 yuan. The first coverage will give a “buy” rating.

Risk warning: V2X's progress falls short of expectations, profit forecasts and valuation judgments fall short of expectations