The Hangzhou Auto Road Cloud pilot is progressing at an accelerated pace, and Hangzhou Trading has taken on many tasks. According to the Ministry of Industry and Information Technology's announcement on July 1, 2024, the Hangzhou-Tongxiang-Deqing Consortium is a pilot city for intelligent connected vehicle “vehicle road cloud integration” applications. Previously, on June 18, 2024, Hangzhou Transportation Investment Group Co., Ltd.'s “Request for Approval of the Feasibility Study Report of the Intelligent Connected Vehicle “Vehicle Road Cloud Integration” Application Pilot Project in the main urban area of Hangzhou” was approved by the Hangzhou Municipal Development and Reform Commission. According to Hangzhou's “Vehicle Road Cloud Integration” application implementation plan, during the pilot period, Hangzhou Exchange mainly undertook the construction and operation of the industrial exhibition hall of the cloud control platform. The construction of and Tasks such as operation, smart high-speed engineering construction, intelligent roadside infrastructure planning, intelligent connectivity industry fund formation, data element development, and commercial operation.

Special financial support was provided to Hangzhou Exchange and Investment, and the Cheluyun project was quickly incubated. According to the “Announcement of the Special Financial Incentives List for the 2024 First Batch of National Intelligent Connected Vehicle “Vehicle Road Cloud Integration” Application Pilot Cities Unveiled in Hangzhou” released on September 23, 2024, Hangjiao distributed 5 municipal districts to receive special financial incentives. Hangzhou Trading was the only enterprise to receive financial incentives, with an incentive amount of 2.75 million yuan. On December 20, Hangzhou Trading announced that the Group has formed Hangzhou Intelligent Connected Technology Co., Ltd., as the implementing entity for tasks related to the intelligent connected vehicle “vehicle road cloud integration” pilot. Currently, Hangzhou Stock Exchange is working with relevant entities to plan the establishment of intelligent connected industry funds and project reserves to actively expand investment incubation in the intelligent connected vehicle industry in Hangzhou.

Longyuan Construction is expected to receive order favors with shareholders' support. Currently, Hangzhou Trading has an initial shareholding of 8.4% of the company, and is expected to receive more order support in the field of vehicle traffic. The company announced on November 12 that it won the bid for the “ordinary express dual-use” renovation and expansion project design, procurement and construction (EPC) engineering general contracting project (0.20939 billion yuan) for the Hangzhou Xinjing Expressway Tonglu Service Area; on July 31, it was announced that it won the bid for the underground road and wiring project of the Hangzhou West Railway Station South Complex (0.44984 billion yuan). Along with the fixed increase, Hangzhou Trading Co., Ltd. was further implemented as an important implementation unit for the vehicle road cloud complex. We expect the company to receive more order support from shareholders within Hangzhou.

Profit forecasting and valuation: The current shortage of capital is the company's most critical issue. In the future, after Hangzhou Stock Exchange invests in shares, it will directly bring about capital improvements and risk asset revaluation in the short term. On the other hand, it is expected that multi-level cooperation at the business level will enable listed company entities to increase construction business. We believe we should pay close attention to matters related to the fixed growth of Hangzhou Stock Exchange. In another dimension, the company's existing PPP operating investment can provide relatively stable cash flow. The green construction business is resilient. Currently, due to poor financial conditions and low market expectations, the company has already obtained an initial stake in Hangzhou Trading, and there is a high level of confidence in continuing operations in the future. It is recommended to focus on the logic of reversing the dilemma in the short term and focus on business growth in the medium to long term. Overall, the company's revenue for 2024-2026 is 9.67 billion yuan/11 billion/ 16.15 billion yuan, maintaining a “highly recommended” rating.

Risk warning: There is a risk of uncertainty about the fixed increase of Hangzhou Trading; project introduction falls short of expectations; risk of capital shortage; debt implementation falls short of expectations; infrastructure investment falls short of expectations