The Industrial Operating System Alliance was formally established, and the construction of the Dongtuhongdao ecosystem was accelerated. On November 9, at the 2024 National Industrial Software Conference, the “Industrial Intelligent Operating System Alliance” was formally established. Dongtu Technology joined the alliance with its 100% self-developed core technology products, Hongdao Industrial Operating System (Intewell) and AUTBUS broadband industrial network bus technology, injecting strong impetus into the alliance's technological ecosystem. As a national strategic operating system to promote new industrialization, the company Intewell (Intewell) has achieved the integration and unification of control, computing and cloud services, which can better promote the development of artificial intelligence technology. AUTBUS broadband industrial network bus technology enables deep IT/OT integration and unifies the “last mile” communication protocol for industrial control. In November 2024, the company integrated internal resources to absorb and merge the wholly-owned subsidiary Dongtu Huasheng Technology Co., Ltd. and the wholly-owned subsidiary Dongtu Huihe Technology Co., Ltd. to optimize the industrial operating system business and equity structure, respond positively to the country's demand for industrial operating systems and industrial software update tasks, and better grasp the development opportunities of businesses related to domestic industrial operating systems.

Increase investment in the chip business and work with Neurons to build a new industrial ecosystem. In September 2024, Dongtu Technology further increased its investment in Neuron Information Technology (Chengdu) Co., Ltd., and transferred 7.6172% of Neuron's shares with 0.2 billion yuan. The shareholding ratio increased from 11.0393% to 18.6565%. This strategic layout is conducive to deep collaboration between Dongtu Technology's Hongdao Intewell industrial operating system and Neuron's chips. The company will further utilize its advantages in terms of market and resources to integrate the Hongdao Intewell industrial operating system with Neuron's chips to various industrial fields, promote the promotion and incubation of chips in various application scenarios, and gradually become mainstream chips for new industrialization in China. China's first automotive-grade TSN switching network chip included in the Ministry of Industry and Information Technology's domestic automobile chip list, was awarded a 0.1 million chip order from the National New Energy Vehicle Technology Innovation Center in August 2024, and will be applied to vehicle gateways on a large scale to enable a new generation of autonomous and controllable vehicle network communication architectures.

Fully showcase the autonomous power of new racetracks such as industrial AI. At the 24th China International Industry Fair in September 2024, Dongtu Technology showcased the first industrial AI intelligent robot control system created by an industrial AI controller in China. The company's intelligent robot control system enabled the robot to transform from traditional automation to intelligence, and reached the world's advanced level in terms of functionality and performance. Currently, Dongtu Technology is jointly developing domestic autonomous solutions for robot internal communication and control with robot companies and related research institutes to solve the problem of stuck necks in this field. In addition, the company also showcased its new intelligent control technology system. The system integrates technologies such as control, computing, visual recognition, and artificial intelligence to build an integrated platform similar to an “industrial smartphone”. Through software-defined control, users can manage processes in a more flexible and intelligent manner. Currently, it is widely used in fields such as semiconductors, intelligent construction, rail transit, energy storage, and intelligent manufacturing.

Investment advice: We are optimistic about the future development prospects of the industrial Internet. Dongtu Technology is one of the few enterprises in China that also has the ability to provide software and hardware products and complete solutions in the industrial Internet industry chain. Moreover, the company has unique competitiveness in cutting-edge fields such as industrial operating systems, industrial chips, and autonomous industrial communication protocols. It is expected that the next few years will benefit deeply from the development of the industrial Internet circuit and the wave of domestic substitution. We expect the company's net profit to be 0.04/0.086/0.156 billion yuan in 2024-2026, respectively, and the corresponding PE will be 190.5/88.8/49.2X, respectively, maintaining the “incremental” rating.

Risk warning: Risk of downstream prosperity falling short of expectations, risk of product pricing review, risk of increased competition, risk of falling short of expectations, risk of policies falling short of expectations, global geopolitical risk.