Safety point of view:

The company is the forerunner of intelligent network connection of commercial vehicles in China, with rich technical reserves: founded in 2009, the company has been deeply rooted in the intelligent network connection industry of commercial vehicles for more than a decade, and is an early solution provider in the field of intelligent network connection of commercial vehicles in China. Since its establishment, the company has continuously developed the application fields of intelligent network products for commercial vehicles, and successfully extended the network-connected products (intelligent enhanced driving system) from passenger cars to trucks, new energy buses, construction machinery vehicles, etc.; the intelligent products (advanced auxiliary driving system) are extended from slag trucks to cement mixers, engineering dump trucks, hazardous chemicals vehicles and other models, and realize the expansion from rear loading to front loading. The company attaches great importance to research and development, rich technology reserves, a number of core technologies leading the industry. By the end of 2020, the company has obtained 72 patents and 159 software copyrights. Through continuous investment in research and development, the company has built a moat of its products, providing a strong support for the company to maintain its leading edge in the industry.

Policy promotion, technological development and internal demand bring opportunities for industry development: in terms of policies, multiple policies stack to open up the market space of the industry. According to our estimates, in the networked market, policies such as the new national standard for automobile driving recorders, heavy diesel vehicles and off-road mobile machinery will bring more than 5 billion of the market scale to the industry by 2023; in the intelligent market, the policy on the installation of active safety intelligent prevention and control equipment for commercial vehicles will bring more than 4 billion of the market size to the industry by 2023. In terms of technology, thanks to the development of passenger car autopilot technology, the current autopilot technology has been able to support L2 and below self-driving, and there are no technical obstacles to the penetration of commercial vehicles L2 and below. In terms of internal demand, driven by the internal demand of downstream customers for energy saving and cost reduction, mainstream commercial vehicle manufacturers have set up vehicle networking platforms to drive the demand for Internet-connected terminals such as T-BOX.

Driven by policy, technology, internal demand and other factors, the commercial vehicle intelligent network industry ushered in the development opportunity.

"network connection + intelligence" two-wheel drive, the company's future development can be expected: at present, the company has formed a "network connection + intelligence" two-wheel drive development model, network connection business is the cornerstone of the company's business, intelligent business is an important strategic direction of the company. In the field of network-connected business, the company's front-loading vehicle factory has obvious customer base advantages, and the company's intelligent enhanced driving system in the heavy truck market share has increased from 14.27% in 2016 to 26.67% in 2019. By the end of 2020, the company has established a cooperative relationship with seven of the top ten heavy truck manufacturers, and is the first supplier of Shaanxi Auto and BAIC Foton.

As a market leader in commercial vehicle network connection, the company will fully benefit from the industry growth dividend brought by the policy promotion, and is expected to gain a larger market share, and the company's network connection business is expected to continue to grow at a high speed. In the field of intelligent business, the company takes the lead in the market share of rear-loaded slag trucks, and extends to the cement mixer market, and is expected to be extended to heavy truck models in the future; in addition, the company's front-loaded ADAS products achieve breakthroughs in construction machinery vehicles (cement mixers) and other models to open the front-loading market. As the strategic direction of the company, the company's intelligent business has achieved a positive breakthrough in the commercial vehicle front and rear assembly market, and the future development is worth looking forward to.

Profit forecast and investment advice: we expect the EPS of the company from 2021 to 2023 to be 1.22,1.66,2.21 yuan respectively, and the PE corresponding to the closing price on June 3 is about 31.3,23.1,17.4 times respectively. The company is the forerunner of the commercial vehicle intelligent network connection industry in our country, the network connection service is the cornerstone of the company's business, and the intelligent business is the important strategic direction of the company. At present, according to our estimates, policies such as the new national standard for automobile driving recorders, country VI for heavy diesel vehicles, country IV for non-road mobile machinery, and the installation of active safety intelligent prevention and control equipment for commercial vehicles will bring an order of magnitude market of 10 billion for the intelligent network connection industry of commercial vehicles. As a market leader in commercial vehicle network connection, the company's network connection business is expected to continue to grow at a high speed. At present, the company's intelligent business has achieved a positive breakthrough in the commercial vehicle front and rear assembly market. We are optimistic about the future development of the company, covering it for the first time and giving it a "recommended" rating.

Risk tips: (1) the progress of policy landing is not as expected. According to our estimates, the policy will bring a market size of 10 billion yuan to the industry, but if the policy landing progress is not as expected, the market demand may be lower than expected, which will affect the acquisition of orders. (2) the development of corporate networking business is not up to expectations. The company is rich in technical reserves and has obvious advantages in the front customer base of the whole car factory. However, if the company can not continue to maintain the leading edge of networked products and technologies, there is a risk that the company's market share cannot continue to improve or even decline, and the company's networked business may not meet expectations. (3) the development of the company's intelligent business is not up to expectations. Intelligence is the inevitable trend of the future development of commercial vehicles. The company's existing pre-installed customer base has obvious advantages, and it is expected to promote the installation of advanced driving assistance system products in the existing customer base in the future. However, if the company's ADAS products can not continue to break through in technology and performance, then the development of the company's intelligent business in the pre-and post-assembly market is not up to the expected risk.