HUAXI Securities: "Radish Run" Commercialization Breakthrough, Apple Intelligence Welcomes the Year of Explosive Growth

According to the financial news app Zhitong Finance, Huaxi Securities published a research report stating that Baidu's "Luobo Kuaipao" autonomous ride-hailing service has seen a significant increase in orders in Wuhan. "Luobo Kuaipao" has deployed over 400 autonomous vehicles in Wuhan. Based on previously disclosed information, it is expected that by the end of 2024, "Luobo Kuaipao" will achieve a balance between revenue and expenses in Wuhan, and will enter a full profit period in 2025. At the WWDC conference, Apple officially launched the personal intelligent system Apple Intelligence, stating that it will be deeply integrated into the next generation of systems such as iOS 18. This strategic move not only signifies Apple's deep layout in the field of artificial intelligence but also indicates its precise grasp of future technological trends. Boosted by market confidence in the Apple Intelligence strategy, Apple's stock price hit a historic high on July 8.

(I) Integrated Empowerment of Car-Road Cloud, Autonomous Driving Challenging Traditional Travel

With the integrated empowerment of Car-Road Cloud, the industry scale continues to expand, showing a steady upward trend. With the development of technology, the feasibility of cost reduction, the autonomous driving industry is in a period of rapid development. The popularity of automation technology in daily life is increasing, and consumers' acceptance of autonomous driving technology is gradually rising. Autonomous driving has become a consideration for consumers when purchasing cars. The country has issued multiple policies to guide the strategic direction of the intelligent driving industry, clarifying that current autonomous driving should develop towards the direction of Car-Road Cloud integration. Recently, Baidu's "Luobo Kuaipao" autonomous ride-hailing service has seen a significant increase in orders in Wuhan. "Luobo Kuaipao" has deployed over 400 autonomous vehicles in Wuhan. Based on previously disclosed information, it is expected that by the end of 2024, "Luobo Kuaipao" will achieve a balance between revenue and expenses in Wuhan and will enter a full profit period in 2025. Luobo Kuaipao has opened passenger test operation services in 11 cities and conducted full unmanned autonomous travel services testing in Beijing, Wuhan, Chongqing, Shenzhen, and Shanghai. Beijing and Shanghai continue to promote the commercialization of autonomous driving: at the 2024 World Artificial Intelligence Conference, Shanghai issued the first batch of demonstration application licenses for intelligent connected vehicles without drivers, namely "fully unmanned passenger vehicle licenses". Four certified companies can implement fully unmanned passenger vehicle applications on certain roads in Pudong, Shanghai; the Beijing Municipal Bureau of Economy and Information Technology issued the "Beijing Autonomous Driving Vehicle Regulations (Draft for Solicitation of Comments)", intending to support autonomous driving vehicles for urban public electric bus passenger transport, ride-hailing, car rental, and other urban travel services.

(II) New Direction in the Power Sector: Installed Capacity Growth and Green Transformation

On July 11, State Grid Corporation of China released the "State Grid Corporation of China Service New Energy Development Report 2024", pointing out that in 2023, the integration of new energy by State Grid's operating areas mainly showed four characteristics: the installed capacity reached a new level; the operating areas added 2.26 billion kilowatts of new wind and solar energy capacity throughout the year; the new scale is about 80% of the cumulative installed capacity of new energy in the United States by the end of 2023 and 1.5 times that of Germany; distributed power sources have become the main growth driver. In the first half of 2024, State Grid's operating areas continued to maintain a good trend of rapid growth and efficient integration of new energy The newly installed capacity of renewable energy reached 96.15 GW, an 18% year-on-year increase. The electricity generation from renewable energy reached 734.4 billion kWh, also an 18% year-on-year increase. The utilization rate of renewable energy remained high at 96.2%.

On July 10th, the China Electricity Council released the "China Power Industry Annual Development Report 2024". The report indicated that in terms of power production and supply, the green transformation of electricity has accelerated. By the end of 2023, the installed capacity of non-fossil energy power generation reached 1,575.41 GW, a 24.1% year-on-year increase, accounting for over 50% of the total installed capacity for the first time, reaching 53.9%. The "Report 2024" predicts that the growth rate of national electricity consumption in 2024 will be similar to that of 2023, with rapid growth in new energy installations and continuous improvement in power supply capacity, leading to an overall balanced national power supply-demand situation.

(III) Apple Stock Price Hits New High, Apple Intelligence Enters Explosive Year

Apple's stock price hit a record high on July 8th, with a market value close to $3.5 trillion, surpassing Microsoft to become the largest market cap in the U.S. Since early April, Apple's stock price has surged by over 30%, while the S&P 500 index has only risen by about 5% during the same period. The driving force behind this surge mainly comes from the market's confidence in Apple's strategic move with Apple Intelligence. At the WWDC conference on June 11th, Apple officially introduced the personal intelligent system Apple Intelligence, stating that it will be deeply integrated into the next generation of systems such as iOS 18. This strategic move not only signifies Apple's deep layout in the field of artificial intelligence but also indicates its precise grasp of future technological trends. According to TechInsights data, in the first quarter of 2024, iPhone shipments decreased by 11% year-on-year, while global smartphone shipments increased by 9.7% year-on-year. The integration of AI technology is expected to bring new vitality to Apple's smartphone business.

(IV) Investment Recommendations

Beneficiaries:

Computing Power: 1. Domestic Chain: Hygon, Capinfo, Taiji Shares, Digital China, Sugon, GigaDevice, etc.; 2. NVIDIA Chain: Chunzhong Technology, Industrious Foxconn, Megmeet, etc. AI Applications: Kingsoft Office, iFlytek, Foxit Software, Jiafa Education, Kingsoft Cloud, Hanvon Shares, Toersoft, HuiChen Shares. Electric Power IT: Keyeye Intelligence, State Grid New Energy, Orient Electronic, Ankura, State Grid Information Communication. HarmonyOS/Huawei AI Applications: Runhe Software, Softcomm Power, Runda Medical, Keyeye Intelligence, Nengke Technology. Edge AI: Softcomm Power, Huawei Technologies, Ninebot Technology, Zhiwei Intelligent, Zhongke Chuangda. Low Altitude: New Morning Technology, Laisi Information, Sichuan Jiuzhou. Financial and Tax IT: Zhongke Jiangnan, BOSOFT, Tax Friend Shares, etc.

Risk Warning: Risks include policy advancement falling short of expectations, risks of macroeconomic downturn, risks of core technology research and development falling short of expectations, and risks of escalation in China-US trade frictions