Report summary
Satellite application sub-new stocks, focusing on high-precision navigation and positioning technology. The company was founded in 2012 and is a national specialized, innovative “little giant” enterprise focusing on the core technology and application of high-precision Beidou/GNSS modules in China. On August 16, 2023, the company landed on the Science and Technology Innovation Board.
The results of market expansion were evident, and revenue and profit grew at the same time. In 2023, the company's revenue (412 million yuan, +22.66%) and net profit to mother (42 million yuan, +15.57%) grew simultaneously. The main reason was the company's increased market development capacity and revenue growth in various sectors, driving the company's revenue and net profit to continue to grow. The company's gross profit margin (52.16%, -4.95pcts) and net profit margin (9.65%, -1.13pcts) both declined to varying degrees, mainly due to factors falling market prices. Terminal prices were lowered to a certain extent, leading to a decline in gross margin in related businesses. This can be confirmed by the decline in gross margins of businesses related to other companies in the same industry, and competition in the industry is intensifying. 2024Q1, the company's revenue (39 million yuan, +30.57%) and net profit to mother (-7.0993 million yuan, an increase of 5.885 million yuan over the same period last year) continued to grow.
By industry, the company's revenue in all three industries increased in 2023. Geographic information applications and other revenue ($214 million, +20.48%) grew steadily, and the gross profit margin (58.68%, -0.47pcts) remained stable, which was the company's main source of revenue in the downstream market. Revenue from intelligent driving and digital construction (55 million yuan, +119.74%) increased significantly, and gross profit margin (26.71%, +16.92pcts) increased significantly. The increase in gross margin was mainly due to differences in sales regions. The revenue of modules and data applications increased steadily ($141 million, +6.13%), and the gross profit margin (51.86%, -11.45pcts) decreased. The main reason for the decline was changes in product structure.
By product, application products in the middle and downstream markets continue to grow. The revenue growth rate of high-precision GNSS boards/modules (64 million yuan, -22.15%) has slowed, and the gross profit margin (63.98%, -4.73 pcts) has declined, but it remains at a high level. Data acquisition equipment revenue ($214 million, +20.48%) grew steadily, and gross profit margin (58.68%, -0.47pcts) remained stable. Agricultural machinery autonomous driving system revenue (55 million yuan, +119.74%) increased significantly, and gross profit margin (26.71%, +16.92pcts) increased significantly. The increase in gross margin was mainly due to differences in sales regions. Revenue from data applications and system solutions ($65 million, +29.63%) grew steadily, and gross profit margin (37.28%, -17.03pcts) declined, mainly due to changes in product structure.
By region, foreign gross margins are significantly higher than domestic ones. In 2023, the company's domestic revenue (315 million yuan, +23.15%) continued to grow, and the gross profit margin (46.18%, -6.33pcts) was at a high level; foreign revenue (95 million yuan, +19.28%) continued to grow, accounting for a stable share of total revenue (23.07%, -0.65pcts), and the gross profit ratio (71.43% 6, -0.43pcts) was basically flat year-on-year, but still significantly higher than the domestic gross profit margin.
On a quarterly basis, the company's annual revenue and profit for 2023 was mainly concentrated in Q4. There are three main reasons why the company's revenue is clearly seasonal: First, the company's customers in the fields of measurement, surveying and mapping are mainly state-owned enterprises, governments, and public institutions, which are affected by budget arrangements. Second, the company's customers in the agricultural sector are affected by the work characteristics of spring farming and fall harvesting, and procurement is concentrated in Q2 and Q4; third, some customers use project acceptance methods for settlement. The inspection period is generally concentrated at the end of the year, resulting in a relatively high Q4 revenue.
The cost ratio has increased, and R&D investment continues to grow. In 2023, the company's three-fee rate (29.04%, +1.38pcts) increased, mainly due to an increase in sales expenses ratio (21.46%, +0.89pcts) and management expenses ratio (7.56%, +0.33pcts). R&D investment (85 million yuan, +23.78%) continued to grow. By the end of the 2023 fiscal year, the company had 189 R&D personnel (an increase of 25 over the same period last year), accounting for 33.69% of the total number of employees. We believe that as the company moves into emerging downstream markets, it is expected to have a scale effect and achieve cost reduction and efficiency; as the company continues to increase investment in R&D, the company's product system will become more and more perfect, and market competitiveness is expected to gradually improve.
Accounts receivable increased and cash flow improved. In terms of assets and liabilities, the company's accounts receivable (311 million yuan, +51.69%) increased significantly in 2023, but accounts receivable are generally less than 1 year old. In terms of cash flow, net cash flow from operating activities in 2023 (-34 billion yuan, an increase of 267.315 million yuan over the previous year) increased, mainly due to an increase in cash received from sales of goods and provision of services, and a decrease in cash from purchasing goods and receiving labor payments. We believe that as the company strengthens the management of accounts receivable and improves the credit management control system, the company's repayment speed is expected to accelerate and the efficiency of the use of funds is expected to improve.
The fund-raising project progressed steadily, and the strategic placement and buyback showed the company's confidence. On August 16, 2023, the company raised a total of 785 million yuan in IPO capital, of which 160 million yuan was overfunded. By the end of 2023, the company's fundraising project was progressing steadily. When the company went public, a strategic placement was carried out to the company's executives and core employees, and the number of allotted shares accounted for 7.71% (about 1.198,600 shares) of the number of shares issued. On March 8, 2024, the company plans to use part of the overraised capital and its own funds to repurchase some of the issued shares. The shares repurchased will be used for employee stock ownership plans or equity incentives at an appropriate time in the future. The act of strategic placement and buyback shows the company's management's confidence in the company's future, sends positive signals to investors, and motivates employees to contribute to the company's long-term success and growth.
Relying on the core technology of high-precision satellite navigation, we are building a business model for the entire industry chain. The company has formed a full-industry chain business model of “basic products (chips, modules) +terminals+data applications and system solutions”. The main products are high-precision GNSS board/module data acquisition equipment, agricultural machinery autonomous driving systems, and data applications and system solutions, and have been industrialized in the fields of surveying and mapping, ground reinforcement, deformation monitoring, agriculture, etc.
Overall, we believe that on the demand side, according to our analysis of “Flying Snow to Spring - Military Industry - 10 Questions and 10 Answers & 2024 Investment Strategy”, the compound growth rate of the high-precision satellite navigation application market is expected to exceed 20% during the “14th Five-Year Plan” period. The company's downstream products for high-precision satellite navigation applications will enjoy new incremental markets (such as vehicle-grade autonomous driving, low-altitude economy, etc.) brought about by the “Beidou+” and “+ Beidou” industry integration trends. Along with the accelerated release of demand from overseas markets, the company's demand-side prospects are good.
On the supply side, in the context of the company's increased investment in R&D, the company is expected to further broaden the market space for high-precision satellite navigation applications in emerging fields such as drones, intelligent driving, and the Internet of Things, and the company's expansion in overseas markets with relatively large profit margins will also form a solid foundation for future revenue growth and maintaining a high level of profitability.
Investment advice:
1. At the industry level, the compound growth rate of the high-precision satellite navigation application market is expected to exceed 20% during the “14th Five-Year Plan” period. At the business level, the company's high-precision satellite navigation application downstream products will enjoy the new incremental market brought about by the “Beidou+” and “+ Beidou” industry integration trends. At the same time, driven by the accelerated expansion of overseas markets, the demand of the company's downstream market segments will gradually be fulfilled, supporting the company's performance certainty in the medium to long term; 3. At the business level, the company continues to increase R&D investment and the number of R&D personnel Maintaining steady growth, market competitiveness is expected to gradually improve..
Based on the above view, we expect the company's revenue for 2024-2026 to be 515 million yuan, 649 million yuan and 83.3 billion yuan respectively, with net profit of 49 million yuan, 59 million yuan and 72 million yuan respectively, and EPS of 0.79 yuan, 0.94 yuan, and 1.16 yuan respectively. We maintain a “buy” rating with a target price of 50.50 yuan, corresponding to 64 times, 53 times and 44 times PE, respectively.
Risk warning
The application of high-precision Beidou/GNSS technology in emerging fields falls short of expectations; the market where the company's products are located is fiercely competitive, and there is a risk of a further decline in profitability or further decline; the risk of loss in product exports and exchange due to exchange rate fluctuations; and the risk that the company's fund-raising projects fall short of expectations.