Incident: The company released the 2024 semi-annual performance forecast, with net profit of 0.243-0.254 billion yuan (YoY 38.27%-43.96%), deducting non-attributable net profit of 0.202-0.212 billion yuan (YoY 28.87%-35.25%).

The company reported steady growth in mid-term performance. Although non-recurring revenue during the reporting period was 41 million, the company's net profit after deducting non-net profit grew at a high quality rate of 28.87% to 35.25%. Considering that the equity incentive payment fee of 27 million yuan was a significant increase compared to 17.36 million yuan in the same period last year, the actual profitability of the company was better after excluding the relevant impact. (1) In terms of business classification, the resources and utilities sector continues to expand, and the agricultural machinery business is the main source of rapid growth in the company's performance; (2) From a regional perspective, the company's overseas revenue increased rapidly, with overseas revenue CAGR of 62% in 2020-2023, while industry leader Trimble's revenue grew in single digits, making the company's global competitiveness prominent.

The company has strong performance growth and has maintained a high investment in R&D for a long time. 1) Strong growth sustainability: Revenue increased more than 10 times in 10 years, with the lowest growth rate growing by 17%; profit increased about 15 times in 10 years, and there was only one decline in 2018 (increased R&D investment and personnel expansion). 2) Long-term adherence to strategic R&D investment: Since 21 years, the company's R&D cost rate is 17% +, and 24H1 has continued to increase R&D investment, continuously strengthening its core competitiveness around high-precision positioning chips, boards, modules, intelligent robots, flight control technology, vehicle-grade chips, global SWAS wide-area enhancement systems, and core algorithms.

Satellite navigation applications are developing rapidly in emerging fields including drones, unmanned ships, autonomous driving, etc.

(1) Drones/industrial drones: We believe that the company is also expected to expand into the eVTOL market based on technical advantages and project experience such as high-precision positioning+lidar+drones+autonomous driving. The company's main products are the Hornet (BB4) quadcopter drone, the P330 Pro pure electric vertical take-off and landing fixed-wing aerial survey drone, and the P60 fixed-wing drone aerial survey system, which are widely used in geological survey, 3D reality, water conservancy digital twins, etc.

(2) Autonomous driving field: a combination of satellite navigation+inertial navigation, combining the technical advantages of the two to enable car navigation and positioning. In the future, with the development of autonomous driving, comprehensive solutions combining sensing sensors and “health habits” may become mainstream applications. The company's passenger car integrated navigation terminals have been targeted at many car manufacturers such as Nana, Lotus, and Great Wall, which are expected to benefit from autonomous driving in the long term.

Investment advice: The company's overseas revenue grew rapidly, and the performance growth rate in the first half of the year was high. We raised the company's net profit from 24-26 to 5.63/6.69/7.85 to 0.594/0.781/1.013 billion yuan respectively, corresponding PE to 28X/21X/16X, maintaining the “gain” rating.

Risk warning: Downstream market demand falls short of expectations; autonomous driving development falls short of expectations; industry competition intensifies; performance forecasts are only preliminary accounting results. The specific data is subject to the company's official semi-annual report.