Performance Forecast

The company voluntarily disclosed the semi-annual performance forecast. The first half of 2024 is expected to achieve net profit of 0.243-0.253 billion yuan, a year-on-year increase of 38.27%-43.96%, after deducting net profit of 0.202-0.212 billion yuan, an increase of 28.87%-35.25% year-on-year. Mainly resources, utilities and overseas revenue have achieved rapid growth. The company actively expands industry applications, builds the company's brand influence, continues to increase investment in R&D, build core technical barriers, and enhance the competitiveness of the company's products.

Short-term catalysis

1) Autonomous driving. Recently, the Wuhan “Radish Run” driverless taxi caught fire. Radish Express is Baidu's autonomous travel service platform. It uses Baidu's robotaxi series models. The company has reached a cooperation with Baidu in Interactive Easy to supply Pbox products to its robotaxi. The company's P-box products have been designated as designated suppliers for autonomous driving position unit business for many car companies. Many models, including the Xiaomi SU7, have been shipped in batches, and the product value ranges from several hundred yuan to thousands of yuan. The company has been digesting the last round of autonomous driving valuations in the past two years. With Tesla FSD entering China, the integrated construction of domestic vehicle-road clouds, and the promotion of driverless taxis, the company's autonomous driving business is expected to usher in a new round of inflection points.

Core logic

1) Go to sea. Overseas markets are a sea of stars, and the international giant Tianbao Navigation (TRIMBLE) has an annual hardware revenue of 15 billion yuan, of which overseas 0.72 billion yuan of revenue currently accounts for less than 30%. The compound growth rate of overseas revenue in the past 3 years has remained above 50%, and overseas gross margin has remained above 70%. The export regions are mainly Russia, South America, Asia Pacific, and the Middle East. The European and North American markets are mainly dominated by giants such as Tianbao, Leica, and Topcon. The company's export product categories have expanded from RTK equipment in the past to autonomous driving of agricultural machinery to drones, and there are broad prospects for overseas business.

2) Strong α. We believe that the reason why the company can compete in the domestic market and enjoy high growth in overseas markets is that the company has two leading advantages in algorithms and management. The first is the algorithm. The general RTK algorithm is not difficult. The core competition is the ability to eliminate errors and prevent interference. For example, ionosphere interference has no rules to follow, and manufacturers are required to establish their own ionosphere models based on experience. Ultimately, the product side is performance and stability, and the company continues to lead in terms of core algorithm capabilities. Furthermore, the company's leading management system has been proven effective many times, and the market share should have received a valuation premium.

Investment advice

We expect the company's net profit forecast for 2024-2026 to be 0.584, 0.759, and 0.99 billion yuan, corresponding EPS of 1.07, 1.39, and 1.81 yuan, respectively. The current stock price corresponding to 2024-2026 PE is 28.60X/21.99X/16.87X, respectively, maintaining a “buy” rating.

Risk warning

The autonomous driving business fell short of expectations, and overseas market expansion fell short of expectations.