Incident: The company recently released a semi-annual performance forecast for 2024. It is expected to achieve net profit of about 0.243 billion yuan to 0.253 billion yuan in the first half of 2024, an increase of 38.27% to 43.96% in the same period last year; net profit without deduction from mother is about 0.202 billion yuan to 0.212 billion yuan in the first half of 2024, with a year-on-year increase of about 0.157 billion yuan. 28.87% ~ 35.25% Compared with the situation in the first quarter, the company's performance growth accelerated further in the first half of the year.

Comment: Resources and utilities business and overseas markets are growing rapidly, and brand influence continues to increase.

In 2023, the company achieved revenue of 0.719 billion yuan in the overseas market, YoY +47.51%; the domestic market achieved revenue of 1.96 billion yuan, YoY +12.04%, and the overseas market growth rate was significantly higher than that of the domestic market. From the perspective of the business sector, in 2023, the company's resources and utilities sector achieved revenue of 1.127 billion yuan, YoY +41.29%, and has become the core business sector driving the continuous growth of the company's performance. In overseas markets, the company has established a strong dealer network and continues to invest in overseas team building. With its advantages of high cost performance and excellent service, the company competes disproportionately with international brands to effectively meet the potential needs of more customers. Looking at the resources and utilities sector, the company's agricultural machinery autonomous driving business has the leading market share in the industry, and the agricultural automation market is in a rapid phase, and the potential for future growth is still huge. In the field of geological disasters and water conservancy testing, the company has already used tens of thousands of devices on a large scale in key geological disaster prevention and control provinces across the country, covering more than 0.01 million hidden geological hazard sites, and installed 10,000 sets of monitoring equipment in more than 1,000 reservoirs across the country.

The Ministry of Industry and Information Technology issued a pilot selection notice for Beidou application cities, further speeding up the promotion of Beidou applications.

On July 12, 2024, the Ministry of Industry and Information Technology issued the “Notice on Launching the Selection of Pilot Cities for Beidou-scale Applications in the Field of Industry and Information Technology”, which plans to select a number of cities to carry out pilot work on Beidou scale applications, focusing on the three fields of mass consumption, industrial manufacturing, and integrated innovation, to accelerate the penetration rate of Beidou and promote the orderly upgrading of Beidou equipment applications to the North. As a leading domestic satellite navigation company, Huazu Navigation will benefit deeply from the promotion and expansion of Beidou applications.

Profit forecast: Huazu Navigation is a leading enterprise in the field of satellite navigation in China. It is optimistic that the company will use its competitive advantage to deeply benefit from the high prosperity brought by the construction and promotion of the domestic Beidou industry, while maintaining rapid expansion abroad to achieve rapid growth in performance. The company is expected to achieve operating income of 3.434/4.369/5.51 billion yuan in 2024-2026 and net profit of 0.59/0.765/0.984 billion yuan, corresponding to EPS of 1.08/1.40/1.80 yuan, maintaining a “buy” rating.

Risk warning: Competition in the industry intensifies, and the expansion of new market segments falls short of expectations.