1H24 results are in line with our expectations

The company announced 1H24 results: revenue of 1.484 billion yuan, YoY +22.86%; net profit to mother of 0.251 billion yuan, YoY +42.96%, after deducting non-net profit of 0.211 billion yuan, YoY +34.55%. The company's performance was in line with our expectations. In 2Q24, the company's revenue in a single quarter was 0.867 billion yuan, YoY +24.57%, QoQ +40.57%; net profit to mother was 0.148 billion yuan, YoY +53.28%, and QoQ +43.77%.

Development trends

1H24 revenue growth was steady, and the resources and utilities sector performed well. The company 1H24 achieved revenue of 1.484 billion yuan, YoY +22.86%. By sector: 1) Revenue from the resources and utilities sector was 0.681 billion yuan, YoY +48.06%, agricultural machinery autonomous driving business maintained rapid growth, and trillion treasury bond projects helped accelerate large-scale application of geological disasters and water monitoring equipment; 2) The robot and autonomous driving sector had revenue of 0.079 billion yuan, YoY +29.80%, and the company's passenger car autonomous driving business achieved good breakthroughs. Mass production of some related models led to rapid growth in the sector; 3) The construction, infrastructure, and geospatial information sectors respectively achieved revenue of 0.533 /0.191 billion yuan, YoY +4.62%/7.48%

Overseas markets are expanding rapidly, and good cost control during the period has helped to steadily improve profitability. 1) 1H24's overseas business achieved revenue of 0.445 billion yuan, YoY +34.98%. The global market share of high-precision intelligent receivers continued to increase, digital construction products went overseas smoothly, and the company's overseas business maintained rapid growth with the support of a global distribution and service network. 2) 1H24's gross margin increased by 0.20ppt to 58.44% year on year, and the net interest rate benefited from good cost ratio control during the period, which increased 2.29ppt to 16.50% year on year. 3) The cost ratio for the period decreased by 2.07ppt to 43.17% year over year, with sales expenses ratio -2.60ppt to 19.55% year over year, management expenses decreased 0.91 ppt to 7.46% year over year, and the cost ratio for the period was well controlled.

The autonomous driving business continues to gain strength, and it is a benchmark enterprise for high-precision satellite navigation and positioning. 1) The company continues to expand its autonomous driving business and has been designated as a designated supplier for autonomous driving position unit business for many car companies, and exclusively supplies Baidu Radish Express sixth-generation unmanned vehicle P-Box. We believe that the company's active deployment of automotive-grade chips and global SWAS wide-area enhancement systems is expected to strengthen the company's core competitiveness in the field of driverless driving, and the passenger car business may become a new growth support for the company. 2) The company focuses on basic devices such as GNSS chips, OEM boards, antennas, etc., and high-precision positioning algorithms, and is a benchmark enterprise for high-precision satellite navigation and positioning. We believe that with the selection and opening of pilot cities for large-scale Beidou applications, the company is expected to continue to benefit from the construction of the national PNT system and the promotion of large-scale Beidou applications.

Profit forecasting and valuation

We keep the company's 2024/2025 net profit forecast unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 28.1x/22.8x. We maintain our outperforming industry rating and target price of 33.14 yuan, corresponding to the 2024/2025 32.1x/26.1x P/E and 14.3% upward space.

risks

Overseas market expansion fell short of expectations, and the pace of passenger car business expansion was slowing down.