Key points of investment

24H1 net profit to mother is close to the upper limit of the performance forecast range

The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 1.48 billion yuan, +22.9% year over year; achieved net profit of 0.25 billion yuan, +43.0% year over year, close to the upper limit of the performance forecast range, mainly due to 24H1's continuing rapid growth in the two major business segments of resources and utilities, robotics and autonomous driving; achieving net profit deducted from mother of 0.21 billion yuan, +34.6% year over year. The company achieved a gross sales margin of 58.44%, +0.20pct year on year; achieved a net sales margin of 16.50%, +2.29pct year on year.

In a single quarter of 24Q2, the company achieved revenue of 0.87 billion yuan, +24.6% year over month; realized net profit of 0.15 billion yuan, +53.3% year on year, and +43.8% month on month; realized net profit without return to mother 0.12 billion yuan, +30.7% year on year and +43.0% month on month. The company's gross sales margin for the 24Q2 single quarter was 58.18%, +0.63pct year on year, down 0.62pct; 24Q2 net sales margin was 16.64%, +3.28pct year on year, +0.35pct month-on-month.

The resources and utilities sector contributes to the main driving force for development

In the first half of 2024, the company's resources and utilities achieved revenue of 0.68 billion yuan, accounting for about 46% of total revenue in the first half of '24. Between 2022-2024H1, the company's resources and utility revenue increased by 31.07%/41.29%/48.06%, respectively, which has become the main driving force for the rapid growth of the company's performance in recent years. The resources and utilities sector mainly provides high-precision navigation and positioning services for agricultural, forestry and public service customers. The company has developed Beidou agricultural machinery automatic navigation and control systems, satellite leveling systems, agricultural machinery production informatization management platforms, land leveling solutions, intelligent spray control solutions, etc., to achieve intelligent work machinery integration and remote interaction and sharing with multiple machine operations to improve agricultural operation efficiency and reduce costs. The company's “Navigator NX510” products are leading in sales in the field of autonomous driving of agricultural machinery.

In July 2024, the National Development and Reform Commission and the Ministry of Finance issued “Certain Measures to Strengthen Support for Large-scale Equipment Renewal and Consumer Goods Trade-In” to coordinate the arrangement of ultra-long-term special treasury bond funds of around 300 billion yuan to increase support for large-scale equipment renewal and consumer goods trade-in. In terms of equipment renewal, renewal subsidies for sectors such as industry, transportation, ships, agricultural machinery, new energy buses, and power batteries were highlighted. The resources and utilities sector is expected to benefit from the positive impact of this policy.

The company has developed deformation monitoring system solutions for different industries, which are widely used in geological disasters, mine safety, traffic slope monitoring, water conservancy and hydropower monitoring, emergency monitoring, and building deformation monitoring. Since 2020, the company has vigorously invested in R&D and innovation of universal geological hazard monitoring equipment, and has achieved a series of application results. As of the release of the mid-year report in '24, tens of thousands of devices have been used on a large scale in key geological disaster prevention provinces across the country, covering more than 0.01 million hidden geological hazard sites. In the field of water conservancy monitoring, the company has installed more than 10,000 sets of monitoring equipment in more than 1,000 reservoirs across the country to provide decision information for reservoir managers and protect the safe operation of reservoirs.

The overseas business segment is growing rapidly, and its share of revenue continues to rise

24H1's foreign revenue was 0.45 billion yuan, +35.0% year-on-year, and its share of revenue continued to increase. The company has established a strong dealer network overseas. In recent years, with the advantages of a global sales network and cost-effective products, while maintaining the continuous growth of RTK products, the company has rapidly expanded its agricultural machinery autonomous driving products. As the product technology of the company's various product lines continues to be refined and matured, various products, including 3D intelligence, marine surveying and mapping, digital construction, etc., have gone overseas and shown a good development trend.

Application sectors in various industries are developing steadily, and there is considerable room for development

The construction and infrastructure sector 24H1 achieved revenue of 0.53 billion yuan, +4.62% year-on-year. In the first half of '24, the construction and infrastructure business promoted high-precision receiver intelligent equipment such as “video measurement RTK” to the market, integrating satellite navigation, inertial guidance, and video photogrammetry technology, supporting video measurement and 3D modeling, and quickly obtaining high-precision 3D coordinates in batches from live video, further improving measurement efficiency and data quality. Through localized applicability improvements, guidance and control systems such as bulldozers, graders, and excavators have begun to be applied in more than 30 countries around the world, and the company will continue to strengthen the promotion of construction automation products in the international market.

The geospatial information sector 24H1 achieved revenue of 0.19 billion yuan, +7.48% over the same period last year. In the direction of the geospatial information sector, the company grasped the development opportunities of the low-altitude economy and developed devices equipped with integrated multi-source sensors on mobile carriers to obtain three-dimensional spatial information based on high-precision GNSS+INS+lidar+unmanned flight control technology, including multi-platform lidar, airborne lidar, etc. 3D intelligent products can be used in fields such as the construction of digital platforms for smart city spaces, emergency monitoring, power inspection, etc., as well as the intelligent acquisition of spatial data required in land surveys, surveys, smart cities, etc., to build a real 3D city. The rise in demand in the low-altitude economy is expected to further drive the rapid development of the company's geospatial information sector.

The Robotics and Autonomous Driving Division 24H1 achieved revenue of 0.079 billion yuan, +29.80% compared to the same period last year. The company has reached cooperation with companies such as Easy Control, Sany, and XCMG in the fields of low-speed robots, mining vehicles, ports, logistics autonomous driving, etc. The company has made a good breakthrough in the passenger car autonomous driving business. In 2024, the company reached a cooperation with Baidu to supply products such as P-box to its robotaxi; the company is also the exclusive supplier of IMUBOX for Xiaomi SU7 series products. As of the release of the 2024 semi-annual report, the company has been designated as a designated supplier for autonomous driving position unit business for many car companies, and some related models have been mass-produced.

Adhere to R&D, and the overall cost rate remains stable

The company insisted on R&D, and 24H1 achieved R&D investment of 0.242 billion yuan, +31.3% over the same period last year. 24H1's sales, management, and R&D expenses rates were 19.5%, 7.5%, and 16.3%, respectively, with changes of -0.2pct, +0.1pct, and -0.9pct compared with the full year of 2023, respectively. The company's overall expense ratio has remained stable.

Profit forecasting and valuation

We forecast that the company's net profit for 24-26 will be 590 million yuan, 7.6 million yuan, and 970 million yuan, respectively. The corresponding PE multiples for 24-26 will be 27, 21, and 16 times, respectively, maintaining a “buy” rating.

Risk warning

Overseas policies fell short of expectations; progress in resources and utilities services fell short of expectations; progress in robotics and autonomous driving businesses fell short of expectations; overseas business development fell short of expectations, etc.