The growth rate for the first half of 2024 exceeded the target at the beginning of the year. The company released its 2024 semi-annual report, achieving operating income of 1.48 billion yuan, a year-on-year increase of 22.9%; realized net profit of 0.25 billion yuan, a year-on-year increase of 43%; and realized net profit deducted from non-mother of 0.21 billion yuan, an increase of 34.5% over the previous year. Non-recurring income is mainly investment income and government grants of about 21 million.

Looking at a single quarter, the company achieved revenue of 0.87 billion yuan in the second quarter, an increase of 25% over the previous year; realized net profit of 0.15 billion yuan to mother, an increase of 53% over the previous year. The company's growth rate in the first half of the year exceeded the annual target (profit growth rate of 25%), and the whole year is expected to exceed expectations.

Steady profits and improved cash flow. The company's overall gross margin in the first half of 2024 was 58.4%, reaching the best level in the past five years, and the net profit margin reached 16.5%, which is also the highest level in history. Mainly thanks to effective cost control, the cost rate has been declining steadily. There was a significant year-on-year improvement in the second quarter of '24, thanks to the company's emphasis on repayment and increasing the development of high-quality overseas businesses.

Resources and utilities, robots, and autonomous driving are growing at an impressive rate. In the first half of 2024, the company's resources and utilities sector increased 48% year-on-year, mainly due to increased domestic investment in natural disaster monitoring, and the company's deformation monitoring system solutions increased rapidly in the context of agricultural modernization, and the company's high-precision positioning products accelerated shipment; in terms of water monitoring, the company has installed more than 10,000 sets of monitoring equipment in more than 1,000 reservoirs across the country. The robot and autonomous driving sector grew 37% year over year, mainly due to the increase in the penetration rate of the company's integrated navigation products in industrial vehicles, passenger cars, etc. With the advent of new business forms such as robotaxi and radish fast running, the company's autonomous driving sector can be expected to grow.

Overseas business continues to develop, accounting for 30%. The company's overseas business revenue in the first half of the year was 0.445 billion, accounting for 30%. The gross margin of overseas business reached 67%, which is an important contributor to the company's profit growth. At the same time, the company's domestic business also achieved a growth rate of 18%, which is steady, moderate and positive. The company has established a strong dealer network overseas and has branches in 8 countries/regions including Hungary and Singapore. At the same time, it has built strong competitiveness by relying on product strength, pricing advantages, service advantages, and customization capabilities, and overseas business is expected to continue to grow rapidly.

Risk warning: downstream market demand falls short of expectations; overseas market development falls short of expectations; market competition intensifies.

Investment advice: Maintain profit forecasts and maintain a “better than the market” rating.

Based on the company's growth targets, cost control capabilities, etc., the company's net profit forecast for 2024-2026 is expected to be 0.57/0.7/0.85 billion yuan, respectively, and the PE corresponding to the current stock price is 27/22/18 times, respectively. The company accelerates the development of overseas markets, empowers fields such as automotive and low-altitude economy with satellite navigation, is optimistic about the company's growth potential, and maintains a “superior to the market” rating.