occurrences

On August 28, Gaohua Technology released its 2024 semi-annual report. With 2024H1, the company achieved revenue of 0.158 billion yuan, a year-on-year increase of 10%, and realized net profit to mother of 0.031 billion yuan, a year-on-year decrease of 24%.

reviews

1. Revenue grew steadily, and gross margin increased by 1.37 pcts year-on-year. 2024H1, benefiting from the booming development of the aerospace industry and the positive impact of increased railway investment and passenger flow recovery, demand for the company's products in aerospace, rail transit and other fields rose, and the company achieved revenue of 0.158 billion yuan, an increase of 10% over the previous year. By product, the company's revenue from high-reliability sensors was 0.142 billion yuan, up 18% year on year, and sensor network system revenue was 0.014 billion yuan, down 36% year on year.

2024H1, the company's gross sales margin was 59.52%, up 1.37 pcts year-on-year, and profitability was further enhanced.

2. Strengthen R&D investment to enrich the product line, and increase the cost ratio over the same period last year. The company is steadily advancing research and development of sensor chips, sensors, sensor network systems, etc., and completed research and development of new products such as laser distance sensors, wireless mining pressure sensors, high-voltage common rail pressure sensors, high-speed rail train dual-channel braking pressure sensors, aerospace engine ground data acquisition systems, marine wireless environmental monitoring systems, and second-generation tire pressure detection systems. By the end of 2024H1, the company had 109 R&D personnel, an increase of 20 over the same period last year. 2024H1, the company's R&D expenses were 29.65 million yuan, up 59% year on year. The R&D cost ratio was 18.76%, up 5.81 pcts year on year; sales, management and finance expenses were 4.73%, 12.18%, and -2.15%, respectively, +0.70pcts, +0.74pcts, and -0.09pcts, respectively; the four fee rate was 33.52%, up 7.16pcts year on year.

3. The development strategy is clear, and the military and civilian markets advance in parallel. The company has always adhered to the two-wheel drive development strategy of “military products and industrial products go hand in hand, and sensor devices+sensor network systems advance collaboratively”. In the aerospace sector, the company's space market is growing steadily. It has made breakthrough progress in supporting fields such as ground test equipment, rocket engines, rocket telemetry systems, launch vehicles, launch boxes, launch sites, etc., and has achieved outstanding market development results in commercial space. In the aviation sector, the company has sufficient orders for next-generation fighter jets, drones, transport aircraft, etc., and deliveries are in an orderly manner. As the low-altitude economy industry booms, the company will actively lay out the supporting market for low-altitude aircraft. Outside the aerospace field, the company focuses on rail transit, mechanical equipment, metallurgy and energy, etc., and has a broad market space.

4. Establish subsidiaries in Suzhou and Beijing, and enhance market competitiveness with multi-regional layout. In January 2024, the company established a wholly-owned subsidiary, Suzhou Zixin Microelectronics Co., Ltd. with its own capital to focus on the development of high-precision sensor chips and conditioning circuit chips, while promoting the transformation of R&D results into the market. In July 2024, the company established a wholly-owned subsidiary, Beijing Gaoxing Huachen Sensing Technology Co., Ltd., with its own capital, to accurately allocate team resources in a regional market-oriented manner to further develop strategic emerging industries such as commercial aerospace and low-altitude economy to drive technology updates and market breakthroughs.

5. The company plans to repurchase shares for a total amount of 50 million yuan to 0.1 billion yuan. The repurchase of shares will be used for employee stock ownership plans or share incentives. On August 28, the company disclosed plans to repurchase the company's shares through centralized bidding transactions. The company plans to use overfunded capital to repurchase the company's shares. The repurchase price is no more than 35 yuan/share, and the total repurchase amount is not less than 50 million yuan and not more than 0.1 billion yuan. The repurchase of shares will be used for employee stock ownership plans or equity incentives.

6. We expect the company's net profit to be 0.121 billion yuan, 1.57 billion yuan, and 196 million yuan in 2024-2026, corresponding to the current PE valuation of the stock price, which is 31, 24, and 19 times, maintaining an “increase in holdings” rating.

Risk warning

Demand in the military goods market fell short of expectations; market expansion in the industrial sector fell short of expectations; product price reductions or raw material costs exceeded expectations, etc.