Description of the event
On April 24, 2024, the company announced 2024Q1 results. 2024Q1 achieved operating income of 617 million yuan, +21% year over year, realized net profit of 103 million yuan, +30% year over year, and realized net profit of 87 million yuan without return to mother, +40% year over year.
Incident comments
Net profit attributable to mother was in line with the median forecast, and net profit after deducting non-return to mother slightly exceeded the median forecast value. Profit side: The company has previously announced the 2024Q1 performance forecast, which is basically in line with expectations. Revenue side: Resources, utilities, and overseas revenue are growing at a high rate, and the share is expected to continue to increase. Expense side: About 14 million yuan was paid for shares due to the implementation of the company's equity incentive plan.
Emerging businesses have been launched one after another, and the traditional business continues to be iterated, and the business environment is improving: Emerging business: RTK achieved a major breakthrough in 2010, and began combining high-precision positioning technology with various applications and entered deformation monitoring in 2009; entered precision agriculture, 3D lasers, etc. in 2013; acquired Tianchen Lida in 2014 to further cultivate precision agriculture and digital construction; increased the capital of Wuhan Smart Bird in 2018 to strengthen drone capabilities; and announced the passenger car intelligent driving business in 2021. Traditional business: Multi-star multi-frequency RTK launched in 2008; Weigen Group RTK was launched in 2018; lightweight and compact pocket RTK was launched in 2020; AR visual RTK was launched in 2022; video RTK pioneered non-contact measurement in 2023; SLAM&RTK products were released in 2024, integrating lidar with RTK. Marginal improvement: The main application areas of the company's RTK products are building construction, surveying and mapping, etc., and the key investment direction of trillion treasury bonds, such as earthquakes and dam monitoring, was deployed early, and is expected to benefit deeply.
Going overseas+low altitude economy+intelligent construction of three main lines of growth: Main line 1: Overseas markets are characterized by large space, high gross profit, and high growth rate. In 2023, Huazu Navigation's share of overseas revenue has reached 27%. Compared with the domestic market, the gross margin is nearly 20 pcts higher, and there is plenty of room for future growth. Main line 2: The low-altitude economy is expected to significantly increase the demand for 3D smart devices. The company's 3D intelligent products have basically completed domestic replacement of core devices and product refinement, and the development of the low-altitude economy will significantly raise the demand for high-precision 3D maps, which is expected to drive the growth of the 3D surveying and mapping equipment business. Main line 3: There are differences in sensors that are relied upon for intelligence in different scenarios, but as the degree of intelligence increases, there are higher requirements for the accuracy of data collected by external sensors, and multi-sensor fusion will also greatly reduce the difficulty of decision-making. At present, the focus is on areas such as assisted driving of agricultural machinery and intelligent driving of passenger cars.
The company has a layout in the fields of high-precision positioning terminal integration, core algorithms, SWAS enhanced networks, basic devices, cloud services, etc., to enhance the user experience of terminals and enhance accurate cost control capabilities. For example, there was a large-scale price war in the agricultural machinery auxiliary driving equipment industry in 2021. The gross margin of the company's resources and utilities sector fell by only 7.26 pct, and quickly returned to normal in 2022. In 2020, the chip successfully developed itself or played a critical role in cost optimization. We believe that as the company's capabilities in core devices such as chips continue to improve in the future, the improvement of the company's overall strength is expected to be further strengthened.
Investment proposal and profit forecast: In 2024, the company will focus on investing in basic devices such as chips, industrial intelligent robots for closed and semi-closed scenarios, SWAS systems, and unmanned flight control technology. We recommend focusing on the direction of going out to sea, agricultural machinery, and low-altitude economy. According to the 2023 annual report, the company's net profit target for 2024 is 550 million yuan, +25% year-on-year, which is higher than the target profit growth rate for 2023. After the review in 2020-2023, the company's profit target was at least 98%, and the level of confidence was high. We expect the company to achieve net profit of 570/755/1,004 million yuan in 2024-2026, +27%/32%/33% over the same period last year. The corresponding valuation is 28x/21x/16x. We focus on recommending and maintaining the “buy” rating.
Risk warning
1. Overseas market expansion falls short of expectations;
2. Intelligent upgrades in key industries fall short of expectations.