Deeply involved in guidance equipment and navigation system support, and equity incentives have been provided to demonstrate confidence in development. The company was founded in 2013. It has experienced a development path from module support to complete machine support to system support, and its products cover special and civilian fields. In July 2020, the company was listed on the Science and Technology Innovation Board; in 2021, the company set up an electronic competition division as a key strategic development direction for the business; in April 2022, the company implemented equity incentives. The performance assessment was based on 2021, and net profit growth rates from 2022 to 2024 were no less than 40%, 90%, and 150% respectively, demonstrating confidence in long-term development; in May 2022, the company released employee stock ownership plans to stimulate enterprise business vitality and maintain competitive advantage. The company has become a core supplier of domestic guidance equipment navigation systems.

High customer concentration, benefiting from increased downstream demand; forward-looking layout of electronic countervailing business. 1) The company has strong R&D and design capabilities, and continuously breaks through technology to improve the assembly rate of localized products. From 2018 to 2021, the company's satellite navigation business revenue CAGR = 44.8%. The company's main customers include Aerospace Science and Technology, Aerospace Science and Industry, China Telecom Group, etc. Since 2017, the top five customers have accounted for more than 70%, and the concentration is high. 2) Relying on satellite navigation technology, the company successfully developed integrated terminal products for ballistic-borne navigation data links, achieving the first breakthrough for private enterprises in this field. 3) In 2021, the company adopted the electronic adversarial business as a new strategic development direction with a forward-looking layout. The investment in electronic warfare accounted for about 20% of R&D expenditure in 2021. The company has obtained 6 patents in the field of electronic warfare, including 4 utility model patents, 2 design patents, and 7 independent design and development software copyrights to achieve functions such as millimeter wave radar signal generation, reception, detection and recognition. The company's technological advantage in the field of electronic competition segmentation is obvious, creating a second growth pole for performance.

There is broad room for growth, and product penetration is expected to increase further. 1) China's special equipment informatization market is developing rapidly, driven by the demand side. The scale grew from 78 billion yuan in 2016 to 102.9 billion yuan in 2020. As the “14th Five-Year Plan” lists equipment informatization construction as a key development target, the industry is expected to continue to grow steadily. As a leading company among private enterprises, the company's product penetration rate and market share are expected to increase further as new models are being launched at an accelerated pace. 2) Electronic warfare has become one of the keys to the modern information war. The company's electronic warfare construction project will address the current production capacity limitations of electronic anti-aircraft equipment products and meet the production needs of larger batches of fixed equipment products. In September 2022, the company announced that it plans to issue convertible bonds to raise no more than 300 million yuan to build an “electronic combat equipment research and production center”.

Investment advice: The company is a private core supplier of satellite navigation and is the core target of the national defense informatization circuit. The concentration of supporting downstream customers is high, and demand is expected to grow rapidly. The company is actively deploying electronic competition, which is expected to create a second growth pole. In 2022, the company implemented equity incentives and announced plans to implement employee stock ownership plans, demonstrating confidence in long-term development. We expect the company's net profit from 2022 to 2024 to be 27 million yuan, 241 million yuan, and 342 million yuan respectively. The current stock price corresponding to PE from 2022 to 2024 is 298x/34x/24x, respectively.

Considering the company's competitive advantages and large room for growth, we gave 40 times PE for 2023, 2.09 yuan/share for EPS in 2023, corresponding target price of 83.60 yuan. Maintain a “Recommended” rating.

Risk warning: Fund-raising project construction falls short of expectations, product development falls short of expectations, fluctuations in raw material prices, changes in market demand, etc.