As a leading domestic high-precision satellite navigation and positioning service provider, Huazu Navigation has core algorithm capabilities with technical barriers. Relying on the layout of the entire industry chain and multiple measures to reduce costs and increase efficiency, it fully explores domestic and foreign markets. It covered for the first time, and gave it an “increase in weight” investment rating.

The leading domestic high-precision satellite navigation and positioning service provider has fully expanded “one core, two platforms, and four major sectors”. The company is positioned as an industry-leading high-precision satellite navigation and positioning service provider. Currently, the company has formed a strategic layout of “one core, two platforms, and four major sectors”, serving customers in more than 120 countries and regions around the world. There is strong certainty in performance growth, and the company's multiple rounds of incentives and holdings increase have demonstrated management confidence.

Resources and utilities are booming, and RTK and geospatial information going+ policies catalyze new growth opportunities.

Construction and infrastructure: The size of the domestic surveying and mapping RTK market was about 2.27 billion yuan in '19. The industry concentration was high, the market competition pattern was stable, and domestic brands gradually replaced the original share of overseas manufacturers and focused on going overseas.

The company's share of the domestic market is expected to exceed 30%, and overseas markets are expected to maintain a relatively rapid growth rate in 24 years.

Resources and utilities: 1) In terms of autonomous driving of agricultural machinery: In 2022, the domestic agricultural machinery autonomous driving market was about 1.604 billion yuan, with a CAGR of over 50% in 18-22. Currently, the domestic penetration rate is low, demand for aftermarket equipment is sufficient, and scope growth has been achieved in 23 years; compared overseas, Tianbao and others have obtained long-term customer orders due to cost performance advantages. It is expected that the overall business will continue to grow at a high rate in the future. 2) The field of displacement monitoring: The domestic GNSS displacement monitoring market was about 4.795 billion yuan in '22. The CAGR exceeded 20% in 15-22, and the issuance of additional trillion treasury bonds in 23Q4 is expected to accelerate the deployment of key infrastructure for disaster prevention and mitigation.

Robots and autonomous driving: GNSS+RTK+IMU+ high-precision map positioning accuracy can reach the centimeter level, and the domestic market is expected to reach 4.219 billion yuan in 2026. The company has targeted a number of models and has been the exclusive supplier of the Xiaomi SU7 IMU-Box for 24 years, and has continued mass production and delivery to improve the sector's performance.

Geospatial information: Low-altitude economic policies catalyze the continuous superposition of 3D intelligent products to accelerate the process of going overseas, and the company's geospatial information sector will usher in new growth opportunities.

The whole industry chain layout+core algorithm, direct sale+distribution focus on strengthening customer loyalty. The company refined algorithms while accelerating the expansion of midstream and downstream links in the industrial chain, and relied on self-developed chips to help reduce costs and increase efficiency. In addition, the company's overseas markets have accelerated the deployment of localized service teams and are expected to grow rapidly.

Investment advice: Leading high-precision navigation service provider, global layout accelerates expansion. It is estimated that in 2024-2026, the company's net profit to mother will be 0.589 billion yuan, 0.742 billion yuan, and 0.949 billion yuan, respectively. The corresponding PE is 26.2 times, 20.8 times, and 16.2 times, respectively, covered for the first time, giving it an “increase in wealth” rating.

Risk warning: the risk of macroeconomic disturbances exceeding expectations, the risk of increased industry competition, falling short of expectations in market segment expansion, falling short of expectations in product technology research and development, and the risk of exchange rate fluctuations.