Core views

A leading company in domestic Beidou high-precision positioning applications. Since its establishment in 2003, the company has always focused on the R&D, manufacturing, integration and industrial application of core technologies and products and solutions related to high-precision navigation and positioning. Currently, four major sectors have been formed: construction and infrastructure, geospatial information, resources and utilities, and robotics and autonomous driving. Among them, the geospatial information sector is mainly the company's three-dimensional products, and the resources and utilities sector includes agricultural machinery autonomous driving and deformation monitoring.

The company's performance has maintained steady growth. The compound growth rates of the company's revenue and net profit to mother in 2014-2023 were 27.78% and 34.58%, respectively. 2024H1 achieved revenue of 1.484 billion yuan and net profit of 0.251 billion yuan to mother, with year-on-year growth rates of 22.86% and 42.96%, respectively.

The company's overseas business grew significantly, and the gross margin was high. 2024H1, the company's domestic business revenue increased by 18.3%, and the company's overseas business revenue growth rate was 34.98%. As of 2024H1, the company's share of overseas revenue has exceeded 30%, and the gross margin of overseas business is 67.29%. The company said in the investor exchange notes that there is still plenty of room for growth in overseas markets, and overseas business will continue to grow rapidly in the second half of the year, and the annual growth rate is expected to be faster than in the first half of the year.

The Beidou industry is developing steadily, high-precision applications are the main development direction, and overseas markets are growing significantly.

The overall output value of China's satellite navigation and location service industry reached 536.2 billion yuan in 2023, an increase of 7.09% over 2022. The output value of China's high-precision satellite navigation and positioning industry grew from 2.3 billion yuan in 2012 to 21.4 billion yuan in 2023. According to data from China Research Network, it is estimated that by 2028, China's high-precision navigation market will reach 126.34 billion yuan. In 2023, Beidou's overseas application development rate reached 15% year-on-year.

The agricultural machinery autonomous driving system market is growing rapidly. It is estimated that in 2024-2025, the sales volume of autonomous driving systems for agricultural machinery in China will reach 0.1643 million units and 0.1906 million units, with growth rates of about 30.40% and 16.01%.

The global agricultural machinery autonomous driving system market is approximately USD 1.049 billion in 2023, and is expected to reach USD 2.107 billion in 2029.

The deformation monitoring market is generally rising steadily. The market size of China's security monitoring and intelligent control industry in 2023 was 22.717 billion yuan. It is predicted that the market size of China's security monitoring and intelligent control industry will rise steadily from 2024-2030. The market size of China's security monitoring and intelligent control industry in 2030 was 35.61 billion yuan.

The 3D reality market space is vast. The Ministry of Natural Resources issued the “Notice on Comprehensively Promoting the Construction of Realistic 3D China”, which states: “By 2025, more than 50% of government decisions, production scheduling, and life planning can be completed through online virtual 3D space; by 2035, more than 80% of government decisions, production scheduling, and life planning can be completed through online virtual 3D space.” According to statistics from the Huajing Industry Research Institute, the size of the 3D reality direct market (project amount) in China reached 0.425 billion yuan in 2021. China's reality 3D market is expected to reach 3.966 billion yuan in 2025, with growth rates of 59.73% and 24.83% in 2024-2025, respectively. It is estimated that between 2022 and 2027, China's 3D digital products market will grow at a compound annual rate of more than 20% and reach 20.08 billion yuan in 2027.

The company is technologically advanced. The company has maintained a high R&D cost rate. The R&D cost rate for the past three years has been above 16%. After years of R&D investment and exploration, it has formed core algorithm capabilities with technical barriers, and has complete algorithm technical capabilities such as high-precision GNSS algorithms, 3D point clouds and aerial surveying, GNSS signal processing and chipization, and autonomous driving sensing and decision control. The development of the company's next-generation GNSS chip is progressing smoothly. After the launch of the new chip, it is expected that the company's chip self-sufficiency rate will increase dramatically, and at the same time, it may bring a new business model to the company.

Autonomous driving and deformation monitoring of the company's agricultural machinery are the main growth points. According to the 2024 semi-annual report, the company's resources and utilities sector generated revenue of 0.681 billion yuan, an increase of 48.06% over the previous year. Revenue accounted for 45.89%. This section mainly focuses on agricultural machinery autonomous driving and deformation monitoring.

The company has the second largest domestic market share for autonomous agricultural machinery. In 2023, Shanghai Huace subsidized sales of 14,469 autonomous driving systems, accounting for 13.98% of the market, ranking second in quantity. It is expected to benefit from the growth of the domestic agricultural machinery autonomous driving system market.

Profit forecasting and investment advice

Covered for the first time, giving a “buy” rating. The company is a leading enterprise in domestic Beidou high-precision positioning applications, and is expected to fully benefit from the development of Beidou high-precision positioning applications. At the same time, the company is actively expanding overseas markets, and overseas market revenue is growing rapidly. We expect the company's net profit to be 0.585 billion yuan, 0.74 billion yuan, and 0.935 billion yuan respectively, with year-on-year growth rates of 30.2%, 26.6%, and 26.3%, respectively, and EPS of 1.07 yuan/share, 1.35 yuan/share and 1.71 yuan/share, corresponding to the closing price of November 11 at 41.23 yuan, PE 38.65 times, 30.53 times and 24.17 times, respectively. For the first coverage, we gave a “buy” rating.

Risk warning

Risk of policies falling short of expectations; risk of technology iteration; risk of overseas market development falling short of expectations.