It covered Huazue Navigation for the first time and gave it a purchase rating. The target price was 44.22 yuan. The company is a leader in the domestic high-precision satellite navigation and positioning application industry. The net profit CAGR for 19-23 was 23/ 34%. Future growth is expected to be driven by two aspects: 1) horizontal expansion: from traditional applications such as construction and geographic information to emerging fields such as precision agriculture, autonomous driving, and low-altitude economy to accelerate global expansion; 2) vertical deepening: strengthening the layout of upstream chips and algorithms and downstream operation services to enhance profitability.

Policies, demand, and technology resonate. From a policy perspective, the boom in China's satellite navigation and positioning application industry is expected to increase the penetration rate of Beidou applications, such as Beidou, China Time and Space Information Group, and trillion treasury bonds, etc., and the prosperity of China's satellite navigation industry is expected to rise further. From the demand side, there is strong demand for high-precision navigation and positioning in fields such as autonomous driving, precision agriculture, and unmanned intelligence. In 2023, China's high-precision market reached 21.5 billion yuan, and the CAGR exceeded 25% in 11-23. From a technical perspective, China's industrial chain is autonomous and fully equipped, leading in core component production technology, and some indicators have surpassed overseas leaders.

Technology+product+channel creates a competitive advantage and is expected to grow into a leading global navigation and positioning technology. The company has mastered core technologies such as GNSS chips and algorithms, autonomous driving perception and control, and 3D point cloud aerial surveying, forming obvious barriers. In terms of product strength, the company closely followed customer needs, continued to iterate products, maintained a leading market share in the fields of measurement and mapping, autonomous driving of agricultural machinery, displacement monitoring, etc., and achieved a high increase in export sales with cost-effective advantages, with overseas revenue CAGR of 54% in 21-23. In terms of channel power, the company has established a national marketing system with equal emphasis on direct sales and distribution, and a strong overseas dealer network to create marketing service advantages and lay a solid foundation for global market expansion.

Expanding business areas horizontally opens up room for growth, deepens vertical development and enhances profitability The company broadens its business layout horizontally. The passenger car autonomous driving business breaks through new customers such as Xiaomi and Radish Express and achieves mass production and shipment, actively lays out the low-altitude economy, and accelerates the development of international business. The company deepens vertical development, lays out the entire chip/algorithm/terminal and system integration/operation service industry chain, and provides integrated software and hardware solutions, which is expected to enhance profitability and achieve an upgrade from an equipment vendor to a platform company.

How we differ from the market view

The market is worried that the Beidou industry is not growing well, and the company has limited room for growth. We believe that the Beidou industry has recently ushered in many positive changes, and the boom will continue to rise: policies push for Beidou applications, technological maturity drives down costs, and demand for Beidou alone and high precision increases. As a leader, the company will benefit from the rapid development of the industry.

Profit forecasting and valuation

We expect net profit of 0.596/0.757/0.958 billion yuan in 24-26, +33%/+27% compared to the same period. Referring to the same PE average of comparable companies Wind in 25 years, the company was given PE32x in 2025, with a target price of 44.22 yuan, which covered the “buy” rating for the first time.

Risk warning: risk of macroeconomic fluctuations; risk of international political uncertainty; application expansion falls short of expectations.