New Shares Outlook | Backed by the "national team" and positioned in the GNSS sunrise track, how much is the investment value of Huawei's Beidou?

Under the strong support of government policies, the BeiDou satellite navigation system is becoming an important force in driving the development of China's digital economy and international cooperation. As is well known, the importance of the BeiDou satellite navigation system has greatly increased with its wide application in new infrastructure, spatiotemporal big data, and smart cities. It not only provides accurate positioning and timing information for China's digital economy, but also promotes the digital transformation of many industries such as intelligent transportation, disaster warning, and precision agriculture through the integration with new technologies such as artificial intelligence, 5G, and Internet of Things. As a great national instrument, this undoubtedly means that the GNSS space positioning service industry is a high-growth sunrise track. At present, it is the moment when the leading domestic space positioning service provider - Huada BeiDou is sprinting for listing on the Hong Kong Stock Exchange. The company is backed by the "national team", incubated by China Electronics, and holds strong technological barriers. Therefore, it is worth using it as a sample for observation and exploring the investment value of space positioning service enterprises in depth. On June 11th, Shenzhen Huada BeiDou Technology Co., Ltd. ("Huada BeiDou") submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CMB International and Ping An Securities (Hong Kong) as its joint sponsors. The company is a leading space positioning service provider in China empowered by the BeiDou satellite navigation system. It is in a leading position in the field of navigation positioning chip design and has significant advantages in chip-level dual-frequency high-precision positioning technology, low-power technology, and high integration SoC design technology. Once Huada BeiDou successfully lands on the Hong Kong stock market, it may become the "first stock of space positioning service in Hong Kong." With an annual revenue of over 800 million, it still faces the "profitability dilemma" under high R&D investment Looking back at the development of Huada BeiDou, the company, formerly known as the Navigation Business Unit of Huada Electronics under China Electronics Information Industry, was established in 2013 with a focus on navigation chip field. In 2016, the Navigation Business Unit achieved "independence", moved to Shenzhen, and was jointly invested by enterprises such as CEOVU, SAIC Motor Corporation, BAIC MOTOR Corporation, BOWAY SHARE, Shenzhen Jinjia Group, and others. To date, Huada BeiDou has become a leading space positioning service provider in China and is in a leading position in the field of navigation positioning chip design. In 2024, based on the shipment volume of GNSS chips and modules, the company is the sixth largest GNSS space positioning service provider in the world, ranked second among mainland Chinese companies, with a global market share of 4.8%. In the field of dual-frequency high-precision RF baseband integrated GNSS chips and modules, the company's performance is more prominent, ranking fourth in the world among GNSS space positioning service providers, ranked first among mainland Chinese companies, with a global market share of 10.5%. At the same time, Huada BeiDou is also highly favored by capital - it is deeply tied to the state-owned enterprise (China Electronics), representing the national will and strategic resources, bringing together the top, most powerful financial investment institutions and industrial capital in China. Specifically, Huada BeiDou's core controlling shareholder is CEC Optoelectronics, controlled by China Electronics Information Industry Group Co., Ltd., one of China's largest state-owned IT enterprise groups ("national team"). The other investors include BYD Company Limited, Gree Electric Appliances, TCL Corporation, CEC, China Shipbuilding, SAIC Motor, Jiangling Motors, CICC, CMB International, DHgate, and other well-known institutional enterprises. Backed by the national team and strong technological barriers, the business scale of Huada BeiDou has significantly expanded, and its income has continued to grow. According to the prospectus disclosure, from 2022 to 2024, the sales volume of the company's standard precision chips and modules will be 3.4 million, 8.3 million, and 10.9 million pieces respectively; and the sales volume of high-precision chips and modules will be 2 million, 3 million, and 5.1 million pieces, respectively. At the same time, the company's revenue scale has also significantly expanded: from RMB 698 million in 2022 to RMB 645 million in 2023, and then increased significantly to RMB 840 million in 2024, with a three-year compound growth rate of 9.7%. However, Huada BeiDou is still in a loss-making state at present. From 2022 to 2024, the company's annual losses were RMB 92.612 million, RMB 289 million, and RMB 141 million respectively. The total accumulated losses over the three years were RMB 523 million. This may be related to the company's high R&D investment. During the reporting period, the company's R&D expenses were RMB 103 million, RMB 110 million, and RMB 118 million, accounting for more than 40% of the total expenses during the same period, a proportion much higher than that of general technology companies, and the scale of R&D investment is increasing year by year. The "profitability dilemma" under high R&D investment is undoubtedly a common problem for many technology chip companies, but the company focuses on securing technical heights, sacrificing short-term profits, which is also understandable. In the future, with the company's products benefitting from the industry trend and significantly increasing production volume, the company is expected to quickly enter the growth and harvesting period. Industry barriers heighten vs. fierce "price wars" GNSS is the common name for satellite navigation systems that provide navigation services globally, usually including the space segment (navigation satellite constellation), the ground segment (system operation management facilities), and the user segment (receiving devices), used to provide positioning, navigation, and timing services worldwide. Currently, there are four major operating GNSS systems in the world, including China's BeiDou Navigation Satellite System (BDS), the U.S. GPS, Russia's GLONASS, and the EU's Galileo. Compared with other global satellite navigation systems, the BeiDou satellite navigation system has three key advantages: strong anti-shielding capability and obvious performance advantages in low latitude regions. The positioning accuracy is comparable to GPS, and the timing accuracy is leading. Unique two-way short message communication capability. At present, the BeiDou satellite navigation system has launched 60 satellites, which can complement other satellite navigation systems such as GPS to provide users worldwide with all-weather, all-time, and high-precision positioning. Currently, the BeiDou satellite navigation system has been put into use in more than 100 countries and regions worldwide, and has had deeper applications in countries along the Belt and Road Initiative such as Pakistan, Laos, Myanmar, and Thailand. With the rapid development of industries such as mobile internet, smart cars, intelligent driving, and shared travel, as well as the rise of China's.With the active promotion by the government, the market size of China's Beidou satellite navigation industry has increased from 417.4 billion yuan in 2019 to 485.7 billion yuan in 2023, with a compound annual growth rate of 3.9%. It is estimated that by 2028, the market size of China's Beidou satellite navigation services will reach 954 billion yuan, with a compound annual growth rate of 14.5% from 2023 to 2028.From the perspective of competition, Huada Beidou may face intense price wars, leading to pressure on the company's gross profit margin. On one hand, there is downward pressure from international giants such as Qualcomm (GPS integrated in mobile SoC), Broadcom, and u-blox, who can lower prices of mid to low-end chips (such as reducing unit prices to 1-2 US dollars) with their economies of scale, squeezing the survival space of domestic manufacturers. On the other hand, although Huada Beidou's high-precision chips are technologically advanced, the high-price markets (such as surveying and agriculture) have limited scale, requiring penetration into the consumer market and being forced to participate in price wars. In terms of industry entry barriers, Huada Beidou has strong technological barriers and plays a certain benchmark role in the industry. The global GNSS space positioning service industry belongs to the high-tech field, with extremely high difficulty in core technology research and development, requiring long-term research and development investment and profound technological accumulation. The technological system in this field is complex, covering multiple areas such as satellite signal processing, surveying and mapping, and high-precision positioning algorithms. New entrants find it difficult to fully grasp the core technological elements in the short term, thus forming high entry barriers in terms of technology. In addition, industry-leading companies deeply participate in the formulation of relevant technical standards at home and abroad, have control over the formulation of standards, and have formed barriers that new entrants find difficult to overcome at this level. As the only enterprise in China focusing on Beidou GNSS chips (included in EUSPA's 2022 global market report), Huada Beidou continuously tackles technological challenges and sets standards for domestic satellite navigation chips. For example, its chip-level dual-frequency high-precision positioning technology reduces power consumption by 50%, significantly optimizes costs, and promotes the penetration of Beidou applications from professional fields to consumer electronics, smart driving, and other mass markets. In conclusion, it is easy to see that Huada Beidou, as a core enterprise in the field of Beidou chips, has outstanding technological strength and strategic value, but the issue of profitability is indeed present, which is jointly caused by multiple factors such as industry characteristics, development stage, and market competition. Huada Beidou's research and development investment shows characteristics of high intensity, high focus, and high conversion. Its technological breakthroughs and market performance have become benchmarks in the domestic Beidou navigation chip field. Despite facing short-term profit pressure, its continuous investment in core technology, research and development ecosystem, and industry standards make it still possess high investment value and development potential.