High-level autonomous driving adoption a long way to go
NavInfo’s appeal lies in three key areas. First, its 40% share in pre-installednavigation system, a high margin but maturing business, along with itsongoing investment in HD mapping. Second, is the recent RMB3.9bnacquisition of Jiefa which supplies SoC solutions for infotainment systems.Third, is its position as an investment within Tencent group. While we seeconsistent growth of 7% for the former operation and the major contributionthat Jiefa already generated, the RMB18bn market cap and 2018 PER of over50x is above our expectations for developments in the ADAS field on a 2-3 yeartime horizon, and we initiate coverage with a Sell and RMB14.9 target price.
Leader in pre-installed auto navigation maps and Internet of Vehicles (IoVs)
Navigation maps contributed 48-54% of NavInfo’s revenues in FY12-16 and49-64% of its gross profit. Given increasing pre-installation penetration andpricing competition, we expect muted growth