Incidents:
On February 6, 2024, the company released its 2023 performance report: in 2023, it is expected to achieve operating income of 1,675 billion yuan, an increase of 6.3%; net profit to mother of 131 million yuan, an increase of 46.87% year on year; net profit after deducting non-return to mother was 107 million yuan, an increase of 25.28% year on year.
Investment highlights:
Gross margin increased year-on-year in 2023, and net profit increased significantly
According to our estimates, in 2023 Q4, the company achieved revenue of 708 million yuan, a year-on-year decrease of 3.54%; net profit to mother was 119 million yuan, an increase of 35.23% over the previous year. The company's performance increased dramatically in 2023. The main reason was that the company strengthened project organization and management, promoted project acceptance according to the plan, the scale of revenue continued to grow, and the gross margin of the project increased year-on-year. At the same time, the company is scientifically planning application projects, actively seeking various types of government subsidy funds, and efficiently promoting the final acceptance of various topics; in June 2023, the company went public to raise funds, and cash management revenue from idle funds raised increased.
The air traffic control business continues to lead, and breakthroughs have been made in airports and transportation
Relying on the core technical advantages of command and control, the company focuses on the three major business segments of traffic management, urban road traffic management, and urban governance in civil aviation, increasing market development and increasing investment in R&D.
① In the field of traffic management in civil aviation: step up the construction of a “two wings fly together” development pattern for air traffic control, strengthen core product strategic leadership in air traffic control, expand advantages, and steadily lead; new airport tracks continue to gain strength, and breakthroughs have been achieved in the international market. ② In the field of urban road traffic management, the national market layout has advanced in depth, and the megacities market has made progress; major projects have led to outstanding results, once again breaking the record for the size of newly signed contracts.
The low-altitude economy has a solid business foundation, and a trillion-dollar new market
The low-altitude economy industry is a comprehensive industrial form driven by low-altitude flight activities and radiation-driven integrated development in related fields, including low-altitude infrastructure construction, low-altitude aircraft manufacturing, low-altitude operation services, and low-altitude flight support.
In December 2023, the Central Economic Work Conference raised the low-altitude economy to the height of a strategic emerging industry; on January 1, 2024, the “Interim Regulations on the Administration of Unmanned Aircraft Flight” jointly issued by the State Council and the Central Military Commission officially came into effect, and 2024 may become the first year of low-altitude economic development.
According to data released by the Civil Aviation Administration of China, the market size of China's low-altitude economy is expected to reach 1.5 trillion yuan by 2025, and 3.5 trillion yuan by 2035.
The company is deeply involved in air traffic services, low-altitude flight service informatization, etc., and provides overall solutions, core products and technical services for enterprises and institutions such as flight service stations, general aviation airports, general aviation companies, etc. Since 2020, the company has constructed the first Class A flight service station in Jiangsu Province, as well as general aviation airport construction missions centered on flight service stations in Xuzhou, Jiangsu, and Hefei, Anhui.
In 2021, the company cooperated with strategic partners to launch the “Drone Test Cloud” to connect with the operation business of 13 drone test zones across the country. In 2022, the company won the bid for a major engineering project in the low-altitude field. The project provides owners with a complete simulation and verification platform for low-altitude flight services, which aims to provide platform support for future national low-altitude operation concepts, key technology research, and policy research. In January 2024, the company successfully won the bid for a low-altitude flight service platform project integrating new technology in Anhui Province. Currently, the company is demonstrating and advancing the layout of the Advanced Low Airspace System (Advanced Low Airspace System) low-altitude intelligent connectivity system and core product development. The company has leading technology, team and market foundation in the low-altitude economy business, and will benefit from the development of the national low-altitude economy industry.
Profit forecast and investment rating: The company is the only listed company within the China Telecom 28 system. It continues to create a development pattern where air traffic control and the airport go hand in hand, and is expected to benefit from air traffic control expansion and smart airport construction. At the same time, the company actively promotes the application of the “data+application” model in urban transportation and governance. According to the disclosure of the company's performance report, we adjusted the 2023-2025 net profit of the company to be 1.31/1.55/ 188 million yuan, EPS to 0.80/0.95/1.15 yuan/share, respectively, and the corresponding PE for 2023-2025 was 29.06/24.53/20.22X, respectively, maintaining the “buy” rating.
Risk warning: Macroeconomics affects downstream demand, market competition intensifies, district management expansion falls short of expectations, airport intelligence falls short of expectations, smart cities and transportation fall short of expectations.