The company released its 2023 annual report on March 22, 2024. In 2023, it achieved operating income of 18.727 billion yuan, an increase of 7.16%; net profit attributable to the parent company was 525 million yuan, a year-on-year decrease of 14.35%; net profit after deducting non-recurring profit and loss of 413 million yuan, a year-on-year decrease of 24.15%.

The company's net profit is under pressure, the business scale continues to grow, and sales from related transactions are expected to increase significantly. The company's 2023 annual report shows that in 2023, the company achieved revenue of 18.727 billion yuan, of which revenue from aerospace products was 14.349 billion yuan, an increase of 15.46% over 2022, and revenue from civilian products was 4.230 billion yuan, down 12.86% from 2022. The company's gross profit margin was 20.34%, up from 19.62% in 2022. Affected by aerospace electricians' losses, the company's revenue scale increased and net profit to mother declined. In 2023, net profit attributable to shareholders of listed companies was $525 million, a decrease of 14.35% over the previous year.

Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was $413 million, a decrease of 24.15% from the previous year. Excluding aerospace electricians, the company achieved a revenue scale of 14.675 billion yuan, an increase of 15.81% over the previous year, net profit of the same caliber of 723 million yuan, an increase of 32.66% over the previous year, and net profit to mother after excluding investment income was 657 million yuan, an increase of 22.64% over the previous year. In terms of expenses, the company's sales expenses increased 17.34% year over year, management expenses increased 16.90% year over year, and financial expenses decreased 24.30% year over year. In 2024, the daily operational-related transactions between the company (including subsidiaries) and member units belonging to the group company will sell products and provide services no more than 7.5 billion yuan, an increase of 87.5% and 91.2%, respectively, from the estimated amount (4 billion yuan) and actual amount accrued (3.92 billion) in 23.

Investment in R&D was increased, drones were actively deployed, and the traditional wire and cable business was divested and “lightweight”. According to the company's annual report, in 2023, the company invested a total of 1,075 billion yuan in R&D, accounting for 5.74% of revenue, and R&D expenses increased 20.31% year-on-year. The company attaches great importance to scientific research work, continues to increase investment in R&D, and vigorously introduces outstanding R&D talents. The improvement of core technology and R&D capabilities has enriched the variety of products, helped develop the market, and effectively enhanced the company's core competition. The company closely follows user needs in the field of unmanned systems equipment, continuously expands new markets, accelerates the pace of development of Aerospace Feihong Company into a core original technology source for unmanned systems and a “chain leader” unit in the unmanned systems industry chain, and is active in the unmanned systems industry. In terms of asset structure, the company plans to publicly list and transfer 51% of Aerospace Electrician's shares, which will help focus more on the company's main business and improve the quality of the company's development.

Unmanned systems are starting again, and fund-raising projects help industrialize scientific research results. On July 21, 2023, the company completed the issuance of shares to specific targets, with an issuance scale of 4.136 billion yuan. The funds raised will be used for intelligent unmanned system equipment industrialization projects, intelligent electronics and satellite communication product industrialization projects, inertial navigation system equipment industrialization projects, and supplementary working capital. With the implementation and commissioning of multiple projects, it is expected to guarantee the growth of the company's products.

The dual resonance of satellite internet and the low-altitude economy enhances the company's growth momentum. Measurement and control communications, inertial navigation, integrated circuits, electromechanical components, etc. are the company's traditional strengths. It has always maintained a leading domestic level in related industries, and has maintained a high supporting ratio. The market share has basically shown a steady upward trend.

The core benefits from the rapid development of China's aerospace industry. The explosion of the low-orbit satellite industry chain is expected to bring continued orders and open up new momentum for growth. In addition, the country is vigorously developing a “low-altitude economy,” and cities are scrambling to introduce relevant policies and strive for the “first city status” of the low-altitude economy. In a wider range of industrial applications, unmanned system equipment is spawning a new model of “unmanned economy” development, showing great economic value and development potential, which is conducive to the company's achievement of a double improvement in performance and valuation.

Maintaining an “incremental” investment rating: We predict that the company's net profit due to mother in 2024-2026 will be 718 million, 787 million, and 889 million, respectively, corresponding valuations of 33, 30, and 27 times, maintaining the “increase in holdings” rating.

Risk warning: Military purchase orders have fluctuated, and market competition has intensified.