“Science and Technology Innovation Board Daily”, March 29 (Reporter Wu Xuguang) “The company is very concerned about the development of technology and products related to the low-altitude economy, and is developing various small and medium-sized drone products of 1 ton or less.” Regarding the layout of the “low altitude economy” field, Zhang Xiaojun, chairman of China Drone, said at the company's 2023 company performance briefing on the afternoon of March 28.

Currently, in terms of the low-altitude economy, many parts of the country are seizing a period of strategic opportunity for intensive innovation and rapid development of the low-altitude economy industry. Many provinces have included content related to the low-altitude economy, general aviation, etc. into government work reports and introduced relevant policies. According to incomplete statistics, more than 20 provinces (districts and municipalities) across the country have included content related to the low-altitude economy in government work reports, and 2024 is expected to be the first year for the development of the low-altitude economy.

In response to questions from the “Science and Technology Innovation Board Daily” and some investors, Zhang Xiaojun said that from a product perspective, the company's products can meet the needs of the low-altitude economy, and the company is also actively connecting with relevant provincial and municipal governments to discuss the direction of achieving the needs of the low-altitude economy. In the future, it will gradually develop related products according to application scenarios and market demand.

However, some industry experts said that while the low-altitude economy brings many convenience and opportunities, it also faces many safety challenges such as flight safety and privacy protection. These challenges need to be solved through relevant research and policy formulation. Therefore, it is difficult to say how much this has substantially boosted the performance of companies in the relevant industrial chain in a short period of time.

In addition to having a layout in the “low-altitude economy” field, the business layout of Chinese drones in the large-scale fixed-wing long-flight drone industry chain has also attracted investors' attention.

At the performance meeting held on the afternoon of March 28, some investors were concerned and asked: “What new product reserves does the company have in store in the future? When is it expected to land?”

In response, Zeng Qiang, general manager of China Drone, said that in addition to the drone systems below 1 ton mentioned above, the company's follow-up products include a large-scale multi-purpose medium- and high-altitude long-flight time drone system — the Pterosaur-3 drone system, and an advanced drone system with a high efficiency ratio.

China Drones are mainly engaged in the design, development, manufacture, sales and service of drone systems. The company's drone products include Pterosaur series such as Pterosaur-1, Pterosaur-1D, Pterosaur-1E, Pterosaur-2, Pterosaur-2D, and Pterosaur-3.

On the evening of March 14, China Drone released its annual performance report showing that in 2023, the company achieved revenue of about 2,664 billion yuan, a year-on-year decrease of 3.94%; realized net profit of about 305 million yuan, a year-on-year decrease of 18.27%.

Looking at the main business by product, China's drone products mainly focus on the military trade market, including two categories: drone systems and related products, and drone technology services. As of the 2023 annual report, the company's drone system achieved revenue of 2,558 billion yuan, a year-on-year decrease of 6.24%; drone technology services achieved revenue of 106 million yuan, an increase of 136.37% over the previous year.

Regarding changes in performance, China Drone said that it was mainly affected by market demand, resulting in a slight decline in operating income compared to the same period of the previous year; the decline in net profit was mainly due to a decrease in revenue scale in 2023 compared to the same period last year, and overall gross margin declined due to differences in the structure of products delivered from the same period last year, leading to a decrease in net profit compared to the same period last year.

When talking about 2024 performance expectations, China Drones are optimistic about the development prospects of the industry.

At the performance meeting, Zhang Xiaojun explained that the company has good expectations for the domestic market this year. The main reason is that drone application scenarios in the military and civilian market continue to expand, benefiting from industry, technology, and policy support including “treasury bonds” projects, and it is expected that the growth trend will continue for some time to come.

However, Zhang Xiaojun also said that in terms of the military trade market, it is expected that there will be some pressure in 2024, mainly due to increasingly fierce competition in the military trade market, which is also affected by multiple factors such as geopolitics. There is high uncertainty, and customer needs are constantly changing.

The “Science and Technology Innovation Board Daily” reporter noticed that in addition to the decline in the company's performance, the gross margin of China's drones has shown a downward trend in recent years. From 2021 to 2023, the company's gross margins were 24.02%, 24.26%, and 18.95%, respectively. The company said that during the reporting period, gross margin decreased by 5.32 percentage points, mainly due to market demand, and the different product delivery structure in 2023 led to a decline in gross margin.

It should be pointed out that while performance is declining, R&D expenses for Chinese drones have also been reduced. According to the 2023 annual report, the company invested 173 million yuan in R&D, a year-on-year decrease of 8.71%.

“Does the company intend to reduce R&D expenses when performance declines?” At the results meeting, some investors asked questions. In response, Zeng Qiang, general manager of the company, said that R&D capabilities are the core competitiveness of Chinese drones. The company always attaches importance to building and investing in R&D capabilities. R&D investment varies according to the different stages of R&D projects. In addition to R&D expenses, the company also has other fixed assets and other investments to support R&D work.

In recent years, in addition to developing the military trade market, the company has continued to expand the civilian market, and its products have played a role in emergency response, weather, and security.

At the results meeting, some investors raised questions. Currently, the civilian market is still in its infancy. How can the company solve the problem that commercial commercial use of industrial grade drones is also limited in industry, agriculture, etc.?

“As drones continue to develop in the direction of diversification, polymorphism, intelligence, etc., the application scenarios of civil industrial drones in civil fields such as atmospheric weather, emergency response, and major security will continue to expand, including in the fields of urban management, smart transportation, and emergency rescue, which have substantial application needs.” Zeng Qiang explained.

Regarding the order situation for products in the civilian sector, Yang Ping, secretary of the company's board of directors, said that the company is guided by customer demand, responds quickly to customer needs, and has achieved market breakthroughs in many new domestic civilian fields. At present, the company has completed the delivery tasks of large-scale drones for users such as the Ministry of Emergency Management and the China Meteorological Administration.