Incident: Rice Information released its 2023 annual report. In 2023, it achieved revenue of 1,676 billion yuan, up 6.35% year on year; net profit to mother was 132 million yuan, up 47.60% year on year, in line with market expectations. In Q1 2024, we achieved revenue of 245 million yuan, a year-on-year increase of 38.62%, and net profit to mother of -16 million yuan. Losses narrowed by 48.81% year on year, exceeding market expectations.
Key points of investment
The air traffic control and urban transportation business is growing steadily. The company's 2023Q4 revenue was 709 million yuan, down 3.32% year on year, and net profit to mother was 120 million yuan, up 35.63% year on year. By business, traffic management business revenue in civil aviation was 551 million yuan, up 10.67% year on year, gross profit margin was 40.53%, up 2.68 pct year on year; urban road traffic management business revenue was 503 million yuan, up 31.11% year on year, gross profit margin was 22.44%, down 4.45 pct year on year; urban governance business revenue was 511 million yuan, up 2.16% year on year, gross profit margin was 20.02%, down 2.19 pct year on year; enterprise level informatization and other business revenue was 107 million yuan, year-on-year decrease of -48.85 pcts %, gross profit margin 29.98%, a year-on-year increase of 12.03pct. The company's gross profit margin in 2023 was 28.21%, up 0.58pct year-on-year. In terms of cost ratio, sales expense ratio is 6.16% (YoY +0.67pct), management expense ratio 6.90% (YoY -0.16pct), R&D expense ratio 7.67% (YoY +0.14pct), which is relatively stable overall.
Consolidate the basic market: continue to deepen the field of civil aviation management and seize opportunities for localization and internationalization. In 2024, the company will consolidate its basic market, expand its leading edge in civil aviation management, lay out and promote the localization of air traffic control, accelerate new growth points such as airport informatization and internationalization, and open up the ceiling of the industry. At the same time, the company is grasping next-generation system capabilities and the two main lines of autonomy and control to implement key projects, promote strategic cooperation, and ensure the completion of tasks. On the airport side, with core products such as the Airport Information Integration System (IIS) and berth guidance as a starting point, small and medium-sized airports expand product coverage, improve core product capabilities at hub airports, and expand market share.
Expanding new tracks: Low-altitude economic infrastructure construction is in full swing, and the core low-altitude air control system benefits.
Since the low-altitude sector was defined as a strategic emerging industry at the end of last year, national and local governments have been actively promoting the development and implementation of the low-altitude economy industry this year. At present, it is clear that ground infrastructure needs to be built first. Since entering the second quarter, we have seen related orders land one after another. We expect that as low-altitude construction plans continue to be clarified in various regions, related tenders are expected to appear intensively. Low-altitude ground infrastructure specifically includes air traffic control systems, communications, navigation, surveillance, etc., all of which must be supported. As a leader in the field of air traffic control systems, the company actively develops a series of products such as general aviation and low-altitude flight services, drone operation management, and manned and unmanned collaborative information platforms in response to the country's strategic needs, and lays out future low-altitude control and operation services. It is expected that with the clarification of construction goals in various regions, the company's low-altitude economy business is expected to achieve substantial growth.
Profit forecast and investment rating: As a leading air traffic control system company, we maintain the company's 2024-2025 EPS forecast of 1.00/1.28 yuan, and the 2026 EPS forecast of 1.64 yuan. It is expected that as infrastructure construction for the low-altitude economy continues to be implemented, the company is expected to take the lead in benefiting and maintaining a “buy” rating.
Risk warning: Policy progress falls short of expectations; technological progress falls short of expectations; competition intensifies the impact.