24Q1 revenue continues to be under pressure, and the growth rate is expected to return to a positive level throughout the year
Aerospace Hongtu released a quarterly report. In 2024, Q1 achieved revenue of 221 million yuan (yoy -19.49%, qoq -4.68%), net profit to mother of 151 million yuan (yoy -69.22%, qoq +54.85%), and deducted non-net profit of 152 million yuan (yoy -56.61%). The company's revenue declined year-on-year in 24Q1, mainly due to a drop in new orders in 2023. We believe that driven by constellation construction, low-altitude economy, and data factors, the company's revenue growth rate in 24 is expected to recover. Considering short-term revenue pressure and lowering profit forecasts, the company's 2024-2026 EPS is expected to be 0.52, 1.15, and 2.30 yuan, respectively (previous values of 0.52, 1.21, and 2.36 yuan). Comparable to the company's average 25E 24.1x PE (Wind), the company was given 25E 24.1x PE, with a target price of 27.74 yuan (previous value 28.48 yuan), “buy”.
Net operating cash flow picked up markedly in 24Q1
The gross margin of the 24Q1 company was 38.04%, -11.99pct year on year. It is expected that the gross margin of orders will decline in 2023, mainly due to macroeconomic pressure, which will drag down 24Q1 gross margin performance. The 24Q1 sales/management/R&D expense ratio was 26.38%/42.04%/32.21%, +2.70pct/+14.97pct/+6.05pct. The year-on-year increase in cost ratio was mainly due to declining revenue while personnel costs remained rigid. The 24Q1 net operating cash flow of -392 million yuan was +40.99% year-on-year, and profit quality picked up.
Constellation construction is expected to consolidate the advantages of autonomous data source layout
In recent years, the company has adhered to the development strategy of the entire satellite application industry chain and built a high-precision commercial radar remote sensing satellite constellation. According to the 2023 report, the company has successfully launched 4 high-resolution commercial radar satellites in 2023, and is expected to launch at least 12 high-resolution commercial radar satellites in 2024. We believe that through constellation construction, the company is expected to continue to consolidate the advantages of autonomous data source layout, as reflected in: 1) autonomous data sources will link with existing remote sensing cloud platform facilities to establish a closed commercial loop from data to information to knowledge, and open the second curve of cloud service growth; 2) Through SAR satellite constellation and drone data collection, space data integration will be realized, and the data element market and the space information service market in the “Belt and Road” countries will be expanded.
The drone industry chain business is expected to benefit from the development of the low-altitude economy
In March 2024, the Ministry of Industry and Information Technology, the Ministry of Science and Technology, the Ministry of Finance, and the Civil Aviation Administration of China jointly issued the “Implementation Plan for Innovative Application of General Aviation Equipment (2024-2030)”, which proposes that a new general aviation industry development model characterized by high-end, intelligent, and green will be basically established by 2030. General aviation equipment will be fully integrated into all fields of people's production and life, becoming a powerful driving force for low-altitude economic growth, forming a trillion-level market size. In the field of low-altitude economy, the company has a complete drone industry chain and full-scenario applications. It is expected to use the comprehensive advantages of drones, Beidou, and meteorology to carry out low-altitude flight support, airspace management, low-altitude information services and equipment sales, benefiting from the development of the low-altitude economy.
Risk warning: downstream demand falls short of expectations, product development falls short of expectations