Event: On August 28, 2024, the company released its 2024 annual report. 2024H1 achieved revenue of 0.637 billion yuan, a year-on-year increase of 21%; net profit to mother of 5.4519 million yuan, with losses narrowing by 56.54% year on year; net profit not attributable to mother - 12.918 million yuan, and losses narrowed 3.15% year over year. The results are in line with market expectations.

Key points of investment

Revenue grew steadily, and the cost control effect was remarkable: 2024H1 revenue growth was mainly due to an increase in sales revenue in the field of urban road traffic management during the reporting period. The narrowing of net profit to mother was mainly due to increased budget and expense control efforts during the reporting period, and a year-on-year increase in VAT refund revenue for software products.

2024Q2 achieved revenue of 0.393 billion yuan in a single quarter, up 12.14% year on year; 24Q2 achieved net profit of 10.2836 million yuan, a year-on-year decrease of 46.85%; 24Q2 realized deduction of non-net profit of 5.5119 million yuan, a year-on-year decrease of 70.67%. In terms of gross margin, 2024H1 was 21.89%, a year-on-year decrease of 8.29pct. This is expected to be due to an increase in revenue from the relatively low gross margin traffic management business. In terms of cost ratio, sales expense ratio and management expense ratio were 7.34% and 8.63% respectively, down 2.34pct and 3.43pct, respectively. The cost control effect was remarkable.

Build low-altitude core products and actively promote the implementation of benchmark projects: In the low-altitude field, the company builds core products and develops new low-altitude flight service guarantee products -- the Rice “Tianmu” series, including the low-altitude flight management service platform - “Tianmu-M”, drone operation service system - “Tianmu-S”, the airspace route planning simulation system - “Tianmu-P” and the landing site intelligent management system - “Tianmu-A”, which aims to open up the upstream and downstream of the industrial chain and build a complete low-altitude support service system with the platform “brain” as the core for development and development Occupying the low-altitude market lays a solid foundation. In addition, the company promoted the implementation of benchmark projects, relied on deep technology and business accumulation, focusing on accelerating the development of low-altitude “Tianmu” series products around flight management platforms, jointly planning overall low-altitude development plans with local governments, and developing close exchanges and strategic cooperation with more than 20 provinces and cities, including Beijing, Shanghai, Chongqing, Jiangsu, Anhui, Guangzhou, Nanjing, Suzhou, and Zhuhai. It has also achieved phased results in some regions, empowering the low-altitude flight service guarantee system and accelerating the development of the low-altitude economy industry.

Profit forecast and investment rating: A leading air traffic control system company, we maintain the company's 2024-2026 EPS forecast of 1.00/1.28/1.64 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.