[Incident: _S Gongum Isamu Isa Ary Report] 2024 Third Quarterly Report Review:

The company's revenue grew steadily, and net profit declined

2024Q1-3 achieved operating income of 12.194 billion yuan, a year-on-year increase of 1.06%; realized net profit of 0.638 billion yuan, a year-on-year decrease of 30.92%; and realized net profit deducted from mother of 0.572 billion yuan, a year-on-year decrease of 21.47%, mainly due to a decline in gross margin due to rising commodity prices and a year-on-year decrease in non-recurring profit and loss items such as government subsidies. Looking at a single quarter, the company achieved operating income of 4.216 billion yuan, a year-on-year decrease of 0.85%; net profit to mother of 0.245 billion yuan, a year-on-year decrease of 23.03%; net profit after deducting non-return to mother of 0.224 billion yuan, an increase of 2.80% year-on-year.

Profit margins have declined and expense ratios have increased

2024Q1-3 achieved a gross sales margin of 25.46%, a year-on-year decrease of 0.47pct, and a year-on-year increase of 1.07pct. Among them, the sales expense ratio, management expense ratio, financial expense ratio and R&D expense ratio were 5.31%, 7.88%, 1.42%, and 4.16%, respectively, +0.49/- 0.21/+0.04/+0.75pct year-on-year, respectively.

Low-altitude core component circuit, the electric aviation business is steadily advancing. The company began setting up an electric aviation R&D center in 2019, led by high-level national overseas talents, focusing on the development and industrialization of advanced motors and drive products in the fields of urban air transport, emergency rescue, logistics and transportation. The aeronautical electric power system developed by the company achieved breakthroughs in core technologies such as system weight reduction, dynamic sealing, electromagnetic compatibility and low-cost batch manufacturing, and completed the intellectual property layout for core products. At the same time, the company and the China Civil Aviation Science and Technology Research Institute jointly built the “New Energy Aircraft Electric Power System Airworthiness Verification Laboratory”, hosted a seminar on “Airworthiness Standards for Multi-rotor Unmanned Aerial Vehicles”, and actively participated in and promoted the formulation of standards related to aeronautical electric power systems. Recently, the first domestic 100 kilowatt variable configuration distributed electric power system, jointly developed by Wolong Electric Drive and COMAC, was unveiled at the opening ceremony of the “National Science and Technology Activity Week” and the China-Europe Talent Exchange and Innovation Cooperation Conference in Zhejiang Province.

Investment advice and profit forecasting

We expect the company's revenue for 2024-2026 to be 16.696/17.919/19.253 billion yuan, net profit to mother of 0.899/1.006/1.112 billion yuan, and corresponding EPS of 0.69/0.77/0.85 yuan/share, respectively, corresponding to PE 24/21/19 times, respectively, maintaining an “gain” rating.

Risk warning

The risk of increased competition in the industry; the risk of fluctuations in raw material prices; the risk of exchange rate fluctuations; the risk that the low-altitude economy industry will not develop as expected; the risk that the eVTOL airworthiness certification process falls short of expectations.