Event: the company released its 2023 mid-term report on August 18, 2023. 1H23 achieved 1.19 billion yuan in revenue and YoY-28.2%; returned to its mother with a net profit of 210 million yuan, YoY-9.4%. The company's 1H23 performance was lower than market expectations, and the decline in revenue was mainly due to a decrease in the number of products delivered under contract in the first half of the year compared with the same period last year. Our comprehensive comments are as follows:
2Q23's performance is up 47% year-on-year; profit margins have improved. In a single quarter, the company: 1) 1Q23~2Q23 realized income of 480 million yuan (YoY-44.3%) and 720 million yuan (YoY-10.9%) respectively; 1Q23~2Q23 realized net profit of 60 million yuan (YoY-52.1%) and 150 million yuan (YoY+47.3%) respectively. 2Q23 revenue declined; but net profit increased by 47.3% compared with the same period last year; 2) 2Q23 gross profit margin was 32.2%, up 5.26ppt from the same period last year; and net profit rate was 20.8%, up 7.26ppt from the same period last year. In the first half of 2023, the comprehensive gross profit margin increased by 5.86ppt to 30.1% year on year, and the net profit margin increased by 3.70ppt to 17.9% year on year.
Investment in research and development continued to increase, and the development of new aircraft pterodactyl-3 and other products advanced in an orderly manner. The company's expense rate during the first half of 2023 was 9.9%, an increase of 1.59ppt over the same period last year. Among them: 1) the sales expense rate is 0.56%, an increase of 0.24ppt over the same period last year, mainly due to the active development of the market, and the market promotion cost has increased; 2) the management expense rate is 3.6%, an increase of 1.14 ppt over the same period last year; 3) the R & D expense rate is 8.4%, a decrease of 2.89 ppt over the same period last year; and the R & D expenditure is 100 million yuan, an increase of 9.5% over the same period last year, mainly due to the company's promotion of R & D progress and increased R & D investment.
During the reporting period, the pterodactyl-1E UAV, the pterodactyl-2D UAV and the new command and control station completed the scientific research verification; the development of the pterodactyl-3 advanced in an orderly manner, adding strength for the company to compete for domestic and foreign markets; 4) the financial expense rate was-2.7%, it was-0.02% in the same period last year. The financial expenses are-32.23 million yuan, compared with-340000 yuan in the same period last year, mainly due to the company's efficient management of raising funds and an increase in interest income in order to improve the efficiency of raising funds.
Monetary funds increased by 49.8% over the beginning of the year; the reduction in sales rebates affected the net cash flow of business activities. By the end of 2Q23, the company: 1) accounts receivable and bills were 1.2 billion yuan, basically the same as at the beginning of the year; 2) the monetary fund was 4.63 billion yuan, an increase of 49.8% over the beginning of the year, mainly due to the company's redemption of principal-guaranteed income vouchers; 3) inventory of 1.38 billion yuan, down 4.7% from the beginning of the year 4) the contract liability was 360 million yuan, a decrease of 54.6% compared with the beginning of the year, mainly because some of the advance receipts reached the settlement conditions and had been carried forward; 5) the net cash flow of operating activities was-16.42 million yuan (16.4 million yuan in the same period last year), mainly due to a decrease in sales rebates in the current period compared with the same period last year.
Investment suggestion: the company is the leading enterprise of large-scale UAV system in China, and the aviation industry group is currently the only UAV listing platform. The pterodactyl series UAV ranks second in the global market share of unmanned aerial vehicles, with users in more than a dozen countries. Benefiting from the continuous development of domestic special areas and overseas military trade business during the 14th five-year Plan period, including the growing demand in the field of emergency response, the company's performance is expected to continue to increase in the next few years. The company's short-term income is under pressure, and we adjust the company's net profit to 471 million yuan, 652 million yuan and 910 million yuan in 2023 to 2025 according to the pace of downstream demand, corresponding to 69x/50x/35x in 2023 to 2025.
We maintain the "recommended" rating, taking into account the growing demand of the company's downstream users and the company's strong barriers.
Risk tips: downstream demand is not as expected; product delivery is not as expected.