The company's 1Q24 performance fell short of market expectations
The company announced 1Q24 results: operating income of 221 million yuan, -19.49% year-on-year, -4.68% month-on-month; loss of 151 million yuan; loss of 152 million yuan after deduction. The company's performance fell short of market expectations, mainly due to the year-on-year decline in new orders in 2023, which led to a decline in revenue.
Development trends
The decline in orders in '23 disrupted 1Q24 results, and cash flow improved year over year. 1) The suspension of the company's 4Q23 special bidding qualifications caused delays in the bidding process for some projects. The amount of new orders signed in 2023 declined, leading to a decline in 1Q24 revenue scale. 2) The company's net cash outflow from operating activities in 1Q24 was -41% to 392 million yuan. The company continued to promote cost reduction and efficiency. In 1Q24, cash from purchasing goods and receiving labor payments was -38% year-on-year, helping to improve cash flow from operating activities year-on-year.
Cost-side expansion suppressed profit performance, and data resources were included in the table for the first time. 1) The company's expense ratio during the 1Q24 period was +29.60ppt to 114.29% year-on-year, and the cost ratio rose sharply, putting pressure on the profit side for a short time. 2) The company's 1Q24 contract debt/inventory increased by 4.71%/19.03% at the end of 23, respectively, to 384/1.914 billion yuan, and the forward-looking indicators remained high. 3) The company's 172 million yuan data resources were first recorded and included in intangible assets in 1Q24. We believe that data resource registration can accelerate the flow of data resources and stimulate the economic value of data resources, thereby helping the company's data-related business grow and strengthen the advantages of independent data sources.
Continue to promote the construction of an independent data source system to boost the low-altitude economy and trillion-yuan treasury bond project. 1) The company has now formed a data source system that complements satellite and drone data. It plans to launch at least 12 commercial radar satellites in 2024 and continue to promote drone production. We believe that the company's integrated data resource system layout is progressing steadily, and that upstream data sources and remote sensing applications are expected to form organic linkages, opening up a new growth curve for cloud services and data services. 2) The company actively improves the entire drone industry chain and full-scene application, creates a benchmark city demonstration site, and carries out low-altitude flight support, airspace management, low-altitude information services and equipment sales. The company has a technical foundation such as low-altitude flight control and airspace management, and we believe it can benefit from the booming low-altitude economy. 3) The company is grasping the trillion-yuan treasury bond project and actively follows up on special orders for advantageous industries such as water conservancy, meteorology, and marine. The company is a core supplier of remote sensing application services in China, and we believe it is expected to fully benefit.
Profit forecasting and valuation
We keep the company's profit forecast for 2024/2025 unchanged. The company's current stock price corresponds to a price-earnings ratio of 23.7/15.3 times 2024/2025. We maintain our outperforming industry rating and keep our target price of 27.54 yuan unchanged, corresponding to the 2024/2025 price-earnings ratio of 30.0/19.4 times, with a potential increase of 26.7%.
risks
Market expansion falls short of expectations; cash flow improvement falls short of expectations; macroeconomic policies and environmental risks.