Having incurred losses for 8 consecutive years, ehang (EH.US) has been able to sustain its operation through continuous financing. However, the revenue scale is only over 100 million yuan. How far can ehang go in the "low-altitude economy" aircraft race?

According to the Securities Times app, low-altitude economy has been a hot topic this year, mainly due to a series of support measures implemented by local governments, such as the release of the "High-quality Construction Plan of Low-altitude Takeoff and Landing Facilities (2024-2025)" and the "Low-altitude Intelligent Fusion System SILAS Pioneer Edition" by the Shenzhen Transportation Bureau and other departments in August, as well as the implementation opinions on accelerating the high-quality development of the low-altitude economy issued by the Jiangsu Province, etc.

Ehang asia vets is one of the participants in the low-altitude economy, providing two types of electric vertical take-off and landing aircraft for passenger and logistics transportation. Since its establishment in 2014, it has not only conducted business in China, but also expanded its presence in East Asia, West Asia, South America, and Europe, with very small revenue scales. In 2023, the company's revenue was 0.117 billion yuan, maintaining a loss-making state. Over the 7 years from 2017 to 2023, it has accumulated a total loss of 1.282 billion yuan.

In the first half of 2024, the company's revenue was 0.164 billion yuan. Although the revenue increased significantly, looking at its past performance history, the revenue fluctuates greatly and has poor sustainability. During this period, its shareholders had a net loss of 0.135 billion yuan, with a loss rate of 82.3%. Including this year, it has been in continuous losses for 8 years since 2017. As of June 2024, the company's net assets were 0.639 billion yuan, of which 0.554 billion yuan was raised through stock issuance in Q2, increasing capital reserves by 0.426 billion yuan. At the current burn rate over the past few years, it can still be supported for two to three years.

Ehang asia vets' main product is the EH216 series. In Q1 and Q2, 26 and 49 units were delivered respectively. The company's development momentum seems to be good this year. In April, it obtained the Production Certificate (PC) for the EH216-S unmanned aerial passenger aircraft system issued by the Civil Aviation Administration of China. In May, it received an order for 50 units from Xishan Cultural and Tourism, and in July, it received an order from Guan Zhong Smart Travel. Under the policy of the low-altitude economy, it has tasted some sweetness.

However, these orders are all cooperative agreements, and within the term of the cooperative agreement, it is agreed that the quantity can be purchased. The low-altitude economy is still in its early stages, and whether it can be transformed into actual orders in the future is not only a production issue, but also includes changes in policy environment and the changing needs of cooperative partners. In addition, the company is also developing overseas markets in parallel, expanding into the Middle East market this year. However, the story of "overseas" is not easy to tell, as there has never been a large volume, and in the eyes of investors, it is more of a "gimmick".

Compared to these "actions", the company's most important concern is cost control. It has been losing money for eight consecutive years, and sacrificing profits has not driven the growth of its revenue scale.

Ehang Intelligent's main expenses include sales expenses, management expenses, and research and development expenses. In the first half of 2024, the expense ratios of these three items were 28.96%, 63.41%, and 61%, respectively, totaling as high as 153.37%. From 2021 to 2023, the total expenses of these three items were 0.368 billion yuan, 0.339 billion yuan, and 0.377 billion yuan, respectively. The fluctuation of expense ratios depends on the fluctuation of income, and with the current revenue volume of less than 0.2 billion yuan, it is very difficult to make profits without implementing "cost reduction" measures.

It is worth noting that the company was targeted by short-selling institutions last November, when Xingdengbao Research Company released a short-selling report questioning Ehang Intelligent's orders and believing that its cash reserves were insufficient to support its operations in the capital-intensive aviation industry. Although Ehang has made refutations and firmly denied "orders and sales misleading investors", the market remains skeptical, and the stock price continues to hit new lows.

Recently, due to some negative news from the management, the company's stock price also experienced a significant decline, with a drop of more than 10% on September 4th. Subsequently, the company issued a statement denying the allegations and stating that the management team was not personally connected to the U.S. investigation event. Obviously, Ehang Intelligent is not stable in terms of news, and whether it was shorted last year or accused by the management team this year, it has had a significant impact on the company's brand and operations.

In the secondary market, investors have also chosen to "sell", and since 2021, Ehang Intelligent's market value has decreased by more than 90% from its peak. In the second quarter, the company raised over 500 million yuan, but it is not optimistic about the future for mainly three reasons: First, the industry is still in the early stage of development, and there is a greater policy risk; Second, the company continues to incur losses, and at the current rate of loss, this amount of money is not enough; Third, the performance has been questioned, which could potentially trigger a fundamental crisis for the company.

That being said, investment in the low-altitude economy is still one of the hottest investment themes in the next two years, and related high-quality targets will also benefit from capital favor. However, investors should remain cautious to avoid pitfalls.