航天南湖(688552) - 2024 Q2 - 季度财报

Definitions This section provides definitions of key terms used throughout the report Company Profile and Key Financial Indicators This section provides an overview of the company's basic information and presents its key financial performance metrics Company Basic Information Aerospace Nanhua Electronic Information Technology Co., Ltd. (ASNH, stock code 688552) is registered in Shashi District, Jingzhou City, with Luo Huihua as its legal representative, primarily engaged in R&D, production, sales, and service of air defense early warning radar products - The company's Chinese name is Aerospace Nanhua Electronic Information Technology Co., Ltd., abbreviated as Aerospace Nanhua, and its English abbreviation is ASNH[8] - The company's legal representative is Luo Huihua, and its registered address is No. 51 Jinlong Road, Shashi District, Jingzhou City[8] - The company's shares are listed on the STAR Market of the Shanghai Stock Exchange, with stock code 688552[11] Contact Persons and Information Board Secretary He Min and Securities Affairs Representative Xiao Xiaohong are responsible for information disclosure and investor relations, with the contact address at No. 9 Jiangjin East Road, Jingzhou Economic and Technological Development Zone, Jingzhou City, Hubei Province - The Board Secretary (domestic representative for information disclosure) is He Min, and the Securities Affairs Representative is Xiao Xiaohong[9] - The contact address is No. 9 Jiangjin East Road, Jingzhou Economic and Technological Development Zone, Jingzhou City, Hubei Province, with telephone 0716-4167788 and email board_nh@casic.com.cn[9] Information Disclosure and Document Custody Location Changes The company designates Shanghai Securities News, China Securities Journal, Securities Times, and Securities Daily for information disclosure, publishes its semi-annual report on the Shanghai Stock Exchange website (www.sse.com.cn), and maintains document custody at its Securities Affairs Department - The company's designated newspapers for information disclosure are Shanghai Securities News, China Securities Journal, Securities Times, and Securities Daily[10] - The website address for publishing the semi-annual report is **www.sse.com.cn**[10](index=10&type=chunk) - The company's semi-annual report is available for inspection at the company's Securities Affairs Department, No. 9 Jiangjin East Road, Jingzhou Economic and Technological Development Zone, Jingzhou City, Hubei Province[10] Company Stock/Depositary Receipt Overview The company's A-shares are listed on the STAR Market of the Shanghai Stock Exchange, with the stock abbreviation Aerospace Nanhua and stock code 688552, and there were no depositary receipt-related matters during the reporting period - The company's stock type is A-shares, listed on the STAR Market of the Shanghai Stock Exchange[11] - The stock abbreviation is Aerospace Nanhua, and the stock code is 688552[11] - The company has no depositary receipts overview[12] Company's Key Accounting Data and Financial Indicators In the first half of 2024, the company's operating revenue significantly decreased by 81.78% to CNY 65.83 million, with a net loss of CNY 39.36 million attributable to shareholders, a 233.34% decrease, primarily due to reduced radar product deliveries and accounts receivable collection, while R&D investment as a percentage of revenue increased to 71.10% Key Accounting Data for H1 2024 | Key Accounting Data | Current Period (Jan-Jun) (CNY) | Prior Period (CNY) | YoY Change (%) | | :------------------------------------------- | :----------------------------- | :------------------- | :-------------------------- | | Operating Revenue | 65,833,671.28 | 361,375,921.30 | -81.78 | | Net Profit Attributable to Shareholders | -39,359,717.83 | 29,519,094.86 | -233.34 | | Net Profit Attributable to Shareholders (Excluding Non-Recurring Items) | -40,738,979.03 | 21,893,720.50 | -286.08 | | Net Cash Flow from Operating Activities | -156,589,971.63 | 281,153,588.93 | -155.70 | | Net Assets Attributable to Shareholders (End of Period) | 2,597,579,992.72 | 2,668,175,875.37 | -2.65 | | Total Assets (End of Period) | 3,121,378,990.22 | 3,270,002,574.85 | -4.55 | Key Financial Indicators for H1 2024 | Key Financial Indicators | Current Period (Jan-Jun) | Prior Period | YoY Change (%) | | :---------------------------------------------------- | :----------------------- | :----------- | :-------------------------- | | Basic Earnings Per Share (CNY/share) | -0.12 | 0.11 | -209.09 | | Diluted Earnings Per Share (CNY/share) | -0.12 | 0.11 | -209.09 | | Basic EPS (Excluding Non-Recurring Items) (CNY/share) | -0.12 | 0.08 | -250.00 | | Weighted Average ROE (%) | -1.49 | 2.36 | decrease of 3.85 percentage points | | Weighted Average ROE (Excluding Non-Recurring Items) (%) | -1.54 | 1.76 | decrease of 3.30 percentage points | | R&D Investment as % of Operating Revenue (%) | 71.10 | 18.90 | increase of 52.20 percentage points | - Operating revenue, net profit attributable to shareholders, net profit attributable to shareholders (excluding non-recurring items), and net cash flow from operating activities all significantly decreased year-on-year, primarily due to reduced radar product deliveries and lower accounts receivable collection[14] Non-Recurring Gains and Losses Items and Amounts During the reporting period, the company's total non-recurring gains and losses amounted to CNY 1.38 million, primarily comprising government grants recognized in current profit or loss and other non-operating income and expenses Non-Recurring Gains and Losses Items and Amounts for H1 2024 | Non-Recurring Gains and Losses Item | Amount (CNY) | | :------------------------------------------ | :------------- | | Government Grants Recognized in Current Profit or Loss | 1,525,404.62 | | Other Non-Operating Income and Expenses (Excluding Above) | 70.10 | | Other Items Meeting the Definition of Non-Recurring Gains and Losses | 97,185.52 | | Less: Income Tax Impact | 243,399.04 | | Total | 1,379,261.20 | Management Discussion and Analysis This section provides a comprehensive discussion and analysis of the company's operations, financial condition, and future outlook Industry and Main Business Overview During the Reporting Period The company's main business is the R&D, production, sales, and service of air defense early warning radar products, falling under "Radar and Supporting Equipment Manufacturing" within the "Computer, Communication and Other Electronic Equipment Manufacturing" sector, primarily serving the national defense military field, with the industry driven by increased national defense budgets, military modernization, and low-altitude economy opportunities, while the company actively expands into military trade exports and low-altitude detection equipment - The company primarily engages in R&D, production, sales, and service of air defense early warning radar products, belonging to "Radar and Supporting Equipment Manufacturing (C3940)", with products mainly applied in the national defense military sector[18] - The national defense budget continues to increase (7.20% year-on-year growth in 2024), with a focus on investment in military radar and other information technology equipment, indicating an urgent demand for new air defense early warning radars[18] - The complex and volatile international situation has heightened security demands globally, while domestic military radar technology advancements present opportunities for military trade exports[18] - The development of the low-altitude economy creates opportunities for building security assurance systems, including low-altitude target detection and flight control[18] (I) Industry Development The company's radar and supporting equipment manufacturing industry benefits from continuous growth in national defense budgets, strategic requirements for military modernization, and increased air defense early warning demands due to international geopolitical conflicts, while the rapid development of the low-altitude economy also brings new market opportunities for low-altitude target detection and air traffic control equipment - The company belongs to "Computer, Communication and Other Electronic Equipment Manufacturing" specifically "Radar and Supporting Equipment Manufacturing", with products primarily used in national defense[18] - The 2024 national defense budget expenditure is projected to reach approximately CNY 1.69 trillion, a 7.20% year-on-year increase, supporting investment in military radar and other information technology equipment[18] - The development of the low-altitude economy, included in the government work report, and the introduction of general aviation equipment innovation application plans, create development opportunities for low-altitude target detection and flight control[18] (II) Main Business and Products The company's main business has not significantly changed, remaining centered on the R&D, production, sales, and service of air defense early warning radars, including surveillance radars and target indication radars, widely used by military clients and actively expanding into international markets, while also leveraging its technological expertise to develop diversified products such as radar supporting equipment, low-altitude detection equipment, and air traffic control equipment - The company's main business has not undergone significant changes, primarily focusing on the R&D, production, sales, and service of air defense early warning radars[18] - Key products include air defense early warning radars (surveillance radars, target indication radars), radar supporting equipment (protection, testing, simulation, anti-jamming training systems), and radar components (maintenance materials, supporting parts and assemblies)[18][19] - The company's products cover multiple military branches and it has developed various air defense early warning radar products for export, actively expanding into international markets[18] (III) Main Business Model The company primarily adopts an independent R&D model, with product development centered on model research and active participation in national scientific research projects; its procurement model is "procurement based on production" supplemented by inventory, strictly adhering to supplier access and management systems; the production model is mainly "production based on sales" and customized production, with military products strictly following national military quality standards; the sales model includes direct sales to domestic military clients and military industrial groups, as well as military trade exports through prime contractors or military trade companies, with pricing primarily determined through military review or negotiation - The R&D model is primarily independent R&D, centered on model development, adhering to regulations such as the "Weapon Equipment Development Management Measures", and actively undertaking national and military scientific research projects[19] - The procurement model is "procurement based on production" supplemented by reasonable inventory, strictly implementing supplier access and tiered management, and determining suppliers and prices through bidding, negotiation, and comparison[19] - The production model primarily adopts "production based on sales" and customized production, with military products strictly adhering to national military quality standards and subject to user representative supervision and acceptance[19][20] - The sales model includes direct sales to domestic military clients and military industrial groups, as well as military trade exports through weapon system prime contractors or military industrial group-affiliated military trade companies[20] - For pricing, military products' final prices are mainly determined through military review, unreviewed products are settled at provisional prices, and products sold to military industrial groups are priced through negotiation[20] Core Technologies and R&D Progress The company continues to increase R&D investment, mastering 7 core technologies including phased array radar overall design, software-defined radar, adaptive anti-jamming, target classification and recognition, high-mobility and high-integration structural design, phased array antenna design, and transceiver module design, and obtained 4 invention patents (including 3 national defense patents) and 2 utility model patents during the reporting period; R&D investment as a percentage of operating revenue significantly increased to 71.10%, mainly due to decreased operating revenue, with several ongoing projects in the state appraisal or engineering development phase, expected to be mass-equipped by users - The company has mastered 7 core technologies, including phased array radar overall design, software-defined radar, adaptive anti-jamming, target classification and recognition, high-mobility and high-integration structural design, phased array antenna design, and transceiver module design[21] - During the reporting period, the company obtained 4 invention patents (including 3 national defense patents) and 2 utility model patents[24] R&D Investment Situation | Indicator | Current Period (CNY) | Prior Period (CNY) | Change (%) | | :------------------------------------ | :------------------- | :--------------- | :------------ | | Expensed R&D Investment | 46,808,813.36 | 68,302,729.40 | -31.47 | | Total R&D Investment | 46,808,813.36 | 68,302,729.40 | -31.47 | | Total R&D Investment as % of Operating Revenue (%) | 71.10 | 18.90 | 52.20 | | Capitalized R&D Investment as % | - | - | - | - Total R&D investment decreased by 31.47% year-on-year, primarily due to changes in the R&D stages of some company projects, leading to reduced material input[26] - The proportion of total R&D investment to operating revenue increased by 52.20 percentage points year-on-year, reaching 71.10%, mainly due to the decrease in operating revenue during the current reporting period[14][25] - The company has multiple ongoing R&D projects, including new air defense early warning radars and detection and identification equipment, most of which are in the state appraisal or engineering development phase, reaching international advanced technical levels, and are expected to be mass-equipped by users[27] 1. Core Technologies, Their Advancement, and Changes During the Reporting Period The company has accumulated 7 core technologies in air defense early warning radar, including phased array radar overall design, software-defined radar, adaptive anti-jamming, target classification and recognition, high-mobility and high-integration structural design, phased array antenna design, and transceiver module design, which demonstrate advanced capabilities in detection range, anti-jamming, target recognition, and mobility, with no significant changes to core technologies during the reporting period - The company has mastered 7 core technologies, including phased array radar overall design, software-defined radar, adaptive anti-jamming, target classification and recognition, high-mobility and high-integration structural design, phased array antenna design, and transceiver module design[21] - Phased array radar overall design technology demonstrates advancement in transmitting power, detection range, anti-jamming capability, automated testing, broadband design, adaptive resource scheduling, and low-altitude target detection[21][22] - The company's core technologies did not undergo significant changes during the reporting period[22] 2. R&D Achievements During the Reporting Period During the reporting period, the company achieved 4 invention patents (including 3 national defense patents) and 2 utility model patents in intellectual property, accumulating a total of 52 invention patents and 83 utility model patents List of Intellectual Property Obtained During the Reporting Period | Category | Newly Obtained in Current Period (units) | Cumulative Number Obtained (units) | | :------- | :----------------------------------- | :------------------------------- | | Invention Patents | 4 | 52 | | Utility Model Patents | 2 | 83 | | Total | 6 | 135 | 3. R&D Investment Table During the reporting period, the company's total R&D investment was CNY 46.81 million, a year-on-year decrease of 31.47%, primarily due to reduced material input resulting from changes in the R&D stages of some projects; R&D investment as a percentage of operating revenue significantly increased to 71.10%, an increase of 52.20 percentage points compared to the prior year, mainly influenced by the decrease in operating revenue R&D Investment Situation | Indicator | Current Period (CNY) | Prior Period (CNY) | Change (%) | | :------------------------------------ | :------------------- | :--------------- | :------------ | | Expensed R&D Investment | 46,808,813.36 | 68,302,729.40 | -31.47 | | Total R&D Investment | 46,808,813.36 | 68,302,729.40 | -31.47 | | Total R&D Investment as % of Operating Revenue (%) | 71.10 | 18.90 | 52.20 | - Total R&D investment decreased year-on-year, primarily due to changes in the R&D stages of some company projects, leading to reduced material input[26] - R&D investment as a percentage of operating revenue increased year-on-year, mainly due to the decrease in operating revenue during the current reporting period[14] 4. Ongoing R&D Projects The company currently has multiple ongoing R&D projects, including new air defense early warning radars and protection systems, and new detection and identification equipment, most of which have entered the state appraisal or engineering development phase, achieving international advanced technical levels, and are expected to be mass-equipped by users; these projects have a total estimated investment of CNY 523.48 million, with CNY 43.06 million invested in the current period and a cumulative investment of CNY 341.06 million Main Ongoing R&D Projects | No. | Project Name | Progress or Phased Achievements | Target | Technical Level | Specific Application Prospects | | :-- | :----------- | :------------------------------ | :----------------------------- | :-------------- | :--------------------------- | | 1 | Project 2 | State appraisal phase | Develop a new type of air defense early warning radar | International advanced | Expected to be mass-equipped by users | | 2 | Project 3 | State appraisal phase | Develop a new type of air defense early warning radar | International advanced | Expected to be mass-equipped by users | | 3 | Project 6 | Engineering development phase | Develop a new type of air defense early warning radar protection system | International advanced | Expected to be mass-equipped by users | | 4 | Project 7 | State appraisal phase | Develop a new type of detection and identification equipment | International advanced | Expected to be mass-equipped by users | | 5 | Project 27 | Prototype development phase | Develop a new type of air defense early warning radar | International advanced | Expected to be mass-equipped by users | - The total estimated investment for major R&D projects is CNY 523.48 million, with CNY 43.06 million invested in the current period, and a cumulative investment of CNY 341.06 million[27] 5. R&D Personnel As of the end of the reporting period, the company had 326 R&D personnel, accounting for 40.85% of the total workforce, with total R&D personnel compensation of CNY 35.65 million and an average compensation of CNY 0.11 million; the R&D team is primarily composed of bachelor's and master's degree holders, with over 80% of R&D personnel aged 30 and below or between 31-40 years old Basic Information of R&D Personnel | Indicator | Current Period (people) | Prior Period (people) | | :------------------------------------ | :---------------------- | :-------------------- | | Number of Company R&D Personnel | 326 | 331 | | Proportion of R&D Personnel to Total Employees (%) | 40.85 | 40.66 | | Total R&D Personnel Compensation (CNY 10,000) | 3,564.95 | 3,781.49 | | Average R&D Personnel Compensation (CNY 10,000) | 10.94 | 11.42 | Educational Background of R&D Personnel | Educational Background | Number (people) | Proportion (%) | | :--------------------- | :-------------- | :------------- | | PhD | 6 | 1.84 | | Master's | 101 | 30.98 | | Bachelor's | 191 | 59.59 | | Below Bachelor's | 28 | 8.59 | | Total | 326 | 100.00 | Age Structure of R&D Personnel | Age Range | Number (people) | Proportion (%) | | :-------- | :-------------- | :------------- | | Under 30 | 143 | 43.87 | | 31-40 | 132 | 40.49 | | 41-50 | 39 | 11.96 | | 51-60 | 12 | 3.68 | | Total | 326 | 100.00 | Analysis of Core Competitiveness During the Reporting Period The company's core competitiveness remained largely unchanged during the reporting period, primarily demonstrated by strong R&D capabilities and technological advantages, extensive industry experience, a stringent quality management system, a positive brand image, and stable sales channels with a comprehensive after-sales service system, supported by continuous high R&D investment, multiple core technologies, a high-caliber R&D team, and various quality certifications to ensure product quality and market competitiveness - The company's core competitiveness remained largely unchanged, encompassing R&D capabilities and technological advantages, extensive industry experience, quality advantages, brand advantages, and sales channel and after-sales service advantages[29] - The company possesses strong independent R&D capabilities, mastering 7 core technologies, is recognized as a high-tech enterprise and a national "little giant" enterprise specializing in niche sectors, with R&D investment accounting for 71.10% of operating revenue[29] - The company has accumulated decades of research achievements and production experience in the field of air defense early warning radar, establishing a complete R&D, procurement, production, and sales system[29] - The company strictly adheres to national military standards, has passed GJB9001C quality system certification and GJB5000B software quality certification, and its product quality is highly recognized by customers[29] - The company maintains stable sales channels and a comprehensive after-sales service system, having built stable customer resources and business relationships[29] (I) Core Competitiveness Analysis The company's core competitiveness is reflected in its strong R&D capabilities (mastering 7 core technologies, R&D investment accounting for 71.10% of revenue, with 326 R&D personnel), decades of industry experience, a stringent quality management system (certified with GJB9001C and GJB5000B), a positive brand image, and stable sales channels with comprehensive after-sales service - The company has mastered 7 core technologies, including phased array radar overall design, is a high-tech enterprise and a national "little giant" enterprise specializing in niche sectors, with R&D investment accounting for 71.10% of operating revenue[29] - The company has accumulated decades of research achievements and production experience in the field of air defense early warning radar, forming a complete R&D, procurement, production, and sales system[29] - The company has passed GJB9001C quality system certification and GJB5000B software quality certification, implementing full lifecycle reliability assurance engineering for equipment[29] - The company possesses stable sales channels, continuously supplying products to domestic military clients and military industrial groups, and has established a comprehensive after-sales service assurance system[29] Discussion and Analysis of Operating Results In the first half of 2024, the company's operating performance was affected by user procurement policy adjustments, international market uncertainties, and seasonal factors, leading to an 81.78% year-on-year decrease in operating revenue to CNY 65.83 million and a net loss of CNY 39.36 million; the company actively responded by strengthening Party building leadership, focusing on market expansion and new industry layouts (such as the low-altitude economy), adhering to innovation-driven development (with multiple R&D projects entering the appraisal stage), advancing new industrial park construction, and continuously deepening management reforms and implementing a "grand security" concept - In the first half of 2024, the company's operating revenue was CNY 65.83 million, a year-on-year decrease of 81.78%; net profit attributable to shareholders was -CNY 39.36 million, a year-on-year decrease of 233.34%[30] - The decline in performance was primarily due to factors such as user procurement policy adjustments, international market uncertainties, and seasonal characteristics, resulting in delayed product deliveries[30] - The company actively expanded its market, strengthened communication with domestic clients, promoted international market development, and strategically planned for new industries such as the low-altitude economy[30] - The company maintained high R&D investment, with multiple key R&D projects entering physical comparison tests or state appraisal phases, the PLM system launched for trial operation, 13 patent applications submitted, and 6 patents granted in the first half of the year[30] - Construction of the new industrial park is nearing completion, expected to be operational in the second half of 2024, which will enhance scientific research and production capabilities and digitalization levels[30] - The company continuously advanced management reforms, including the "Digital Nanhua" initiative, cost control, quality management (GJB5000B Level 3 formal evaluation passed), and human resource management (salary system reform, talent acquisition and development)[30][31] - The company continued to implement a "grand security" concept, strengthening control in areas such as safety, confidentiality, environmental protection, and compliance, and improving its internal control system[31] Risk Factors The company faces multiple risks including significant performance decline, core competitiveness (technology R&D, talent loss), operations (high customer concentration, single product structure, management challenges with scale expansion), financial (gross margin fluctuations, high accounts receivable, inventory impairment), industry-specific (military qualification renewal, state secret leakage, after-sales custody, seasonal operations), and macroeconomic environment (defense policy, military trade export) factors, all of which could adversely affect its future operating performance and sustainable development - Risk of significant performance decline: Operating revenue and net profit significantly decreased during the reporting period, and future performance may continue to decline due to factors such as defense budget, procurement policies, market competition, R&D capabilities, and product delivery[32] - Core competitiveness risk: Long R&D cycles and high investment, with uncertainty in R&D outcomes, mean that if R&D projects fail to achieve mass production or products do not meet market demand, investments may not be recovered; loss of core technical personnel or key staff could adversely affect the company's competitiveness[32] - Operating risk: High customer concentration (primarily military clients and military industrial groups), a relatively single product structure (air defense early warning radars), and increased management complexity due to expanding scale[33] - Financial risk: Significant fluctuations in main business gross margin (current period 12.52%, a year-on-year decrease of 15.41 percentage points), high accounts receivable balance (end of period CNY 258.18 million), and inventory impairment risk (end of period CNY 451.60 million)[33] - Industry risk: Risks specific to military products include the renewal of military qualifications, leakage of state secrets, after-sales custody, and seasonal operating performance (revenue concentrated in the fourth quarter)[33][34] - Macroeconomic environment risk: The defense industry is influenced by international environment, security situation, geopolitics, and other macroeconomic factors, where national defense budget cuts or policy adjustments could adversely affect the company's operations; military trade exports are affected by international security situations and policy changes[34] (I) Risk of Significant Performance Decline During the reporting period, the company's operating revenue decreased by 81.78% year-on-year, and net profit decreased by 233.34% year-on-year, with future performance potentially continuing to decline due to factors such as defense budget cuts, procurement policy changes, market competition, insufficient R&D capabilities, and delayed product deliveries - During the reporting period, the company's operating revenue was CNY 65.83 million, a year-on-year decrease of 81.78%; net profit attributable to shareholders was -CNY 39.36 million, a year-on-year decrease of 233.34%[32] - Future performance decline risks are influenced by various factors including international situations, macroeconomic conditions, industrial policies, tax policies, industry competition, management decisions, and the implementation of fundraising projects[32] - Specific risks include significant defense budget cuts, changes in military procurement policies, entry of new competitors, inability of R&D capabilities to meet demand, and failure to deliver products on schedule[32] (II) Core Competitiveness Risk The company faces risks associated with long R&D cycles, high investment, uncertain R&D outcomes, and the potential loss of core technical talent; if R&D projects fail to achieve mass production or product technologies do not meet market demand, it will adversely affect the company's future performance and competitiveness - Technology R&D risk: R&D cycles for air defense early warning radar products are long, capital investment is high, and customers have stringent requirements for product advancement, safety, reliability, and confidentiality[32] - If new R&D models fail to achieve mass production, it may result in unrecoverable R&D investments and failure to achieve expected benefits[32] - Talent loss risk: High-tech barrier industries heavily rely on core technical talent, and the loss of core technical personnel or key staff could adversely affect the company's core competitiveness, business development, and reputation[32] (III) Operating Risk The company faces operating risks such as high customer concentration (primarily military clients and military industrial groups), a relatively single product structure (mainly air defense early warning radars and supporting equipment), and increased management complexity due to expanding operational scale; these factors could lead to fluctuations in the company's revenue and profit or adversely affect normal production and operations - High customer concentration risk: The company's products are primarily sold to domestic military clients and military industrial groups, with a high proportion of sales revenue from the top five customers, and performance may fluctuate if competitiveness cannot be maintained or customer policies change[33] - Relatively single product structure risk: The company specializes in air defense early warning radar, and if customer procurement demand decreases or products fail to meet upgrade requirements, sales volume may decline[33] - Operating management risk due to scale expansion: As the operating scale and fundraising projects expand, the company faces increased challenges in R&D, procurement, production, sales, and internal management, and mismatched management measures could have an adverse impact[33] (IV) Financial Risk The company faces financial risks including gross margin fluctuations (current period main business gross margin of 12.52%, a year-on-year decrease of 15.41 percentage points), a high balance of accounts receivable (end of period CNY 258.18 million), and inventory impairment (end of period CNY 451.60 million); these risks could impact the company's profitability, cash flow, and asset quality - Risk of gross margin fluctuations: The main business gross margin for the reporting period was 12.52%, a year-on-year decrease of 15.41 percentage points, primarily influenced by seasonal revenue factors and differences in the sales product mix[33] - Risk of high accounts receivable balance: The book value of accounts receivable at the end of the reporting period was CNY 258.18 million, and collection may not be timely due to the planned and seasonal nature of military client procurement[33] - Risk of inventory impairment: The book value of inventory at the end of the reporting period was CNY 451.60 million, and due to long production cycles and complex processes, changes in market conditions could lead to inventory impairment[33] (V) Industry Risk The company's military business faces industry-specific risks such as the renewal of military qualifications, leakage of state secrets, after-sales custody, and seasonal operating performance (revenue concentrated in the fourth quarter); any loss of qualifications, leakage incidents, or damage to custodied products could have a significant adverse impact on the company's operations - Risk of military qualification renewal: Military product business is the main source of revenue, subject to strict qualification review and market access systems, and failure to renew or update qualifications will adversely affect operations[33] - Risk of state secret leakage: The company's military product business involves state secrets, and despite strict confidentiality systems, the risk of leakage due to unforeseen circumstances cannot be ruled out[33] - After-sales custody risk: Products sold by the company to military clients are custodied by the company before shipment, and the company may bear liability for compensation if products are damaged or lost during the custody period[33] - Seasonal operating performance risk: The sales of the company's main products exhibit seasonal characteristics, with a higher proportion of revenue typically recognized in the fourth quarter, so investors should not simply extrapolate full-year performance[34] (VI) Macroeconomic Environment Risk The company's military revenue is influenced by macroeconomic factors such as the international environment, security situation, and geopolitics; if the country reduces military spending or adjusts relevant budgets, or if global macroeconomic and political situations change, it could adversely affect the company's production, operations, and military trade business - The company's main business revenue primarily comes from military products, which are influenced by multiple factors such as the international environment, security situation, geopolitics, and national defense development level[34] - If the country reduces military spending or adjusts budget allocations related to the company's products in the future, it may adversely affect the company's production and operations[34] - Military trade exports are affected by international security situations, bilateral relations between importing and exporting countries, policy changes, and market competition, and changes in the macroeconomic environment could adversely affect military trade business[34] Key Operating Results During the Reporting Period During the reporting period, the company's operating revenue significantly decreased by 81.78% year-on-year, primarily due to reduced radar product deliveries; operating costs decreased in line with revenue, and financial expenses decreased due to increased bank deposits; R&D expenses decreased due to reduced material input resulting from changes in project R&D stages; net cash flow from operating activities significantly decreased, mainly due to reduced accounts receivable collection; net cash flow from investing activities significantly increased, primarily due to increased maturity of bank time deposits and large-denomination certificates of deposit; net cash flow from financing activities significantly decreased, mainly due to a high base from the previous year's stock issuance and listing Main Accounting Data Change Analysis | Item | Current Period (CNY) | Prior Period (CNY) | Change (%) | | :--------------------------------- | :------------------- | :------------------- | :------------ | | Operating Revenue | 65,833,671.28 | 361,375,921.30 | -81.78 | | Operating Cost | 57,375,374.34 | 260,301,024.00 | -77.96 | | Financial Expenses | -17,306,477.59 | -11,708,742.68 | -47.81 | | R&D Expenses | 46,808,813.36 | 68,302,729.40 | -31.47 | | Net Cash Flow from Operating Activities | -156,589,971.63 | 281,153,588.93 | -155.70 | | Net Cash Flow from Investing Activities | -102,914,179.67 | -1,090,580,311.74 | 90.56 | | Net Cash Flow from Financing Activities | -32,582,306.52 | 1,664,596,165.20 | -101.96 | - Operating revenue decreased year-on-year, primarily due to reduced radar product deliveries during the current reporting period[35] - Net cash flow from operating activities decreased year-on-year, primarily due to reduced accounts receivable collection during the current reporting period[35] - Net cash flow from investing activities increased year-on-year, primarily due to increased maturity of bank time deposits and large-denomination certificates of deposit during the current reporting period[35] - Net cash flow from financing activities decreased year-on-year, primarily because the company's stock issuance and listing in the prior year resulted in a significant increase in financing cash inflows, with no such inflows in the current period[35] (I) Main Business Analysis During the reporting period, both the company's main business revenue and costs significantly decreased, with operating revenue down 81.78% year-on-year and operating costs down 77.96% year-on-year, primarily due to reduced radar product deliveries; financial expenses decreased due to increased bank deposits, and R&D expenses declined due to reduced material input resulting from changes in project R&D stages Financial Statement Related Items Change Analysis | Item | Current Period (CNY) | Prior Period (CNY) | Change (%) | | :----------- | :------------------- | :------------------- | :------------ | | Operating Revenue | 65,833,671.28 | 361,375,921.30 | -81.78 | | Operating Cost | 57,375,374.34 | 260,301,024.00 | -77.96 | | Financial Expenses | -17,306,477.59 | -11,708,742.68 | -47.81 | | R&D Expenses | 46,808,813.36 | 68,302,729.40 | -31.47 | - Operating revenue decreased compared to the prior year, primarily due to reduced radar product deliveries during the current reporting period[35] - The change in financial expenses was mainly due to an increase in the average monthly balance of bank deposits during the current reporting period compared to the prior year[35] - The change in R&D expenses was mainly due to changes in the R&D stages of some company projects, leading to reduced material input[35] (III) Analysis of Assets and Liabilities At the end of the reporting period, both the company's total assets and net assets attributable to shareholders decreased; within current assets, monetary funds decreased by 13.76%, notes receivable decreased by 100% (due to maturity and payment), other receivables decreased by 96.02% (government grants received), and inventory increased by 16.62%; within non-current assets, construction in progress increased by 40.01% (industrial park project construction), and deferred income tax assets increased by 161.20% (due to deductible losses); on the liability side, notes payable decreased by 89.22% (due to maturity and payment), and contract liabilities increased by 30.33% (due to advance payments from customers for projects) Major Changes in Assets and Liabilities | Item | Current Period End (CNY) | Proportion of Total Assets at Period End (%) | Prior Period End (CNY) | Proportion of Total Assets at Prior Period End (%) | Change from Prior Period End (%) | | :--------------------- | :----------------------- | :------------------------------------------- | :----------------------- | :------------------------------------------- | :----------------------------------- | | Monetary Funds | 1,798,254,488.24 | 57.61 | 2,085,071,044.67 | 63.76 | -13.76 | | Notes Receivable | - | - | 28,078,166.78 | 0.86 | -100.00 | | Other Receivables | 607,589.08 | 0.02 | 15,250,878.20 | 0.47 | -96.02 | | Inventory | 451,601,553.59 | 14.47 | 387,255,163.63 | 11.84 | 16.62 | | Construction in Progress | 355,493,506.79 | 11.39 | 253,911,730.83 | 7.76 | 40.01 | | Deferred Income Tax Assets | 22,290,606.58 | 0.71 | 8,534,062.11 | 0.26 | 161.20 | | Notes Payable | 11,704,467.46 | 0.37 | 108,583,236.02 | 3.32 | -89.22 | | Contract Liabilities | 153,663,772.10 | 4.92 | 117,901,042.38 | 3.61 | 30.33 | - Reason for change in notes receivable: Primarily due to all notes receivable maturing and being paid during the current reporting period[38] - Reason for change in construction in progress: Primarily due to increased progress in the company's industrial park project during the current reporting period[38] - Reason for change in deferred income tax assets: Primarily due to an increase in deferred income tax assets arising from deductible losses during the current reporting period[38] - Reason for change in contract liabilities: Primarily due to advance payments received from customers for projects during the current reporting period[38] Corporate Governance This section details the company's governance structure, including shareholder meetings, changes in key personnel, and incentive plans Shareholders' Meeting Information During the reporting period, the company convened its first extraordinary general meeting of shareholders in 2024 and the 2023 annual general meeting of shareholders, approving relevant proposals, with resolutions disclosed on the Shanghai Stock Exchange website - The first extraordinary general meeting of shareholders in 2024 was held on March 25, 2024, with the resolution announcement disclosed on March 26, 2024[41] - The 2023 annual general meeting of shareholders was held on May 17, 2024, with the resolution announcement disclosed on May 18, 2024[41] Changes in Directors, Supervisors, Senior Management, and Core Technical Personnel During the reporting period, there was a change in the company's senior management, with Mr. Zhao Qian resigning from his position as Deputy General Manager due to personal reasons, though he remains employed by the company - On March 5, 2024, Mr. Zhao Qian, the company's Deputy General Manager, applied to resign from his position due to personal reasons[42] - After resigning as Deputy General Manager, Mr. Zhao Qian remains employed by the company[42] Profit Distribution or Capital Reserve Conversion Plan During the reporting period, the company did not propose any profit distribution or capital reserve to share capital conversion plan - The company's profit distribution or capital reserve to share capital conversion plan for the current reporting period is not applicable, meaning no distribution or conversion[42] Equity Incentive Plans, Employee Stock Ownership Plans, or Other Employee Incentive Measures and Their Impacts During the reporting period, the company had no progress or changes in equity incentive plans, employee stock ownership plans, or other employee incentive measures - During the reporting period, the company had no equity incentive matters that were disclosed in interim announcements and subsequently had no further progress or changes[43] - During the reporting period, the company had no incentive situations, including equity incentives, employee stock ownership plans, or other incentive measures, that were not disclosed in interim announcements or had subsequent progress[43] Environment and Social Responsibility This section outlines the company's environmental protection efforts and social responsibility initiatives Environmental Information The company has established environmental protection mechanisms, investing CNY 0.12 million in environmental protection during the reporting period; as a key polluting unit, the company's wastewater and exhaust gas emissions meet standards, and it has equipped pollution control facilities such as a comprehensive wastewater treatment plant, exhaust gas purification facilities, and a hazardous waste warehouse, all operating effectively; the company has conducted environmental impact assessments for construction projects as required and obtained permits, formulated emergency plans for environmental incidents, and regularly conducts self-monitoring of the environment, with all results meeting standards; the company has obtained ISO14001 environmental management system certification and actively practices green development principles - The company has established environmental protection mechanisms, investing CNY 0.12 million in environmental protection during the reporting period[44] - The company's wastewater and exhaust gas emissions both meet standards, adhering to "Wastewater Discharge Standard into Urban Sewers" and "Integrated Emission Standard of Air Pollutants" among others[44] - The company is equipped with a comprehensive wastewater treatment plant, exhaust gas purification facilities (activated carbon fiber adsorption, spray scrubbers), and a hazardous waste warehouse for pollution control, all operating effectively[45][46] - The company has conducted environmental impact assessments for construction projects in accordance with laws and regulations, obtained administrative permits, and formulated and regularly drills "Emergency Plans for Environmental Incidents"[47][48] - The company entrusts qualified units to monitor wastewater monthly and exhaust gas and noise quarterly, with all results meeting standards[49] - The company has obtained ISO14001 environmental management system certification and actively practices green development principles[50][51] (I) Environmental Information for Companies and Their Main Subsidiaries Designated as Key Polluting Units by Environmental Protection Authorities As a key polluting unit, the company's wastewater and exhaust gas emissions met national standards during the reporting period, and it is equipped with pollution control facilities such as a comprehensive wastewater treatment plant, exhaust gas purification facilities, and a hazardous waste warehouse, all operating effectively; the company has completed environmental impact assessments for construction projects and obtained permits, formulated emergency plans for environmental incidents, and regularly conducts environmental self-monitoring, without receiving any administrative penalties for environmental issues Main Pollution Discharge Information | Pollutant | Concentration Limit | Unit | Compliance Status | Executive Standard | | :------------------- | :------------------ | :--- | :---------------- | 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