Summary of the Conference Call for Zongheng Co., Ltd. Company Overview - **Company**: Zongheng Co., Ltd. - **Industry**: Low-altitude digital economy and drone systems Key Financial Highlights - In the first half of 2025, Zongheng reported revenue of approximately 1 billion yuan, a year-on-year increase of 71% [2] - The net profit attributable to shareholders was a loss of about 84 million yuan, a reduction in loss of 16 million yuan year-on-year, indicating significant improvement in operational quality [2][3] - The company achieved revenue of approximately 1.35 billion yuan in the first half of 2025, with a year-on-year growth of 62% [3] Core Business Developments - The company is focusing on the low-altitude digital economy and has won the "Smart Bazhong" project worth 1.06 billion yuan, leveraging unmanned systems combined with AI for data services [2][5] - The overseas market revenue share has increased to 15%-20%, with confirmed revenue exceeding 1 billion yuan [2][14] - Zongheng has developed new products, including the C700 vertical fixed-wing unmanned system and the P200 multi-rotor unmanned system [4] Market Expansion and Strategic Initiatives - The company is actively exploring the low-altitude cultural tourism sector and has established a subsidiary "Zongheng Bazhong" in collaboration with the Bazhong municipal government [8] - The company aims to address high costs and low utilization rates of drones in government departments through a centralized procurement model [9][10] - The estimated market value for low-altitude economic equipment in a prefecture-level city is about 1 billion yuan, with a national market potential of approximately 300 billion yuan [10] Product and Service Offerings - The main revenue sources are from the security sector (approximately 50%) and surveying and geographic information (about 25%) [6] - The company has developed a cloud platform "Zongheng Cloud" for low-altitude economic management and monitoring [5][13] Challenges and Solutions - Challenges in promoting drones in government sectors include high costs and low utilization rates [9] - The company proposes a model where government-led platform companies can enhance drone utilization and reduce operational costs [10] Profitability and Margins - The overall gross margin has significantly improved, with drone system margins doubling, and overseas market margins exceeding domestic margins by 15-20 percentage points [4][16][17] - The expected gross margin for the first half of 2025 is close to or slightly above 60% [17] Future Outlook - The company plans to focus on the low-altitude digital economy and overseas markets as core growth drivers over the next 3 to 10 years [18] - The company has set a neutral outlook for revenue and profit targets for 2025, with confidence in achieving long-term goals despite potential uncertainties in order confirmations [18] Conclusion Zongheng Co., Ltd. is positioned to capitalize on the growing low-altitude digital economy and expand its international presence, with a strong focus on improving operational efficiency and profitability through innovative solutions and strategic partnerships.

Core Insights - The company, Zongheng Co., Ltd. (688070), reported a significant increase in revenue and a reduction in net loss for the first half of 2025, driven by the acceleration of the low-altitude economy [2] - The company is a leading player in the domestic industrial drone industry, focusing on an integrated solution of "unmanned systems + Zongheng Cloud + AI" to enhance its capabilities in low-altitude digitalization [2] Financial Performance - The company achieved approximately 135 million yuan in revenue, representing a year-on-year growth of 61.72% [2] - The net profit attributable to the parent company showed a significant reduction in losses compared to the previous year [2] Product and Technology Development - The company upgraded its product offerings with the launch of the JOS-C700 vertical take-off and landing fixed-wing unmanned system and the JOS-P200 multi-rotor unmanned system, enhancing intelligence and environmental adaptability [2] - The company developed proprietary target detection and image interpretation technology, enabling precise recognition, data analysis, and autonomous decision-making capabilities [2] - A new airspace management platform was introduced to provide intelligent supervision and coordination for low-altitude operations, enhancing safety and efficiency [2] Market Expansion Strategies - The company adopted a strategy of "demonstration leadership, precise breakthroughs, and ecological collaboration" to conduct low-altitude operation pilot projects in various cities, creating replicable commercial models [3] - In the low-altitude logistics sector, the company invested in Sichuan Low Altitude Economic Development Co., Ltd. to accelerate the development and validation of multiple product models [3] - The company is exploring new growth points in the education and cultural tourism sectors by collaborating with several universities to establish industry-education integration platforms [3] Research and Development Investment - The company increased its R&D investment to approximately 50.06 million yuan, accounting for 37.18% of its revenue, reflecting a year-on-year growth of 13.39% [3] - The company is comprehensively laying out technologies in vertical take-off and landing fixed-wing drones, multi-rotor drones, large fixed-wing drones, unmanned systems, and integrated cloud-edge systems [3] Future Outlook - With the low-altitude economy being incorporated into national strategy, the continuous opening of low-altitude airspace, and the gradual improvement of regulatory mechanisms, the application scenarios for drones are expanding into new fields such as urban governance, emergency response, transportation, and cultural tourism [3] - The company is steadily building an industrial ecosystem for the low-altitude economy, enhancing its core competitiveness in this emerging market [3]