Core Viewpoint - The termination of the IPO process for Zongshen Aviation Power signals a shift in the low-altitude economy, indicating a cooling trend in investment and a need for companies to become self-sustaining after a period of rapid growth and speculation [3][5]. Company Summary - Zongshen Aviation Power, established in 2016, focuses on lightweight piston aircraft engines for various types of aircraft, including drones and rotorcraft [3]. - The company underwent five rounds of financing from August 2020 to May 2023, raising its valuation from 623 million to 2.2 billion yuan, involving 22 industry capital investors [3][4]. - The company faced significant operational challenges, with a reported revenue of 70.34 million yuan in mid-2025, a year-on-year decline of 29.71%, and a net loss of 37 million yuan, a substantial drop of 316.3% [4]. - Zongshen Aviation Power has been on a losing streak for three consecutive years, with net losses of 9.38 million yuan, 43.22 million yuan, and 3.62 million yuan from 2022 to 2024 [4]. - The company was added to the U.S. Treasury's OFAC SDN list in May 2024, complicating its path to IPO [4]. Industry Summary - The overall financing landscape for the low-altitude economy is contracting, with only 15 disclosed financing events in the eVTOL sector in the first half of 2025, compared to 16 events in the second half of 2024 [5]. - The trend shows a shift towards earlier investment rounds, with angel rounds making up 40.4% of financing, indicating a preference for smaller, earlier-stage investments [5]. - Investment institutions are increasingly cautious, focusing on the research capabilities and policy safety of low-altitude economy enterprises [6][8]. - The lack of a commercial closed loop in the low-altitude economy is a significant barrier, with many companies, including leading firms, reporting substantial losses [10]. - Despite the cooling investment climate, there has been a surge in orders for eVTOLs, with over 100 billion yuan in orders reported in the first half of 2025, driven by international demand and financial leasing models [11][13][14]. - The supply chain for low-altitude economy is rapidly developing, with numerous battery manufacturers entering the aviation battery market and companies from the electric vehicle sector expanding into electric control and motor production [16][18].

Core Viewpoint - Zongshen Power's subsidiary, Zongshen Aviation, has terminated its IPO process due to strategic development needs and changes in the capital market environment, marking the end of a five-year journey towards listing and triggering a share buyback obligation of nearly 600 million yuan for the parent company [2][12]. Company Summary - Zongshen Aviation, established in 2016, is primarily focused on lightweight piston aircraft engines for drones and general aviation aircraft, holding a 95.16% stake from Zongshen Power. The company has seen rapid growth in a small market, with about 30% of its revenue coming from overseas sales to over 30 countries [3][6]. - The market valuation of Zongshen Aviation was approximately 2.2 billion yuan, but its performance has been under pressure due to the nascent low-altitude economy market. In the first half of 2025, the company reported revenue of 70.34 million yuan, a year-on-year decline of 29.71%, and a net loss of 37 million yuan, a significant drop of 316.3% [6][12]. - The company has undergone five rounds of financing since 2020, attracting 22 industry capital investors, including state-backed funds. A buyback agreement requires Zongshen Aviation to list by June 30, 2025, or face buyback demands from investors at an annual interest rate of no less than 8% [6][10]. Industry Summary - The low-altitude economy sector is experiencing a significant downturn, with financing events dropping by 15.2% and total amounts decreasing by 8% in the first half of 2025 compared to the previous year. The focus has shifted to projects with verifiable technology and practical applications [12]. - The market demand in the low-altitude sector remains insufficient, with most applications still in exploratory stages, primarily in logistics, public services, and medical assistance. Many projects rely on government subsidies, indicating a lack of a sustainable business model [12]. - Major players in the industry are facing substantial losses, with Zongshen Aviation's peers also reporting significant financial difficulties. The overall low-altitude economy index showed that 20 listed companies collectively lost 8.487 billion yuan in the first half of 2025, reflecting a 18.2% year-on-year decline in net profits [12].