Core Viewpoint - Despite a decline in revenue and net profit, certain business segments show growth, indicating positive future demand signals [1][2]. Financial Performance - In the first half of 2025, the company reported total revenue of 811 million yuan, a year-on-year decrease of 20.43%, and a net profit of -489,600 yuan, marking a 100.74% decline [2][3]. - The second quarter revenue was 496 million yuan, down 10.69% year-on-year, while net profit was 30.40 million yuan, a 52.1% decrease [3]. - The company's gross margin was 23.15%, down 6.5 percentage points year-on-year, and the net margin was -0.15%, a decrease of 102.35 percentage points [4]. Business Segments - The company's main business consists of UAVs and new materials, with UAV-related revenue at 305 million yuan, down 44.39% year-on-year, while technical service revenue surged by 13,622.60% to 122 million yuan [5][6]. - The new materials segment generated 361 million yuan, a decline of 17.82% [5]. Market Position and Outlook - The company has a comprehensive UAV product line and is actively preparing for a market upturn, as indicated by a 392% increase in contract liabilities and significant growth in inventory and prepayments [6][9]. - The company is recognized as the largest exporter of UAVs in China, with a robust pipeline of products under development, including advanced UAVs and missile systems [7][9]. - Analysts predict a potential turning point in UAV demand, driven by domestic market stabilization and increased global military spending [9][10].

Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The company is expected to benefit from increasing domestic and international demand for unmanned aerial vehicles (UAVs) and related equipment, leading to a significant growth in annual performance [1][2] - The company's revenue for H1 2025 was reported at 811 million RMB, a year-over-year decrease of 20.43%, with a net profit attributable to the parent company of -489,600 RMB, reflecting a year-over-year decline of 100.74% [1][7] - The UAV business is anticipated to recover in the second half of the year, with a strong demand outlook for both domestic and international markets [2] Summary by Sections Financial Performance - In H1 2025, the company's UAV and related products generated revenue of 305 million RMB, down 44.39% year-over-year, while technical services saw revenue growth of 13,622.60% to 122 million RMB [2] - The company reported a significant increase in contract liabilities, up 350.52% year-over-year, indicating strong future revenue potential [3] Product Development - The company has been enhancing its product lineup, establishing a comprehensive UAV application system that includes various types of drones and missile systems, with several products already approved for export [4] - Ongoing research and development efforts include advanced UAV models that are expected to reach international leading standards [4] Profitability Forecast - The profit forecast for the company has been adjusted downward for 2025-2027, with expected net profits of 235 million RMB, 366 million RMB, and 521 million RMB respectively, reflecting a decrease in gross margin due to a higher proportion of lower-margin domestic UAV business [5] - The target price for the company's stock has been raised to 33.78 RMB, based on a price-to-earnings (PE) ratio of 91 for 2026 [5][8]