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Introduction: Currently, the total market value of China Satellite, the industry leader, is 25.2 billion yuan, and its operating income in 2023 is close to 6.9 billion yuan. This figure far exceeds Changguang Satellite's revenue in the same period, reaching more than ten times that of the latter, but its price-to-earnings ratio remains the same.

Text | Daily Financial Report Qin Nan

On June 15, 2023, my country successfully achieved the feat of "launching 41 satellites in one rocket", a milestone achievement that broke the record for the highest number of satellites launched in a single launch. At the same time, the networking and operation of 108 "Jilin-1" satellites has enabled my country to have the world's largest sub-meter commercial remote sensing satellite constellation. This achievement further consolidates Chang Guang Satellite's leading position in the field of remote sensing information services.

Relying on the "Jilin-1" satellite project, Jilin Province has actively promoted the development of related fields such as mechanical manufacturing, optical manufacturing, and optoelectronic sensing technology, and built a complete industrial chain covering all aspects of satellite development, launch, operation, and application, and formed an industrial cluster consisting of nearly 700 upstream and downstream companies.

Among them, Changguang Satellite, as my country's first commercial remote sensing satellite company, not only dominates the industry track, but also was successfully selected into the 2020 China Unicorn Enterprise List, becoming the leading enterprise in Northeast China.

On June 29, Changguang Satellite updated its reply letter to the Science and Technology Innovation Board IPO inquiry, which involved major adjustments to its future performance forecasts and publicly disclosed some information for the first half of 2024.

Although Changguang Satellite is still in a loss-making state, it plans to raise 2.683 billion yuan in this IPO, and plans to issue no more than 229 million shares, accounting for 10.43% of the total shares after issuance. Based on this calculation, its target valuation is as high as 25.73 billion yuan. However, whether this target valuation can be achieved still needs further verification and evaluation by the market and investors.

1. When will you make a profit?

Chang Guang Satellite, as my country's first commercial remote sensing satellite enterprise with a full industrial chain integrating satellite research and development, manufacturing, operation management and remote sensing information services, is also recognized as a national-level specialized and innovative "little giant" enterprise. It has successfully built and operates the world's largest sub-meter (resolution below 1 meter) commercial remote sensing satellite constellation - "Jilin-1".

From 2020 to 2023, Changguang Satellite's main business revenue showed a trend of first increasing and then decreasing, increasing from 104 million yuan in 2020 to 602 million yuan in 2022, with a compound growth rate of 140.17%. However, the revenue growth momentum slowed down in 2023, with revenue of only 585 million yuan, a year-on-year decrease of 2.8%.

In response to the revenue decline, the company said in its reply letter that it was only temporary, and that the company will continue to build and improve the constellation in the next 2-3 years. With the increase in the number of satellites in orbit, the constellation service capabilities will be greatly enhanced, and it will become the world's major satellite remote sensing data provider. Based on the company's business status and development plan, orders in hand and industry prospects, it is expected that satellite remote sensing information services will maintain a high growth level of revenue from 2024 to 2026, and will grow to nearly 2 billion yuan.

Although the company's forecast prospects are good, the company has not yet achieved profitability. In the three years from 2019 to 2021, Changguang Satellite's revenue was 85 million yuan, 104 million yuan, and 312 million yuan respectively; and it has not yet achieved profitability, with net profits of -392 million yuan, -391 million yuan, and -220 million yuan respectively. Although the loss situation in 2023 was not announced in the reply letter, combined with the company's forecast, it will take until 2025 to turn losses into profits.

Changguang Satellite explained that this is because the company continues to be committed to the construction of the "Jilin-1" satellite constellation, so it has to bear higher satellite depreciation costs and R&D investment every year. In addition, the company's early scale was relatively small, and sales revenue was not enough to cover the satellite depreciation costs, R&D expenses and personnel costs in the same period.

In terms of business composition, Changguang Satellite mainly provides two major services: satellite remote sensing information services and satellite manufacturing and related services. Among them, satellite remote sensing information services have always occupied the core position of the company's business during the reporting period. Except for 2022, when it accounted for 47.81% and ranked second, it has been the largest business in other years.

From the perspective of customer nature, although the amount of military-related satellite remote sensing information services provided by Changguang Satellite has shown an upward trend, its proportion has declined.

Specifically, from 2020 to 2022 and the first half of 2023, the proportion of military-related business was 61.57%, 66.5%, 51.28% and 33% respectively.

It is worth noting that the downstream application market of my country's commercial remote sensing industry is still dominated by military-related fields, but demand in the civilian field is gradually emerging. With the continuous improvement of remote sensing information technology and remote sensing service capabilities, especially the enhancement of temporal resolution, demand and market in the civilian field are expected to grow substantially in the future.

In addition, Changguang Satellite is also actively developing naming businesses, such as naming satellite services provided to well-known companies such as Bilibili, Tencent, FAW, and Xueersi. As a cost-free business, this type of business has a gross profit margin of up to 100% and belongs to the category of satellite manufacturing and related services. From 2020 to 2021, the company's naming business revenue was 4.4645 million yuan and 3.8384 million yuan respectively. Although the specific revenue in subsequent years has not been disclosed, according to data from the first half of 2023, among the top five customers of satellite manufacturing and related services, four customers' main sales are naming services, with a total amount of 4.2515 million yuan.

2. The key is to expand the customer base

As we learned above, Changguang Satellite predicts that the company will turn losses into profits in 2025. However, the number of satellites the company plans to launch in 2024 has dropped to 10 and 28 in 2025, causing the relevant data to basically "shrink".

The company's expected time to turn losses into profits is still 2025, but due to changes in various factors, investors have doubts about the rationality of this expectation. Whether Changguang Satellite can turn losses into profits in the future has become the focus of investors.

Therefore, the key issue lies in how to develop more civilian customers and make better use of current satellite resources.

In the current market promotion, Changguang Satellite not only uses traditional marketing methods, but also keeps up with the trend of the times and uses a combination of self-media and official websites to promote its brand. The company publishes daily image content such as "One Picture a Day", "Jilin No. 1 Open Class", and "Stay Home to Visit the Earth" through mainstream self-media platforms such as Douyin, WeChat official accounts, and Bilibili, successfully integrating the concepts of "Jilin No. 1" and satellite remote sensing into people's daily lives, effectively enhancing the company's reputation and brand influence.

It is worth mentioning that Changguang Satellite's active response to major events has also won it wide attention. For example, in response to the suspected crash site of Malaysia Airlines MH370 reported by foreign media, the company quickly mobilized ten satellites to take pictures. Although the wreckage of the plane was not found on the satellite map in the end, this move undoubtedly demonstrated the company's technical strength and social responsibility. In addition, as early as May 2017, the company also attracted widespread attention for successfully photographing a US military base.

Judging from the current board members of the company, there are many experts and scholars from Changchun Institute of Optics, Fine Mechanics and Physics, Jilin University and Jilin University of Finance and Economics. It is precisely with its strong resource background and technical support that Changguang Satellite has successfully attracted the favor and cooperation of many central enterprise customers, including China Electronics Technology Group Corporation, China Electronics Corporation, China Aerospace Science and Industry Corporation, etc., which have become important partners of the company.

But the key is how to expand civilian customers, develop more strategic cooperation with Huawei, and explore more application scenarios of satellite technology in the civilian market, such as smart home, smart transportation and other fields. As well as applications in disaster prevention and mitigation, social and economic monitoring, land and resources management, urban cultural construction and other aspects, Changguang Satellite is trying to meet the needs of different civilian customers.

3. Strong opponents

In the satellite manufacturing industry, state-owned enterprises and public institutions represented by China Aerospace Science and Technology Corporation and the Satellite Innovation Institute of the Chinese Academy of Sciences have shown significant advantages, have been deeply involved in the industry for a long time, and mainly focus on the acceptance and implementation of major national projects. It is worth noting that except for China Satellite, a listed company under China Aerospace Science and Technology Corporation, the other related entities are all non-listed.

At present, Chinese satellites are the big brother in this field.endOn August 2, the total market value reached 29.5 billion yuan, and the operating income in 2023 was 6.88 billion yuan, which far exceeded Changguang Satellite's revenue in the same period, reaching more than ten times that of the latter.At the same time, among the other three listed companies in the field of satellite manufacturing, Aerospace Hongtu and China Science and Technology Satellite Map's operating income in 2023 also reached 1.819 billion yuan and 2.516 billion yuan respectively, which are significantly higher than Changguang Satellite's revenue of less than 600 million yuan. However, from the perspective of market valuation, as of December 29, 2023, the total market value of Aerospace Hongtu and China Science and Technology Satellite Map was 3.7 billion yuan and 16.1 billion yuan respectively, which is different from each other.

Changguang Satellite Company recently announced its fundraising plan, intending to raise 2.683 billion yuan and issue no more than 229 million new shares, which will make the proportion of the company's total shares reach 10.43% after the issuance of new shares. However, given Changguang Satellite's long-term record of losses and uncertainty about its future profit prospects, the market has questioned the rationality of its target valuation of 25.73 billion yuan.

In addition, Changguang Satellite's equity structure has also attracted attention. The company has not yet established a clear controlling shareholder and actual controller. Shareholders such as Wenyu Aerospace, Zhongyuan Aerospace, Zhuoshen Chuangjing, Zhongxing Huasheng, Sun Mingchen, and Zhao Yongyang hold a total direct shareholding ratio of 24.09%. The company's current chairman and general manager, Mr. Xuan Ming, is still the company's largest individual shareholder with a 2.67% shareholding ratio despite being nearly 70 years old. Mr. Xuan Ming has rich industry experience. After graduating from the Changchun Institute of Optics, Fine Mechanics and Physics, he worked as a United Nations technical expert at the Syrian Optical Research Center and won many awards, including the Outstanding Scientific and Technological Achievement Award of the Chinese Academy of Sciences.

As the first commercial satellite company in China to go public, Changguang Satellite is still facing severe challenges of high investment, low income and high losses. At the same time, the issue of its controlling shareholder and actual controller, which has not yet been clarified, has also added a certain degree of uncertainty to the company's future business decisions.