Perspectives of the Week:

Policy catalysis is expected to become the main driving force for the current low-altitude economic development. At the central level, at this year's National People's Congress and the National People's Congress, the "low-altitude economy" was written into the government work report for the first time. Recently (July 30, 2024), the Political Bureau of the Central Committee of the Communist Party of China held the 16th collective study on promoting the construction of modern border, sea and air defense, and once again mentioned the low-altitude economy. At the local level, since 2023, local governments in Wuxi, Chengdu, Rizhao, Wuhu, Wuhan, Suzhou and other cities have successively introduced relevant policies to support the construction of low-altitude economy. Local policies mainly focus on logistics and distribution, emergency rescue, smart city and other fields, including R&D and manufacturing, commercial applications, infrastructure construction and other directions.

Some local low-altitude economic investment projects have entered the filing process, and the pace of construction is expected to accelerate. During the year, corresponding projects in Jiangxi, Hubei, Guangdong and other places were filed one after another. In terms of scale, by 2025, the target of a trillion-level low-altitude economic market will be basically established. Judging from the current recorded projects and local low-altitude economic policy objectives, the scale of low-altitude economic industries in some places is expected to reach 10 billion yuan. For a single project, the investment amount is expected to reach the billion level.

At present, there are still shortcomings in China's UAV in airspace planning, low-altitude traffic control, infrastructure and airworthiness performance. On the issue of airspace management, for a long time, the use and management of low-altitude airspace in China is the same as the approval and control of the use of medium-altitude airspace, that is, all low-altitude airspace flight activities must be approved, so the development of low-altitude flight safety interval standards, and the promotion of low-altitude related regulations and airspace management systems and the current low-altitude economic development and adaptation is an important part of the current low-altitude economic industry.

Investment suggestions: We believe that under the dual promotion of policy catalysis and investment landing, the key time nodes and target market sizes of low-altitude economic development are relatively clear, which is expected to bring new growth opportunities to manufacturers related to satellite navigation and airspace management, and maintain the industry's "recommended" rating. It is recommended to pay attention to RICE information (688631. SH), Xinchen Technology (300542. SZ), SuperMap Software (300036. SZ), Zhongke Xingtu (688568. SH), Aerospace Grand Plan (688066. SH) and so on.

Risk warning: the progress of low-altitude economic projects is not as expected; the risk of error in the data cited; local investment is less than expected; The research and development progress of low-altitude economic software and hardware is less than expected; Focus on the company's performance not meeting expectations; Policy standards have not been introduced as quickly as expected.

1 Week of market performance

From July 29 to August 02, 2024, the Shenwan Computer Index rose by 1.80%. The top five gainers in the sector are Qiming Information (002232. SZ), Sichuang Yihui (300078. SZ), RICE Information (688631. SH), Hengtuo Open Source (834415. BJ), Aerospace Ambition (688066. SH）。 The top five decliners in the sector stocks are *ST Weichuang (002308.SZ), C Boshijie (301608.SZ), Jiayuan Technology (301117. SZ), Wantong Technology (002331. SZ), Tianmai Technology (300807. SZ）。

2 Industry news

On July 30, 2024, the Political Bureau of the Central Committee of the Communist Party of China (CPC) held the 16th collective study on promoting the construction of modern border, sea and air defense. Xi Jinping pointed out that it is necessary to conscientiously implement the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, deepen the study of major issues in border and sea air defense, consolidate and improve the existing reform achievements, do a good job in the implementation of established reform tasks, strengthen follow-up reform planning, and promote the innovative development of border and sea air defense construction. It is necessary to persist in operating, reforming, and perfecting at the same time, optimize the leadership and management system for border and coastal defense, improve the cross-military and civilian coordination mechanism, strengthen the building of the relevant legal system, and ensure that all aspects of border and coastal defense work are standardized, orderly, smooth, and efficient. It is necessary to do a good job in national air traffic management and promote the healthy development of the low-altitude economy. It is necessary to optimize the mode of civil air defense construction and build a modern civil air defense system. (Source: Xinhua News Agency).

On August 3, 2024, the Council of the China Low Altitude Economic Alliance was officially established in Beijing. China Low-altitude Economic Alliance is mainly founded by upstream and downstream leading enterprises such as Wofei Changkong, Shi Technology, Volant, EHang, Fengfei, CCCC Remote Sensing, CETC Diamond Aircraft, Qiaohai Aviation, Aerospace Nanhu, Aerospace Times Feipeng, Aerospace Hongtu, Jiuzhou Air Traffic Control, Civil Aviation Institute II, Supermap Software, China Civil Aviation Flight College, Nanchang Hangkong University, Zhengzhou Aviation Management College, China Youth Travel Service, China Post, etc., aiming to develop together, join hands with low-altitude economic cities, create a number of typical application scenarios, and formulate relevant industry rules. Build a low-altitude economic and industrial ecology. (Source: China Daily).

3 Key company announcements

On July 29, 2024, SuperMap Software signed a strategic cooperation agreement with Jiuzhou Group to cooperate in the development of low-altitude product systems and other fields. Through strategic cooperation, the two sides aim to give full play to their respective superior resources and professional capabilities, seize the major development opportunities of low-altitude economy and digital economy, and jointly carry out close cooperation in the fields of low-altitude product system development, low-altitude infrastructure construction, digital city construction, "Beidou+" key industry applications, and data elements.

On July 29, 2024, it was reported that Philipsson signed a "Cloud Service Intent Cooperation Agreement" with a leading artificial intelligence company. On July 27, 2024, the company signed the "Cloud Service Procurement Agreement" with the leading artificial intelligence enterprise on the specific implementation of the first batch of the "Cloud Service Intent Cooperation Agreement". The total contract amount is RMB540,258,000 (tax included).

On August 02, 2024, Sequoia China reduced its holdings by 0.49% in a block transaction and is no longer a shareholder of more than 5% of the company's shares.

4 Views of the Week

4.1 Policies have been intensively introduced in various places, and the industry ecology has been gradually improved

Policy catalysis is expected to become the main driving force for the current low-altitude economic development. At this year's National People's Congress and the National People's Congress, the "low-altitude economy" was written into the government work report for the first time. During the year, the "Interim Regulations on the Flight Management of Unmanned Aerial Vehicles" was officially implemented on January 1, 2024, which became an important milestone in the standardized development of China's drone industry. On March 27, 2024, the four ministries and commissions issued a notice on the "Implementation Plan for the Innovative Application of General Aviation Equipment (2024-2030)", proposing two key time nodes. By 2027, China's general aviation equipment supply capacity and industrial innovation ability will be significantly improved, the basic support system of modern general aviation will be basically established, the efficient integration of industrial ecology will be initially formed, the general aviation public service equipment system will be basically perfected, and the new general aviation equipment with unmanned, electrified and intelligent technical characteristics will be commercially applied in the fields of urban air transportation, logistics and distribution, and emergency rescue. By 2030, a new model for the development of the general aviation industry characterized by high-end, intelligent and green will be basically established, supporting and guaranteeing the "short-distance transportation + electric vertical take-off and landing" passenger transport network, the "trunk-branch-end" UAV distribution network, and the safe and efficient operation of low-altitude production operations to meet the needs of workers and farmers. Recently (July 30, 2024), the Political Bureau of the Central Committee of the Communist Party of China held the 16th collective study on promoting the construction of modern border, sea and air defense, and once again mentioned the low-altitude economy. Xi Jinping pointed out that it is necessary to conscientiously implement the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China, deepen the study of major issues in border and sea air defense, consolidate and improve the existing reform achievements, do a good job in the implementation of established reform tasks, strengthen follow-up reform planning, and promote the innovative development of border and sea air defense construction. It is necessary to persist in operating, reforming, and perfecting at the same time, optimize the leadership and management system for border and coastal defense, improve the cross-military and civilian coordination mechanism, strengthen the building of the relevant legal system, and ensure that all aspects of border and coastal defense work are standardized, orderly, smooth, and efficient. It is necessary to do a good job in national air traffic management and promote the healthy development of the low-altitude economy. It is necessary to optimize the mode of civil air defense construction and build a modern civil air defense system.

Supporting policies at the local level are frequent, and industry norms are expected to continue to be built. Since 2023, local governments in Wuxi, Chengdu, Rizhao, Wuhu, Wuhan, Suzhou and other cities have successively introduced relevant policies to support the construction of low-altitude economy. Local policies mainly focus on logistics and distribution, emergency rescue, smart city and other fields, including R&D and manufacturing, commercial applications, infrastructure construction and other directions.

4.2 The progress of low-altitude projects has been accelerated, and the target of trillion-level market scale has been established

Some local low-altitude economic investment projects have entered the filing process, and the pace of construction is expected to accelerate. Jiangxi, Hubei, Guangdong and other places have corresponding projects for the record during the year. In terms of scale, by 2025, the target of a trillion-level low-altitude economic market will be basically established. In some places, the scale of low-altitude economic industry is expected to reach 10 billion. For a single project, the investment amount is expected to reach the billion level. Among them, the low-altitude industry training base project of Jingdezhen High-tech Zone in Jiangxi Province passed the record on July 23, 2024, and it is planned to start construction in November 2024. The aerospace industry manufacturing demonstration base project in Dongguan City, Guangdong Province, is scheduled to start construction in December 2024, with an investment of more than 1.22 billion yuan. After it is put into operation, it is expected that the annual output value will not be less than 2.5 billion yuan, and the annual tax will not be less than 120 million yuan.

In the low-altitude economic industry, the key links mainly include: aircraft manufacturing and sales; Aircraft repair, maintenance, aviation supplies and other support services; low-altitude infrastructure construction and airspace management services. At present, there are still shortcomings in China's UAV in airspace planning, low-altitude traffic control, infrastructure and airworthiness performance. On the issue of airspace management, for a long time, the use and management of low-altitude airspace in China is the same as the approval and control of the use of medium-altitude airspace, that is, all low-altitude airspace flight activities must be approved, so the development of low-altitude flight safety interval standards, and the promotion of low-altitude related regulations and airspace management systems and the current low-altitude economic development and adaptation is an important part of the current low-altitude economic industry.

We believe that the key application areas of China's low-altitude economy are clear, the key time nodes are expected to be established, coupled with the traditional general aviation business in the formation of satellite navigation technology has been solidly accumulated, the future low-altitude economic industry is expected to maintain a good development trend, the computer industry, satellite navigation, airspace management and other technology accumulation manufacturers are expected to be the first to benefit.

5 Investment Advice

We believe that under the dual promotion of policy catalysis and investment landing, the key time nodes and target market sizes of low-altitude economic development are relatively clear, which is expected to bring new growth opportunities for satellite navigation and airspace management related manufacturers, and maintain the industry's "recommended" rating. It is recommended to pay attention to RICE information (688631. SH), Xinchen Technology (300542. SZ), SuperMap Software (300036. SZ), Zhongke Xingtu (688568. SH), Aerospace Grand Plan (688066. SH) and so on.

6 Risk warning

(1) The progress of low-altitude economic projects is not as expected. The pace of advancement can be influenced by a variety of factors.

(2) The risk of error in the cited data. The data in this report is based on publicly available data and may affect the results of the analysis.

(3) The R&D progress of low-altitude economic software and hardware is not as expected. In China's low-altitude economic industrial chain, airspace management, infrastructure and other links are still relatively weak.

(4) Local investment is less than expected. The investment in low-altitude economic industries may be periodically delayed.

(5) Focus on the company's performance not meeting expectations. Focus on the company's performance will be affected by various factors, if the performance does not meet expectations, the company's stock price will be affected.

(6) The speed of policy standards is not as fast as expected. The sustainable development of low-altitude economy needs policy guidance.

This article is excerpted from the report: "Computer Industry Weekly: Policy Catalysis + Investment Landing, Low-altitude Economy is Expected to Accelerate Development".

Report release date: 2024-08-06

Report issued by: Hualong Securities

Analyst: Bowen Sun Practising Certificate No.: S0230523080004

Contact: Zhu Lingxuan Practicing Certificate Number: S0230124010005