A technological revolution, a generation of infrastructure.

In 2023, a total of 221 rocket launches were completed worldwide, with SpaceX dominating 98, accounting for 44.34%. In recent years, Starlink has launched more than 5,000 low-orbit satellite systems. SpaceX is rapidly networking based on low-cost rockets and has gradually entered the commercial operation stage, which has profoundly affected the development of the international communications market.

Structural changes in the global satellite market and the successful demonstration effect of SpaceX in the US have drawn global attention. At the same time, some other countries in the world are also intensively promoting their space programs in an effort to take their place in this global space race.

In this context, enterprises and organizations in related industrial chains are expected to usher in new business breakthroughs in the process of helping countries realize their “space dreams.” As a key document for evaluating a company's operating performance, the annual report can help investors clearly understand the actions of major companies in the industry chain over the past year.

On March 27, Intercontinental Aerospace Technology (1725.HK), the first listed commercial satellite company in Hong Kong, announced the full year results of 2023. Financial reports show that in 2023, the company's revenue reached 594 million yuan (RMB, same below), and the annual loss due to equity holders was 211 million yuan.

In fact, early losses in the commercial satellite industry are nothing new. Given that the industry has high technical barriers, large amounts of capital are usually required to support initial R&D work, and to a certain extent in terms of scale and industrial collaboration, profit returns can be achieved. Therefore, instead of focusing on short-term commercial returns, it is more important to learn more about the long-term value behind the company through the gray line revealed in the annual report.

Adequate order reserves, accelerated commercialization

This kind of loss faced by such technology companies in the early stages is generally called a “strategic loss” in the capital market. Typical examples include JD and Tesla.

Among them, JD insisted on investing huge sums of money to build a logistics system during a period of strategic losses that lasted ten years. In the end, it successfully built a complete logistics and supply chain service platform that was completely different from “Four Links and One Access”, and incubated two listed companies, JD Logistics, JD Health, and JD Mathematics, an internet finance unicorn. Tesla also struggled for 16 consecutive years in a quagmire of losses, with a net loss of more than 2.2 billion US dollars. Eventually, Tesla narrowed its losses in 2018, and its total market capitalization once exceeded trillion dollars, growing to become the hegemon of the electric vehicle industry.

The same is true of Intercontinental Aerospace Science and Technology. Looking back at the company's series of strategic layout and actual progress over the past year, it can be seen that the current action is undoubtedly “paying tuition fees” for its long-term development in order to establish a solid foundation.

Currently, through its in-depth layout in the satellite industry chain, Intercontinental Aerospace Technology is the only commercial space enterprise in Hong Kong that spans upstream and downstream of the satellite industry chain, involving various fields of satellite manufacturing, launch, measurement and control, launch and satellite big data applications, and precision electronics manufacturing. It is also the only member of the International Astronautical Federation (IAF) organization in Hong Kong and a strategic partner of APSCO.

In recent years, the company has gone through various preparations and construction, and has also continued to make substantial progress.

On July 25 of last year, ASPACE Hong Kong Satellite Manufacturing Center, a subsidiary of Intercontinental Aerospace Science and Technology, was officially opened. ASPACE Hong Kong Satellite Manufacturing Center is the first satellite manufacturing center in Hong Kong. It is also one of the world's largest intelligent satellite manufacturing plants. It is suitable for multi-star parallel development capabilities for various types of satellites of 30 to 10,000 kg, such as communication, navigation, and remote sensing satellites, and has a mass production capacity of 200 pieces per year.

Production capacity is the key lifeline for the development of the satellite industry. Once production capacity is mastered, large-scale industrial production can be achieved, which is equivalent to taking the lead in this fierce competition. More importantly, the complete civil industrial system supply chain built by the company can help the company more smoothly advance the current accumulated satellite manufacturing orders.

In 2023, Intercontinental Aerospace Technology and Brazilian space companies signed a large order with a total price of US$675 million, including the manufacture of 108 integrated communication and remote sensing satellites, the construction of a satellite management center, a satellite data processing center and two ground stations, construction of a satellite data processing center, and satellite control and operation training.

With the launch of satellite manufacturing bases, Intercontinental Aerospace Science and Technology has accelerated the pace of commercialization. As this order progresses, it will not only bring huge cash flow support to the company, but also further empower the company's performance level. More importantly, the smooth progress of orders has a strong demonstration effect, which in turn stimulates the accelerated transformation of potential cooperative orders.

In addition to satellite manufacturing orders, Intercontinental Aerospace Science and Technology also continues to advance in the upstream and downstream business of the satellite industry chain.

Examples include entering into binding contracts to provide APSCO with remote sensing satellite data from the “Golden Bauhinia Satellite Constellation”, providing infrastructure capacity and services to RBC Signals; and joining forces with the United Arab Emirates and Saudi Arabia to build a space city in the region.

Of course, being frequently favored by the market is also inseparable from the ability of intercontinental aerospace science and technology to fully integrate resources.

Last year, the company successively signed strategic cooperation agreements and memorandums of cooperation with Eos Optoelectronics Technology (Shanghai) Co., Ltd. and China Railway Eighteenth Bureau Group. According to the author, the former is expected to further consolidate the technical advantages of intercontinental aerospace science and technology, and bring good cost reduction and efficiency to its satellite manufacturing, thus bringing more impressive direct or indirect economic benefits to the company. The latter can effectively guarantee the quality and efficiency of intercontinental space science and technology in space construction.

Judging from the company's business layout over the past year, Intercontinental Aerospace Science and Technology will soon enter the harvest stage. At present, the company has actually formed a complete satellite industry chain from development to satellite launch, and has continuously achieved cost reduction and efficiency in the entire satellite industry chain through resource integration, thus enhancing its competitiveness in terms of technology and price. With the fulfillment of reserve orders, the company is expected to enter a new stage of growth.

Policy requirements are driven by dual drivers, and commercial space has been significantly boosted

Looking at it from a longer perspective, the market is also continuously sending positive signals, injecting strong impetus into the development of the commercial satellite industry. Commercial space companies such as Intercontinental Aerospace Technology are facing rare opportunities.

From the policy sideLook, this year's government work report focuses on new quality productivity, and the commercial aerospace industry was included in the work report for the first time as a core driving industry for high-quality development.

The report proposes to actively cultivate emerging industries and future industries. Among them, we are actively building new growth engines such as biological manufacturing, commercial aerospace, and the low-altitude economy. Formulate future industrial development plans, open up new tracks for quantum technology, life science, etc., and create a number of leading zones for future industries.

It was also first proposed at the Central Economic Work Conference held at the end of last year to coordinate planning the transformation and upgrading of traditional industries, the cultivation and expansion of emerging industries, and the forward-looking layout of future industries; building a number of strategic emerging industries such as biomantry, commercial aerospace, and the low-altitude economy.

The release of a number of favorable policies will undoubtedly further promote the development of the commercial space industry. These are huge development opportunities for private commercial space companies such as Intercontinental Aerospace Science and Technology.

From the demand sideLook, the specific focus is mainly on two aspects: strategic requirements and application requirements.

In terms of strategic demand, in the face of increasingly tight foreign constellation planning and deployment and frequency trajectory resources represented by SpaceX and Oneweb, countries have begun to race horses to the ground due to various considerations such as frequency occupancy and rail maintenance, strategic security, and space resources, thus stimulating the development of the communications satellite industry. On the other hand, in the 2022 Russian-Ukrainian war, commercial satellite constellations represented by communication satellites showed amazing power.

Because of this, developing the space industry has become a very urgent strategic task for many capable countries around the world. Judging from the current large-scale domestic Starnet launch process, the full launch will begin in 2023, and the trend of large-scale launches expected to be achieved in 2024 will be very obvious. In this context, the addition of commercial space forces has also accelerated the development and layout of related industries.

In terms of application requirements, with the advent of the digital economy era, satellite internet is also playing an increasingly important role. Consumer electronics and smart mobility are two typical scenarios in the civil satellite communication market. Large-scale and market-based production of C-segment terminal products equipped with satellite communication capabilities will drive satellite communications to open up the mass market.

In terms of consumer electronics, since the release of the Mate60Pro equipped with Tiantong, many smartphones have now been equipped with direct satellite functions. In the future, with the integration of heaven and earth, direct-connected mobile phones are expected to continue to penetrate from high-end models of leading brands to mid-range and high-end models.

In terms of intelligent travel, leading car companies represented by Geely and BYD are actively exploring the implementation of in-vehicle satellite applications. The integration of high-precision positioning, vehicle-grade navigation, and in-vehicle satellite navigation has become a hot topic of application.

Therefore, driven by application demand, direct terminal satellite connection technology will gradually mature, and supply chains such as satellite Internet space segment construction and satellite manufacturing are expected to grow rapidly.

These are huge development opportunities for private commercial space companies such as Intercontinental Aerospace Science and Technology. According to estimates, the market size of satellite manufacturing and launch services alone will exceed 270 billion yuan by 2025. Along with the rapid growth of the satellite industry, the company, as the first commercial satellite listed company in Hong Kong, may be expected to increase its market share as well.

epilogue

Overall, with the advent of the digital age, countries around the world have ushered in a major opportunity in information technology. However, in this process, only countries and enterprises that have mastered core technology can fully absorb the rich benefits of the times.

Among them, satellite internet, as an indispensable infrastructure today, has also become one of the areas that the market is focusing on.

As a private commercial satellite company from China, Intercontinental Aerospace Technology has gained market and capital recognition through continuous efforts, although there is still a gap compared to other international giants. Investments that do not immediately pay off will also be the fuel for Huawei to start the flywheel and drive the growth of intercontinental space science and technology. We might as well pay more attention to companies like this.