Having incurred losses for 8 consecutive years, ehang (EH.US) has been able to sustain its operation through continuous financing. However, the revenue scale is only over 100 million yuan. How far can ehang go in the "low-altitude economy" aircraft race?

According to the financial news app, this year the low-altitude economy has always been a hot topic due to a series of supportive measures introduced by local governments, such as the release of the 'High-quality Construction Plan for Low-altitude Takeoff and Landing Facilities in Shenzhen (2024-2025)' and the 'Low-altitude Intelligent Fusion System SILAS Pioneer Edition' by the Shenzhen Transportation Bureau and other departments in August, as well as the issuance of the 'Implementation Opinions on Accelerating the High-quality Development of Low-altitude Economy' by Jiangsu Province.

eHang Intelligent Technology is one of the participants in the low-altitude economy, providing two types of electric vertical take-off and landing aircraft for manned transportation and logistics. Since its establishment in 2014, it has not only operated in China, but also has layouts in East Asia, West Asia, South America, and Europe. However, its revenue scale is very small. In 2023, the company's revenue was 0.117 billion yuan, and it has been in a continuous state of loss, accumulating a total of 1.282 billion yuan in losses from 2017 to 2023 over the 7 years.

In the first half of 2024, the company's revenue was 0.164 billion yuan. Although the revenue has grown significantly, looking at its past performance history, the revenue fluctuates greatly and has poor continuity. During this period, its shareholders suffered a net loss of 0.135 billion yuan, with a loss rate of 82.3%. Including this year, it has been in continuous losses for 8 years. As of June 2024, the company's net assets were 0.639 billion yuan, of which it raised 0.554 billion yuan through the issuance of stocks in Q2, resulting in an increase of 0.426 billion yuan in capital surplus. At the current rate of spending over the past few years, it can still support two to three years.

eHang Intelligent Technology's main product is the EH216 series. In Q1 and Q2, it delivered 26 and 49 aircraft respectively. The company's development momentum seems to be good this year. In April, it obtained the EH216-S unmanned manned aviation system production certificate (PC) issued by the Civil Aviation Administration of China, received a 50-aircraft order from Xishan Culture and Tourism in May, and acquired a Guan Zhong Smart Travel order in July, gaining some benefits under the low-altitude economy policies.

However, these orders are all cooperation agreements, and within the term of the agreements, the agreed quantity can be purchased. The low-altitude economy is in its early stage, and whether these orders can be transformed into actual orders is not just a production issue, but also involves changes in policy environment and the needs of partners. In addition, the company is also developing overseas markets, expanding into the Middle East this year. However, the 'overseas' story is not easy to tell, as there has been no significant volume, and investors are more focused on the 'gimmicks'.

Compared to these 'actions', the company's most important issue to focus on is cost control. It has been losing money for eight consecutive years, and sacrificing profits has not driven the growth of revenue scale.

Ehang Intelligent's main expenses include sales expenses, management expenses, and research and development expenses. In the first half of 2024, the rates of these three major expenses were 28.96%, 63.41%, and 61%, respectively, totaling as high as 153.37%. From 2021 to 2023, the total of these three expenses was 0.368 billion yuan, 0.339 billion yuan, and 0.377 billion yuan, respectively. The fluctuation of the expense rate depends on the fluctuation of revenue, and with the current revenue volume of less than 0.2 billion yuan, it is difficult to achieve profitability without taking 'cost reduction' measures.

It is worth noting that the company was targeted by a short-selling institution in November of last year. Xingdengbao Research released a short-selling report questioning Ehang's orders and claimed that its cash reserves were insufficient to support its operations in the capital-intensive aviation industry. Although Ehang refuted the claims and vehemently denied 'misleading investors with orders and sales', the market did not buy it, and the stock price continued to hit new lows.

Recently, due to some negative news from the management, the company's stock price has also plummeted. On September 4th, it fell more than 10%. Subsequently, the company announced and denied the false accusations, stating that the management team had no personal connection to the US investigation. Obviously, Ehang Intelligent is not in a stable position in terms of news. Whether it was the short-selling last year or the accusations from the management this year, it has had a significant impact on the company's brand and operations.

In the secondary market, investors have also chosen to 'sell off'. Since 2021, Ehang Intelligent's market value has shrunk by more than 90% from its peak. In the second quarter, the company raised over 500 million, but the future outlook is not optimistic mainly due to: firstly, the early stage of industry development, with significant policy risks; secondly, the company's continued losses, at the current rate of loss, the money is not enough to sustain; thirdly, questions about performance, which could potentially detonate the company's fundamentals.

Speaking of which, investment in the low-altitude economy in the early stages is still one of the hottest investment themes in the next two years. Related high-quality targets will also benefit and receive capital favor. However, investors should remain cautious and avoid stepping on landmines.