This year has been particularly eventful for China's drone industry. Industry giant DJI expanded into the robotic vacuum cleaner market, action camera leader Insta360 announced its entry into the drone sector, and robotic vacuum leader Dreame Technology made a high-profile declaration of entering the drone market.

Recently, agricultural drone leader Guangzhou Xaircraft Technology Co., Ltd. submitted its prospectus to the Hong Kong Stock Exchange, pursuing an IPO.

Founded in 2007, XAircraft Technology has an 18-year history. According to its prospectus, based on 2024 revenue, XAircraft Technology ranks as the world's second-largest agricultural drone company, trailing only DJI. Previously, in November 2021, XAircraft Technology submitted an IPO application to Shanghai Stock Exchange's STAR Market. After undergoing the exchange's first round of inquiries, the company ultimately chose to withdraw its IPO application.

This Hong Kong IPO attempt differs significantly from the previous one - XAircraft Technology has finally achieved profitability. With DJI yet to go public, if XAircraft Technology successfully lists, it could become the "first agricultural drone stock."

Will XAircraft Technology succeed in its IPO this time?

**Withdrawing from STAR Market IPO, Profitable XAircraft Technology Pursues Hong Kong Exchange**

After submitting its prospectus to the Hong Kong Stock Exchange, XAircraft Technology founder and CEO Peng Bin posted on WeChat Moments: "Eighteen years of entrepreneurship, today XAircraft officially submitted its listing application to the Hong Kong Stock Exchange. This feels like a student who has studied hard for years and just finished taking the college entrance exam."

According to records, XAircraft Technology founder Peng Bin was born in 1982 and graduated from Xidian University in 2004 with a degree in Computer Science and Technology. After graduation, he joined Microsoft (China), serving as club chairman for Microsoft's technical community in Guangdong. Through his work, Peng Bin met many technology-loving "geeks," and in 2007, he conceived the idea of starting a business, choosing to enter the smart hardware field.

At that time, China's internet industry was experiencing rapid development, with the software sector full of opportunities. Peng Bin's decision to leave Microsoft to pursue hardware drew much skepticism and failed to attract investor interest. Consequently, Peng Bin had to self-fund his startup, ultimately deciding to focus on drones.

DJI was just getting started then, and there was no concept of "drones" in the market. These "flying gadgets" were collectively called model aircraft, belonging to a niche hobby with a dedicated following. In its early days, XAircraft Technology primarily sold through RCGroups, the world's most active model aircraft community, with orders mainly coming from overseas. By 2009, XAircraft Technology's revenue reached several million yuan, growing to 20 million yuan by 2011.

In 2012, DJI launched the world's first integrated aerial photography drone, the "Phantom," quickly dominating the consumer drone market. That same year, DJI entered the agricultural drone market. During this period, Peng Bin began considering the company's future direction, with the team considering three options: aerial imaging, precision delivery, and aerial performances.

Subsequently, Peng Bin chose precision delivery, envisioning partnerships with courier companies for drone delivery services, but ultimately decided against it, opting instead for agricultural drones.

This decision wasn't made on a whim. According to media interviews, Peng Bin noted that the team discovered many agricultural companies were purchasing their products, prompting them to conduct research in Xinjiang. They found their drones were being modified for pesticide spraying - an excellent application scenario.

In April 2015, XAircraft Technology launched its first-generation plant protection drone, the P20, officially entering the agricultural drone market. Subsequently, its products continued to iterate, with functions expanding from initial pesticide spraying to aerial seeding and fertilization. The company also introduced unmanned vehicles, agricultural machinery autopilots, and smart farm IoT products, becoming an agricultural technology company.

The growing XAircraft Technology began moving toward capital markets.

Before submitting its prospectus to the Hong Kong Stock Exchange, XAircraft Technology had already participated in one "exam."

In November 2021, XAircraft Technology applied for an IPO on Shanghai Stock Exchange's STAR Market, subsequently receiving inquiries from the exchange. The Shanghai Stock Exchange focused on 30 issues including drone usage, major customers and the largest customer, sales models and distribution models, sustainable business capability, share-based payments, sales expenses, and R&D expenses. XAircraft Technology responded in March 2022.

Shortly after the first-round response, on March 25, 2022, XAircraft Technology stated that the company and its intermediaries, affected by the pandemic, could not complete due diligence, respond to audit inquiries, and other work within the prescribed time limit, applying to the exchange for suspension of review. A month later, XAircraft Technology directly withdrew its STAR Market IPO application.

This Hong Kong Stock Exchange IPO attempt gives XAircraft Technology greater confidence. During its STAR Market IPO, XAircraft Technology was still in a loss-making state. From 2018-2020, its revenues were 322 million yuan, 357 million yuan, and 530 million yuan respectively, with net profits attributable to shareholders of -6.72 million yuan, -39.70 million yuan, and -60.85 million yuan respectively.

According to the Hong Kong IPO prospectus, from 2022-2024, XAircraft Technology's revenues were 605 million yuan, 614 million yuan, and 1.066 billion yuan respectively, with drone revenue accounting for 78.6%, 81.2%, and 87.8% respectively. Net profits attributable to shareholders were -254 million yuan, -132 million yuan, and 69.42 million yuan respectively, achieving profitability in 2024. In the first half of this year, XAircraft Technology's revenue was 745 million yuan, with drone revenue accounting for 89.0%, and net profit attributable to shareholders of 130 million yuan.

However, it's worth noting that based on 2024 data, XAircraft Technology's first-half net profit attributable to shareholders of 86.53 million yuan exceeded its full-year performance. Therefore, there may be significant differences between XAircraft Technology's first-half and second-half net profits, with profits possibly concentrated in the first half.

The prospectus shows that XAircraft Technology has become the world's second-largest agricultural drone leader, trailing only DJI, though the gap with DJI remains significant. Based on 2024 revenue, DJI ranks first globally in agricultural drones with a 59% market share, while XAircraft Technology ranks second with a 17.1% market share, and the third-place player holds only a 2.2% market share.

Since its establishment, XAircraft Technology has completed multiple funding rounds. After withdrawing its STAR Market IPO, XAircraft Technology conducted a C++ round of financing in October 2023, introducing Lianxin Guangxin No.1 under Lianxin Kaixing Fund as a shareholder at 18.24 yuan per share. Based on this calculation, XAircraft Technology's valuation at that time was approximately 6.227 billion yuan.

According to the Hurun Research Institute's "2025 Global Unicorn List," XAircraft Technology's valuation increased from 7.1 billion yuan in 2024 to 7.3 billion yuan, while competitor DJI's valuation stands at 84 billion yuan.

**Overseas Business Revenue Doubles, R&D Expense Ratio Continues to Decline**

Company performance is a key factor in IPO success.

From a performance perspective, XAircraft Technology's revenue scale and profitability showed significant improvement in 2024, mainly due to major breakthroughs in global markets, especially overseas.

According to the prospectus, XAircraft Technology's domestic revenue in 2024 was 695 million yuan, up 53.74% year-over-year. Overseas markets performed even more impressively, growing from 163 million yuan in 2023 to 371 million yuan, an increase of 128.02%, with the proportion of total revenue rising from 26.5% to 34.8%.

XAircraft Technology's overseas business mainly includes the Americas and Southeast Asia, with customers including local market leaders. In Southeast Asia, it partners with CP Group; in the Americas, it collaborates with Case New Holland (Brazil); and in Europe and Africa, it works with NIK. This quickly drove XAircraft Technology's overseas business breakthrough.

However, from the first half of 2025 performance, XAircraft Technology's growth seems to have slowed. First-half domestic revenue grew from 555 million yuan to 557 million yuan, remaining essentially flat. Overseas revenue increased from 175 million yuan to 187 million yuan, a 7.10% increase, with overseas revenue accounting for 25.2%.

XAircraft Technology's 2024 performance surge was mainly attributed to increased sales volume. In 2024, XAircraft Technology sold 21,400 drone units, doubling from 10,300 units in 2023. In the first half of this year, XAircraft Technology sold 17,700 units, up 13.67% year-over-year.

From 2022-2024, XAircraft Technology's average drone prices were 46,000 yuan, 48,400 yuan, and 43,700 yuan respectively, with drone product gross margins of 26.8%, 23.1%, and 31.5% respectively. The year with higher average prices (2023) had the lowest gross margin, while the year with the lowest average prices (2024) had higher gross margins.

In the first half of this year, XAircraft Technology's average drone price was 37,500 yuan per unit, down from 41,500 yuan in the same period last year. However, drone gross margins increased from 29.8% in the same period last year to 34.1%.

Besides drones, XAircraft Technology's other two major businesses - accessories and agricultural machinery autopilots - saw rapid revenue growth from 2022-2024, with accessories revenue growing more than 2-fold and agricultural machinery autopilot revenue growing more than 7-fold over three years. However, in the first half of this year, revenues from these two businesses declined 19.25% and 52.18% respectively year-over-year.

In 2024, gross margins for both accessories and agricultural machinery autopilots increased significantly, with accessories gross margins growing from 26.5% to 43.8%, and agricultural machinery autopilot gross margins improving from -29.7% to 46.8%. In the first half of this year, gross margins for both businesses declined slightly, with accessories gross margins falling from 39.8% to 35.0%, and agricultural machinery autopilot gross margins dropping from 46.4% to 43.8%.

According to the prospectus, from 2022-2024, improved gross margins for these two businesses and drone products drove XAircraft Technology's overall gross margins to 17.9%, 18.9%, and 31.9% respectively, with first-half gross margins this year at 34.3%.

Regarding gross margin improvements, XAircraft Technology stated this was mainly due to optimizing drone design through technological innovation, reducing hardware costs, while higher-margin overseas sales revenue contributed more.

While improving gross margins, XAircraft Technology has also enhanced profitability through cost reduction and efficiency improvements.

In 2022, XAircraft Technology's sales expenses and administrative expenses were 84.92 million yuan and 65.07 million yuan respectively, falling to 62.80 million yuan and 45.22 million yuan in 2023. In 2024, as revenue scale expanded, these two expense categories rebounded to 65.81 million yuan and 54.88 million yuan respectively, but remained significantly below 2022 levels. Over three years, the sales expense ratio continuously declined from 14.05% to 6.18%, and the administrative expense ratio continuously fell from 10.76% to 5.15%.

However, it's worth noting that during cost reduction, XAircraft Technology's R&D expenses and R&D expense ratio have continuously declined.

From 2022-2024, XAircraft Technology's R&D expenses were 194 million yuan, 160 million yuan, and 159 million yuan respectively, with R&D expense ratios of 32.13%, 26.06%, and 14.93% respectively, declining by over 17 percentage points over three years. In the first half of this year, R&D expenses were 78.37 million yuan, with an R&D expense ratio of 10.52%, compared to 10.66% in the same period last year.

In the technology-intensive drone industry, XAircraft Technology's reduced R&D investment may improve short-term profitability but could affect long-term competitiveness. Especially as companies like Insta360 and Dreame Technology enter the drone market, intensifying industry competition, XAircraft Technology's R&D reduction could have greater impact.

Additionally, in the first half of 2025, the company's net cash flow from operating activities was -53.67 million yuan. As of June 2025, current liabilities totaled 576 million yuan, with accounts receivable reaching 310 million yuan, accounting for 42% of revenue. If dealer payments slow, this could impact XAircraft Technology's cash flow, indicating substantial funding needs.

This Hong Kong IPO aims to use part of the raised funds for R&D, developing agricultural robot products to maintain industry leadership. Additionally, funds will be used to further expand global sales and service networks, establish new headquarters, and serve as working capital and general corporate purposes.

As the drone sector sees increasing participants, whether XAircraft Technology, the first to pursue an IPO, can leverage capital markets to maintain its leading position and further narrow the gap with industry leader DJI remains to be seen.