Performance review
1H22 performance is basically in line with our expectations.
The company announced 1H22 results: revenue 1.542 billion yuan, year-on-year + 25.19%; return net profit 350 million yuan, year-on-year + 13.22%; non-return net profit 348 million yuan, year-on-year + 13.94%. The performance is basically in line with our expectations.
The change of revenue structure superimposes more investment in three fees, and the profit margin is under pressure. 1H22's gross profit margin was 33.56%, down 2.7% from the same period last year, mainly due to the increase in the proportion of income in Tianjin, where the gross profit margin is relatively low, and changes in revenue structure. 1H22's sales expenses, management expenses and R & D expenses increased by 61%, 48% and 70% respectively compared with the same period last year, which significantly exceeded the income growth rate. The increase in the three expense rates dragged down the net profit margin, which decreased by 2.4ppt to 22.72% compared with the same period last year. The sharp increase in R & D expenses is mainly due to the increase in the salary of R & D personnel and increased investment in electric motorcycle projects.
Trend of development
The penetration rate of electric bikes in Europe has reached 23%, and the subsidy-driven contribution in the US market has increased. The increase in the penetration rate of overseas electric bikes and the increase in the share of intermediate motors are the main sources of profit growth of Bafang shares. In the European market, more than 5 million electric bikes were sold in 2021, with a penetration rate of 23%. The high growth driven by the epidemic shows a marginal slowdown; in the US market, we estimate that more than 1.2 million units will be sold in 2021, with a penetration rate of about 8%. Affected by tax credits, commuter subsidies, tariff suspensions and other factors, we believe that the US market is expected to maintain a growth rate of more than 30% in 2022, becoming a new growth point for the global electric bicycle market.
Production expansion projects have been started one after another, and the comprehensive competitiveness has been further enhanced. During the reporting period, the company's subsidiary infrastructure projects began one after another, of which the Bafang Tianjin electric vehicle drive system manufacturing project is close to Giant, Emma and other end customers, with a construction area of about 30,000 square meters. In the future, it will become the main manufacturing base of the company's domestic business. The first phase of Bafang new energy lithium battery pack and high-end drive system manufacturing project has a floor area of about 100000 square meters, which is a solid step for the company to continuously improve the matching rate of products and provide customers with system optimization solutions. We believe that the successive commissioning of capacity projects will help to enhance the overall competitiveness of the company.
Profit forecast and valuation
Taking into account the long-term development trend of the electric bicycle market, we keep our profit forecasts unchanged in 2022 and 2023. The current share price corresponds to a price-to-earnings ratio of 24.2 times 2023 / 17.7 times earnings. We maintain a list price of 218.00 yuan, corresponding to a price-to-earnings ratio of 34.9 times 2022 and 25.5 times 2023, with 44.15% upside compared to the current stock price.
Risk.
Domestic competition aggravates the risk; overseas demand for electric bikes fell more than expected.