Focusing on field electric vehicles, overseas ODM is growing rapidly. The company sells products such as golf carts, sightseeing cars, and electric patrol cars through ODM and private brand models. The company's revenue in 2022 reached 1,471 million yuan, an increase of 44.65% over the previous year, the compound growth rate in 18-22 reached 46.65%, the net profit of the mother reached 312 million yuan, an increase of 145.09% over the previous year, and the compound growth rate in 18-22 was 86.12%. In recent years, the company has been deeply tied to large overseas customers, driving rapid growth in the company's revenue and profit under the rapid growth of overseas customers. 2019-2022H1's overseas revenue accounted for 61.37%, 75.55%, 86.08%, and 92.87% of its main business revenue, respectively.
The golf cart market is vast, and the penetration rate is expected to continue to increase. The US is the world's largest golf cart market and the golf industry is huge. As of the end of 2020, the US had 16,516 golf courses, accounting for 42.43% of the world. Golf courses used golf carts a lot, making it the most important category of electric field vehicles in the US. The company is deeply tied to American golf cart brands ICON, LVTONG USA, etc., and has signed long-term framework agreements to ensure stable delivery in the medium to long term. In recent years, the company has helped customers grow rapidly with advanced product technology and high cost performance advantages, and ICON has become the fourth largest golf cart brand in the United States. ICON and LVTONG USA have a mature golf cart sales network in the US, and the business area continues to expand. As the company's production capacity increases, customers are expected to continue to increase their market share and expand their business scale.
The expansion of production capacity matches market demand, and the advantage of scale is remarkable. In order to meet the explosive growth in demand from overseas customers, the company's production capacity rapidly expanded from 16,700 units in 2019 to 42,000 units in 2021, and plans to continue to invest 279 million yuan to expand production capacity, adding 17,000 new planned production capacity, leading production in the industry, with a strong scale effect. At the same time, the company's net IPO capital was 2,101 billion yuan, and the company had sufficient cash to continue to expand production capacity. On the other hand, the company has also reduced costs and increased efficiency through domestic substitution, construction of a special production line for golf carts, and the introduction of automated equipment, etc., and the cost performance advantage of the product is obvious. The company's capacity utilization rate continues to be high. In the future, it will further utilize its advantages of scale and expand more customers, and its market share is expected to increase.
Multiple categories have been expanded, and UTV electric all-terrain vehicles are leading new growth. The company lays out electric vehicles for various venues, including golf carts, sightseeing cars, electric patrol cars, electric trucks, etc., which are widely used in golf courses, scenic spots, hotels, etc. As of January-June 2022, the company invested 18.1631 million to develop UTV electric all-terrain vehicles, which can expand application scenarios to leisure and entertainment in some specific areas of the wild. It is expected to lead revenue growth as an important new product for the company in the future.
Investment advice: We expect Lutong Technology's net profit from 2023-2025 to be 426/579/767 million yuan respectively, with corresponding valuations of 20.6/15.1/11.4 times respectively. Considering the continued high growth of the company's overseas ODM customers and maintaining deep medium- to long-term ties with the company through signing cooperation agreements, the “buy” rating was covered for the first time.
Risk warning: There is a high risk of dependence on the top two major customers, industry competition intensifies, and raw material prices fluctuate.