Annual & Quarterly Report Reviews

The company achieved revenue of 2.85 billion yuan in 2022, an increase of 7.7% over the previous year; net profit of 501 million yuan, a decrease of 15.6% over the previous year; after deducting non-net profit of 501 million yuan, a decrease of 7.4% over the previous year; the gross profit margin was 31.2%, a decrease of 3 pct over the previous year, and the net interest rate was 18%, a decrease of 5 pct over the previous year.

The fourth quarter of 2022 achieved revenue of 4.7 billion yuan, a decrease of 37.2% over the previous year; net profit of 38 million yuan, a decrease of 78% over the previous year; after deducting non-net profit of 36 million yuan, a decrease of 71% over the previous year; gross profit margin of 30.04%, a decrease of 4.2 pct over the previous year; and the net interest rate was 8.03%, a decrease of 15 pct over the previous year.

The first quarter of 2023 achieved revenue of 450 million yuan, a decrease of 40.7% over the previous year; net profit of the mother was 47 million yuan, a decrease of 74.1%; after deducting non-net profit of 37 million yuan, a decrease of 79% over the previous year; gross profit margin of 26.7%, a decrease of 9.1 pct over the previous year; and the net interest rate was 10.3%, a decrease of 13.3 pct over the previous year.

By business, 1) Electric scooter motors: 2022 revenue was 1.37 billion yuan, a decrease of 11.3% over the previous year, and the gross profit margin was 48.8%, an increase of 1.24 pct over the previous year. 2) Integrated wheel motors: Revenue in 2022 was 780 million yuan, an increase of 64.2% over the previous year, gross profit margin of 5.3%, an increase of 1.2 pct over the previous year. 3) Package: 2022 revenue was 5.2 billion yuan, a year-on-year decrease of 1.04%, gross profit margin of 32.1%, an increase of 1.9 pct over the previous year. 4) Battery: 2022 revenue was 180 million yuan, a year-on-year increase of 69.2%, gross profit margin of 17.7%, an increase of 0.75pct over the previous year.

Looking at product sales, 1) wheel motors: sales volume of 1,132 million units in 2022, a year-on-year decrease of 28.06%; 2) Mid-mounted motors: 510,000 units sold in 2022, a decrease of 7.75% over the previous year; 3) Integrated wheel motors:

Sales volume in 2022 was 4.14 million units, up 44.6% year over year.

Position high-end customers and build a service system. The company positions high-end customers, actively expands domestic and foreign markets, pays close attention to customer needs and industry trends, makes full use of the technical and quality advantages of the company's products, and provides customers with market-competitive products. The company insists on providing customers with one-stop procurement and solutions from early project connections to in-depth understanding of customer needs, to on-time and high-quality product delivery, to providing customers with quick response after-sales service.

Investment advice

In terms of developing new categories, in addition to continuing to cultivate the segment of electric bicycle motors and electrical systems, the company will continue to expand its layout in the fields of traditional electric vehicles, electric motorcycle motors and related products, promote a multi-brand strategy covering all levels of two-wheeler markets, and enhance the company's core competitiveness. Due to industry sentiment, we adjusted net profit of RMB 1,060 to RMB 1.28 billion and RMB 1,208 million in 2023 and 2024. We expect net profit of RMB 760 million to RMB 760 million in 2025, maintaining the “buy” rating.

Risk warning: Industry competition intensifies, raw material prices rise, demand for electric bicycles grows less than expected, and overseas market development falls short of expectations.