Incident: On August 24, the company released its semi-annual report. Customer demand declined, and the company's performance was under pressure. According to the semi-annual report, the company achieved revenue of 591 million yuan in 2023H1, -19.77%, mainly due to a decline in customer demand; net profit of 142 million yuan, -1.25% year-on-year; net profit of 137 million yuan after deducting non-return net profit of 137 million yuan, -3.5% year-on-year.
Golf cart revenue was -26.54% year over year, and gross margin was +0.93 pct. By product, golf cart revenue was 600 million yuan, -26.54% year on year; sightseeing car revenue was 71.28 million yuan, +28% year on year. The gross profit margin for golf carts was 34.59%, +5.38%, and the gross profit margin for sightseeing cars was 19.49%, +4.39%. The company uses a special production line for golf carts to achieve mass production of golf carts, greatly improving production efficiency and reducing costs.
The company's gross sales margin was +5.15 pct year on year, and the period expense ratio was +0.32 pct year on year. 23H1's gross sales margin was 32.97%, year on year +5.15 pct; net sales profit margin was 23.97%, year on year +4.49 pct. In the first half of the year, the company's sales/management/R&D/financial expenses ratio was 2.81%/3.59%/3.12%/-4.31%, respectively, compared to +1.12 pct/+1.54 pct/+0.09 pct/-2.43 pct. The increase in sales expenses was mainly due to the expansion of the promotion business, and the company's increase in travel expenses and advertising investment; the increase in management expenses was mainly due to the increase in expenses paid by intermediaries; and the decrease in financial expenses was mainly due to the increase in interest income generated by the company from purchasing wealth management products.
The company is deeply tied to new North American golf cart players and signed a framework agreement to ensure medium- to long-term steady growth. Deeply tied to two American brands, ICON and LVTONG USA, ICON has rapidly grown into the fourth largest brand of golf carts in the US. The company has signed separate long-term sales framework agreements to maintain future cooperation and ensure long-term delivery in the next 4-5 years.
Investment suggestions: We expect Lutong Technology's revenue for 2023-2025 to be 1,625/19.93/2,604 billion yuan, compared to +10.5%/+22.6%/+30.7%; net profit to return to the mother is 328/4.03/535 million yuan, respectively, +5.2%/+22.8%/+32.8%, corresponding to current valuations of 17.2/14.0/10.6 times, with value for money, maintaining a “buy” rating.
Risk warning: There is a high risk of dependence on the top two major customers, industry competition intensifies, and raw material prices fluctuate.