On July 14, 2023, the company issued a forecast for the first half of the year, with an estimated net profit of 90 million-115 million yuan in the first half of 2023,-67.2% to-74.3% compared with the same period last year. According to the performance forecast, 2023Q2 realized a net profit of 0.43-68 million yuan, from-59.9% to-74.8% compared with the same period last year, and from-9% to + 47%. We believe that as US inflation declines and consumer demand begins to repair, we expect results at 2H23 to continue to improve. Due to the pressure on 23Q2 performance, we downgraded the company's revenue forecast for 2023, 2024, to $2.76, 334, 000. We believe that based on the observed trend of export data and the improvement of the company's operating conditions, there will be a steady rebound in industry demand and company performance in 2024, so we will be given 21 times PE in 2024, corresponding to a target price of 74 yuan, maintaining a "buy" rating.

The company's 23H1 net profit fell sharply compared with the same period last year, but the decline in Q2 is likely to be narrower than that of Q1. On July 14, 2023, the company issued a forecast for the first half of the year. It is estimated that the net profit for the first half of 2023 will be 90 million-115 million yuan,-67.2% to-74.3% compared with the same period last year. According to the performance forecast, 2023Q2 achieved a net profit of 0.43-68 million yuan, from-59.9% to-74.8% (23Q1) from-9% to + 47%, which is more likely to slow down and repair than Q1. The negative year-on-year growth is mainly due to the fact that demand in Europe and the United States is still being repaired, channel inventory still needs to be digested, and considering the weakening rate of year-on-year decline, we believe that we should pay close attention to the inflection point of downstream demand.

In the long run, the spatial certainty of electric bicycle permeability is high, and the demand in Europe and the United States is suppressed by inflation in the short term, which may begin to be repaired in 2H23. According to the data of the European Bicycle Association, the penetration rate of electric bicycles in Europe is 25% in 2021, and we believe that the trend of electrification of short-distance trips in Europe is still clear for a long time. The short-term decline in demand is mainly due to high inflation, which suppresses demand. We can see that the US CPI growth rate was 3% in June, which has declined for the 12th month in a row, which is the lowest since March 2021. High inflation expectations in Europe and the United States are receding and consumer demand is beginning to repair. According to customs export data, 1Q23 China's exports of electric motorcycles and bikes to the United States fell 22% year on year, but in April-May 23, the export growth rate has rebounded to the same level as the same period last year; 1Q23 China's exports of electric motorcycles and electric bikes to 12 major European countries fell 24.2% year-on-year, corresponding to a year-on-year decline of 8.7% in April-May 23. At the same time, we have also observed that the export growth rate of low-speed vehicles, including all-terrain vehicles and golf carts, is gradually improving compared with the same period last year. Therefore, we believe that the suppression and disturbance of inflation on the demand for electric scooters is weakening. We believe that as an important core parts supplier of electric scooters, the company's competitive position remains strong and will regain order and revenue growth in 1-2 quarters after demand resumes. Therefore, it is optimistic that the demand for Octagonal shares will continue to repair after 2H23 and the reduction of inflation volatility in 2024.

The company continues to practice its internal skills, waiting for the industry demand to pick up again. The company is the leader of electric bicycle motors in the world, the only Chinese manufacturer of electric bicycle motors with a share of more than 10% in Europe, and can provide a full range of core components for electric bicycles, from instrumentation to motors to batteries. it has also become one of the few Chinese suppliers that can supply bicycle variable speed drums in 2022. Its two-wheeled vehicle magnetic hysteresis telescopic torque sensor and strain gauge torque sensor are in the leading position in China. The company's Tianjin all-in-one wheel motor factory has been put into production at the end of 2022, ending the lease of the integrated wheel motor plant and reducing operating costs. The second phase of the company's Suzhou plant is expected to be put into production by the end of 2023 to further expand the production capacity of motor products. At the same time, 2Q23 octagonal shares set up a high-speed electric motorcycle division to cut into the motorcycle motorized track to broaden the growth space.

Risk factors: economic recession in Europe and the United States; declining demand for electric bikes; lower-than-expected expansion of high-end intermediate motors; lower-than-expected profitability of integrated wheel motors; deterioration of overseas trade policies; potential anti-dumping policy risks hinder sales growth; sea freight changes bring disturbance.

Earnings forecast, valuation and rating: in view of the high certainty of demand for electric scooters in Europe and the United States in the long run, the consolidation of the competitive position of the eight parties, and the easing of inflation on the suppression of consumption, we believe that orders and demand for shares of the eight parties will gradually improve in 2H23 and continue to pick up in 2024. Due to the pressure on 1H23 performance, we downgraded our revenue forecast for 2023 Universe 2024 to $2.76 million for 2025 (the original forecast was $342 million for 42.4 billion), and lowered our net profit forecast to $4.3 million for $5.9 billion (compared with $790 million for 6.5).

The company's average Pamp E over the past 12 months is 21x, considering that there has been no significant change in the company's operating conditions, we believe that based on the observed trend in export data and the improvement in the company's operating conditions, there will be a steady rebound in industry demand and company performance in 2024, so it will be 21 times PE in 2024, corresponding to a target price of 74 yuan, maintaining a "buy" rating.