1. One-sentence logic

The release of new products such as leading recreational vehicles and electric low-speed vehicles (golf carts) has accelerated to open a second curve, and performance is expected to exceed expectations

2. Logic that exceeds expectations

(1) Market expectations: The company's stock business has remained stable in recent years, and it is difficult for the company to release new products.

Electric scooters: According to QY Research, the total global production value of electric scooters reached 1.2 billion US dollars in 2020, and is expected to reach 3.3 billion US dollars in 2027, with a compound growth rate of 15% in 2021-2027. The industry is highly fragmented. We expect the company's revenue in 2023 to be about 800 million yuan, with a relatively high market share. The company's electric scooter revenue in 2020-2023 grew at a compound rate of 31%, and its high growth rate has slowed in recent years.

All-terrain vehicles: Currently, the global sales volume of all-terrain vehicles is about 1-1.1 million units. According to Allied Market forecasts, the global all-terrain vehicle market will reach US$141 billion in 2025. The company is a leader in small-displacement ATVs, with sales volume of 160,000 units in 2021 and revenue of nearly 800 million yuan. Currently, it accounts for a relatively high sales volume, but a relatively small share of revenue.

Electric balance scooters: According to EVtank statistics, global electric balance scooter shipments reached 10.32 million units in 2020, an increase of 24% over the previous year. The industry is highly fragmented. The company shipped about 470,000 units in 2021, accounting for a certain share. The company's electric balance scooter revenue grew at a compound rate of 22% in 2020-2023, with steady growth in recent years.

(2) We predict that demand for electric balance scooters/scooters has led the industry to pick up, and new products have begun to be promoted on a large scale.

The company has the dual advantage of a North American brand and a scale effect on the domestic manufacturing side. In 2024, it is expected that old products will pick up and the industry will replenish stocks. Resonance in new product volume will drive the company's revenue and performance to exceed expectations.

The reason is: 1) Deeply involved in the North American market, using the sales model of domestic production, overseas warehousing, overseas sales, and local service, and building several warehousing centers in North America, 2023Q3 revenue increased significantly, and downstream recovery began. 2) Own brand+omni-channel layout, offline supermarket distribution+online e-commerce dual drive, close to the consumer market, products have entered many retail giants such as Amazon and Walmart, and brand power and channel power have significantly helped launch new products.

3. Inspection and catalysis

(1) Test indicators: downstream sales of electric scooters, balance scooters, all-terrain vehicles, etc.; monthly sales growth of electric low-speed vehicles, bicycles, and high-displacement all-terrain vehicles; progress of various channels such as North American dealer terminals, large supermarket chains, and European distributors/agents.

(2) Possible catalysts: sales of new products such as electric low-speed cars (golf carts) and electric bicycles increased month-on-month; demand for consumer goods in North America rebounded beyond expectations; and a breakthrough in sales of high-displacement all-terrain vehicles.

4. The value of research

(1) Distinctive understanding: The market believes that it is difficult to release company golf carts quickly. We believe that the company will benefit from the opportunities brought by the product upgrade of electric low-speed vehicles (electric golf carts, etc.) from lead-acid batteries to lithium batteries. In the future, electric low-speed vehicles will become an important growth point for the company. According to research data from the Advanced Manufacturing Development Alliance, the global field electric vehicle market reached 970,000 units in 2019, with a compound growth rate of about 8.8% in 2015-2019. According to the unit price estimate of 25,000 yuan (export of electric vehicles for golf carts and other venues in China from January to June 2022), the global field electric vehicle market is about 24 billion yuan.

The company is expected to take advantage of manufacturing cost advantages and the industry's lithium electrification trend to achieve curve overtaking and continue to seize the share of leading brands such as ClubCar, E-Z-GO, and Yamaha in North America. Assuming that the company continues to achieve a global market share of about 5-10%, it is expected to contribute 1.2 to 2.4 billion dollars in revenue growth. With the subsequent release of new products such as electric bicycles and high-displacement all-terrain vehicles, the revenue volume is expected to double.

(2) A different understanding from before: In 2023, the company's revenue increased significantly year-on-year in Q3, and sales of major products began to pick up. In terms of new products: The company began selling golf carts in 2023, launched BestBuy (BestBuy) supermarkets, and the high-end dealer network continues to expand. The high-displacement all-terrain vehicle 300ATV entered the market for trial sales in 2023, and the 550UTV and ATV were officially put into research and development. It is expected that next year, there is strong certainty about the trend of increasing channels, customers, and sales of golf carts and high-displacement all-terrain vehicles.

5. Profit forecasting and valuation

We expect the company's revenue in 2023-2025 to be 21.5, 29.1, and 3.94 billion yuan, up 22%, 36%, and 35% year on year; net profit is 2.9, 3.3, and 450 million, up 38%, and 38% year on year, corresponding to PE of 20, 17, and 13 times. We are optimistic that the company's performance growth will accelerate due to the release of new products and channel advantages, and maintain the “buy” rating.

6. Risk warning

1) New product release falls short of expectations; 2) Sales channel expansion falls short of expectations