Deeply involved in all-terrain vehicles and medium to large motorcycles, globalization helps the company grow rapidly. The company is a leading domestic all-terrain vehicle and medium- and large-row motorcycle leader. Among them: 1) all-terrain vehicles are mainly exported to the European and American markets. The company has gained the largest share of the European market, and sales of the U/Z series are rapidly increasing; 2) medium and large cab motorcycles are shifting from mainly domestic sales to equal emphasis on domestic and foreign sales. The company will return to the US market in 2022 and gradually improve the layout of overseas products and channels, which is expected to create a new growth curve for the company.

The company develops high-end all-terrain vehicle products to open up room for long-term growth. In 2023, global all-terrain vehicle sales will be around 955,000 units, of which about 650,000 UTV & SSVs will be sold. We expect that by 2030, the global scale of all-terrain vehicles will reach US$14.4 billion (of which UTV & SSVs account for about 81%), and the CAGR for the period 2023-2030 will be about 4.7%. Major players in the all-terrain vehicle industry include Polaris, Bombardier, Honda, etc. The industry concentration is high. CR2 is over 60%, and the company's market share in 2023 is around 9.3%. The company has been deeply involved in the all-terrain vehicle industry for nearly 20 years, formed a strong technical accumulation in the fields of engines, frames, etc., and continued to improve the product and channel layout. The company's ATV products have become the largest market share in Europe. In the future, the company will accelerate the layout of high-end products and accelerate the launch of new products. Compared with competing products, these new products have stronger power, higher configuration, and a strong competitive advantage. The market share of high-end products is expected to continue to increase in the future. We expect the global market share of the company's all-terrain vehicles to reach 15% by 2030.

We are deeply involved in medium and large motorcycles, and our products have gone overseas to create a new growth curve. The penetration rate of medium and large motorcycles in China has increased rapidly in the past few years, with sales reaching 524,000 units in 2023 (domestic sales of 326,000 units plus export of 198,000 units). Referring to the growth history of the Japanese motorcycle industry, we expect sales of medium and large motorcycles in China to reach 1.5 million units in 2030, including 800,000 domestic sales. The main barrier to the CUHK motorcycle industry is its comprehensive strength in technology, brand, and design. Currently, the main domestic players are Qianjiang, Chunfeng, and Longxin, with a total share of more than 50%. The company has been deeply involved in medium and large motorcycles for many years, and has accumulated deep and strong product polishing capabilities, which is the core characteristic of the company. The success rate of new products launched in the past is very high. In 2023, the company's domestic sales volume reached 39,000 units, with a market share of 11.8%, an increase of 6 pcts over the previous year. In the future, the company will launch more competitive models, and the market share is expected to continue to increase. The company has strong motorcycle products and has achieved excellent results globally. Export sales reached 41,000 units in 2023, an increase of 28.2% over the previous year. The global market space for medium and large motorcycles is large. The company's global market share is relatively low, and there is still plenty of room for growth. As the company gradually improves the layout of overseas products and channels, export sales are expected to maintain rapid growth.

Investment advice: First coverage, with a “buy-A” rating. The company is speeding up the deployment of high-end U/Z series and actively promoting medium and large motorcycles to go overseas, and is expected to continue to grow at a high rate in the future. We expect the company's net profit for 2023-2025 to be 10.3/11.6/1.52 billion yuan respectively, corresponding to the current market value, PE 17.1/15.3/11.6 times, respectively. First coverage, a “buy-A” rating was given, 20 times PE in 2024, corresponding to a 6-month target price of 154 yuan/share.

Risk warning: The pace of new car launches falls short of expectations, the risk of changes in the external environment such as exchange rates and freight rates, the risk of changes in the trade environment between China and the US, and the risk of profit forecasts and assumptions falling short of expectations.