Event: The company announced its 2023 results. In 2023, the company achieved revenue of 34.76 billion yuan, +11.9%; the company achieved net profit of 2.64 billion yuan, +22.2% year over year; the company's sales volume reached 16.522 million vehicles, +17.9% year over year. In terms of annual sales, it has maintained a leading position in the global electric two-wheeler industry for six consecutive years.
Gross margin declined in 2023, the cost ratio remained stable, and the net profit of bicycles rebounded in 2023: the company achieved a gross profit margin of 17.0% in 2023H2, -1.2pct year on year, +0.1pct month-on-month; gross margin in 2023 was 16.9%, -1.1 pct year on year. The company's sales, management, R&D and finance expenses in 2023 were 4.1%/3.2%/3.4%/0.1%, respectively, and -0.2/+0.1/-0.1 pct year-on-year, respectively. The overall cost ratio remained stable during the period. The company achieved a net profit margin of 7.6% in 2023, +0.6pct year-on-year. In 2023, we achieved bicycle revenue of 2104 yuan, or -5.1% year on year, and achieved net bicycle profit of 160 yuan, +3.6% year over year. It is expected that along with the optimization of the company's product structure, bicycle revenue and profit levels will continue to rise.
The industrial chain layout has been further improved, and overseas production capacity construction has accelerated the pace of going overseas: on March 17, 2024, the company announced the acquisition of all shares of Wuxi Lingbo Electronic Technology Co., Ltd., improving the technical layout of electronic control systems, and strengthening vertical integration of the supply chain, which will help reduce production costs and increase profit levels.
The company focuses its overseas business on the Southeast Asian market. At the beginning of 2024, the company held a groundbreaking ceremony for a 232,200-square-meter production plant in Tan Huang Industrial Park in Liangjiang County, Bac Giang Province, Vietnam. The production plant is scheduled to be put into operation in 2025, with an annual design capacity of 2 million electric motorcycles. About 30% of the production will be exported to other countries in Southeast Asia, including the Philippines, Thailand, Malaysia and Laos. Overseas production capacity construction will support the company to accelerate its overseas market share.
Investment advice: The company has a stable leading position and is optimistic about the gradual increase in share, industrial chain integration, product strength improvement, and overseas market expansion. We expect the company to achieve operating income of 404.99/464.11/52.352 billion yuan and net profit to mother of 32.28/40.27/4.706 billion yuan in 2024-2026. The corresponding PE was 12.37/9.92/8.49 times, respectively, maintaining the “gain” rating.
Risk warning: New product sales fall short of expectations; industry competition increases risk; macroeconomic downside risk.