Matters:
The company released its 2023 annual report, achieving operating income of 10.22 billion yuan, +1% year over year; achieving net profit of 598 million yuan, +32.5% year over year; of these, 23Q4 achieved revenue of 2,696 million yuan, +8.2% year over year; and realized net profit of 219 million yuan, +279.9% year over year. The company paid a total cash dividend of 200 million yuan in '23, accounting for 33.45% of net profit returned to mother in '23.
Commentary:
23Q4 electric two-wheeled vehicles continued to grow rapidly, and ToB's direct sales and customized product distribution channels were under pressure in the short term. 23Q4 achieved revenue of 2,696 billion yuan, +8.2% year-on-year. Among them, the independent brand business performed well, and ToB's direct management and customized product distribution channels were under pressure. Looking at the Q4 split channel structure in a single quarter: 1) 2C's independent brand revenue was 2.18 billion yuan, +26% year over year, mainly driven by high growth in the electric two-wheel business. 23Q4 electric two-wheeler revenue was 1.01 billion yuan, +136% year on year. As of February 29, 2024, the company's cumulative shipments of electric two-wheelers exceeded 3 million, and the company's intelligent products continued to transform the industry; self-branded retail scooter Q4 revenue was 570 million yuan, -17% year over year; all-terrain vehicles and lawnmower robots achieved revenue of 220 million yuan, 0.96 million yuan, and long term respectively The growth curve has gradually materialized. 2) ToB's direct sales and customized product distribution channels are under pressure in the short term. 23Q4 ToB direct sales and customized product distribution channels declined by 12% and 84% respectively, mainly due to the declining boom in the downstream scooter sharing industry and the elimination of the Xiaomi channel.
23Q4 gross margin declined slightly year on year, and the cost ratio narrowed year over year and profit increased high during the period. The 23Q4 company achieved net profit of 219 million yuan, a sharp increase of 279.9% over the previous year, and achieved a gross profit margin of 27.7%, -0.6 pct year on year. The gross margin declined slightly in a single quarter. We expect this is mainly due to the decline in direct sales channels for high-profit ToB products.
23Q4 sales, management, R&D, and finance cost ratios were -0.6, +0.8, -1.6, and -0.3 pct, respectively. The total cost rate for the period decreased by 1.7 pct year on year. We expect that investment in business expenses mainly for all-terrain vehicles and lawnmower robots will narrow. The net interest rate for the 23Q4 quarter was 8.1%, +5.8pct year over year. We expect continued improvement in profitability in the future.
Electric two-wheeled vehicles expand market share, and the new all-terrain vehicle product matrix has been improved. During the reporting period, the company's electric two-wheeler released various products such as the high-performance urban electric motorcycle E300P and the full-speed cruiser M95C. We expect to continue to expand our market share along with channel expansion. In terms of all-terrain vehicles, the company released the SuperVillain SX20T Hybrid SSV product in 23 to enter the North American market. Currently, the product matrix fully covers ATV/UTV/SSV to meet the needs of multiple scenarios such as mountain climbing, entertainment, farm freight, events, and complex terrain crossing.
Investment suggestions: Product competitive advantages shaped by production and research barriers, and high-end brand value shaped by product demand establish the company's core competitive advantage. Profitability increases as the share of Xiaomi channels decreases, and two rounds of business have entered a period of performance fulfillment. We adjusted the company's 2024-2025 net profit forecast to be 72/88 million yuan (original value 6/73 billion yuan), and added the 2026 net profit forecast of 1.07 billion yuan. The corresponding PE for 24-26 is 28/23/19 times. The company's cash flow is stable. Using the DCF method for valuation, the target price for each CDR is adjusted to be 39 yuan, which corresponds to 10 CDRs per share. The company has sufficient long-term growth momentum and maintains a “recommended” rating.
Risk warning: New product launches and market responses fall short of expectations, overseas policies fluctuate, and raw material prices fluctuate.