2023 results fall short of our expectations
The company announced 2023 results: revenue of 2,006 billion yuan, -15.6% year on year; net profit to mother of 106 million yuan, -36.6% year on year. Overseas demand and channel inventory improved slowly, and performance fell short of our expectations.
On a quarterly basis, 1-4Q23 achieved revenue of 4.87/5.50/5.16/453 million yuan, respectively, of -37.1%/-6.2%/+1.2%/-10.4%; net profit to mother of 0.14/0.39/0.43/011 million yuan, respectively, of -67.4%/-33.7%/-18.5%/-22.7%, respectively.
The company announced 1Q24 results: revenue of $529 million (+8.7% YoY) and net profit of RMB 121 million (+55.1% YoY). The results are in line with our expectations.
Development trends
Overseas channels are slow to remove inventory, and revenue growth is under pressure. The company's revenue in 2023 fell 15.6% year on year. We think it was mainly affected by weak overseas demand and channel inventory removal, but there was an improvement in the first quarter of this year. According to data from the General Administration of Customs, China's bicycle exports increased 29.3% year on year in 1Q24, and Jiuqi 1Q24 revenue also returned to positive growth. By product, the company's revenue for adult bicycles, children's bicycles, electric power bikes, motorcycles, and accessories changed by -41.6%/-6.9%/-29.4%/+96.4%/-22.6% in 2023; by sales model, OBM and ODM business revenue in 2023 were +3.8%/-34.7%, respectively, and the share of OBM business increased 4.0ppt year-on-year.
Gross profit margins have increased. The company's gross margin in 2023 was +1.5ppt to 15.0% year over year, of which 4q23 gross margin was +1.6ppt to 15.7% year over year. We believe it was mainly due to cost reduction and product structure optimization. In terms of expenses, the company's expense ratio for the 2023 period was +3.4ppt. Among them, sales, management, finance, and R&D expenses rates were +0.7/+0.3/+1.8/+0.5ppt to 7.3%/1.6%/-1.0%/1.5%, respectively. Affected by the increase in the expense ratio, the company's net interest rate to mother in 2023 was -1.8ppt to 5.3% year over year.
I am optimistic about the broad development prospects of the company's electric moped business. The overseas electric moped market has continued to expand rapidly in recent years, but at present, there is still a lot of room for improvement in the penetration rate. As a leading Chinese electric moped export company, Jiuqi has remarkable industrial chain advantages and channel advantages. Currently, domestic and foreign electric moped production capacity continues to be built. In addition, with the help of cross-border e-commerce, the company's electric moped own-brand business is developing rapidly, and the profitability of its own brands is strong, and the increase in proportion has led to an increase in profitability. In the short term, along with the gradual recovery of overseas demand and the decline in channel inventory, we expect that the company's orders will continue to recover and the company's operations will gradually improve.
Profit forecasting and valuation
Considering that overseas demand and channel dewarehousing fell short of expectations, we lowered our 2024 net profit forecast by 21% to 150 million yuan, and introduced the 2025 profit forecast for the first time. The estimated revenue/net profit for 2025 is 2,908/193 million yuan, respectively. The current stock price corresponds to 18/14 times the price-earnings ratio for 2024/2025, respectively. We believe that short-term performance will be pressured without changing the long-term development space for electric mopeds, maintaining an outperforming industry rating, and lowering the target price by 19% to 15.00 yuan based on profit forecast adjustments, corresponding to 23/18 times the price-earnings ratio for 2024/2025, respectively. There is 33% room for upward movement compared to the current stock price.
risks
International trade policies and exchange rates have changed, raw material prices have fluctuated greatly, and industry competition has intensified.