The company released the 2023 Annual Report & 2024 Quarterly Report: 1) 2023: Annual revenue of 2,006 billion yuan (YoY -15.6%), net profit before return to mother was 106 million yuan (-6.6% YoY), net profit after deducting non-return to parent was 0.91 billion yuan (-40.8% YoY); Single Q4 achieved revenue of 453 million yuan (-10.4% YoY), net profit of 0.11 billion yuan (-22.7% YoY). 2) 2024Q1: Achieved revenue of 529 million yuan (YoY +8.7%), net profit attributable to mother of 221 million yuan (YoY +55.1%), net profit not attributable to mother of $0.19 billion (YoY +77.6%). Along with overseas inventory optimization, we expect the company's orders to gradually pick up since the end of '23, with 24Q1 revenue recovering year over year/month; Q2 is expected to continue improving during the peak order season.
Bicycles are getting warm, and electric bicycles are under pressure for a short time. Revenue for adult cars/children's cars/scooters/accessories/other products in 2023 was $3.32/3.84/3.27/6.24/317 million yuan respectively (-41.6%/-6.9%/-29.4%/-22.6%/+177.0% year-on-year, respectively). Adult cars/stroller H2 bottomed out, -4.8%/+22.0% year over year; e-bike H2 was -75.8% year over year, but during the peak sales season in Q1-Q2 Europe, the inventory impact weakened, and demand for electric bikes is expected to improve in 24 years. At present, 400,000 electric scooters have been successfully put into operation at the company's Deqing plant. In the future, Tianjin Jinjiu still has production capacity of 1 million vehicles, and the company is actively extending the industrial chain layout and increasing the added value of products (we expect the average price to rise steadily over 23 years).
OEM is under pressure, cross-border growth is high, and trade is stable. In 2023, OBM/ODM/trade model revenue was 431/7.99/769 million yuan (+3.8%/-34.7%/+4.9% year-on-year, respectively), and gross margin was 23.5%/15.3%/10.0% (+1.9/+1.7/+1.0pct, respectively). The structure of the OBM model has been optimized, and cross-border e-commerce has maintained high growth; revenue from the ODM model has declined, but with iterative new products, the average price is expected to increase.
Profitability is recovering steadily, and exchange earnings affect profit margins. The gross margin for 2023 was 15.0% (+1.5pct year over year), and the net profit margin to mother was 5.3% (-1.8pct year over year); the gross margin for single Q4 was 15.7% (+1.6pct year on year), and the net profit margin for 2024Q1 was 12.8% (+0.1pct year on year), and the net profit margin to mother was 4.1% (+1.2pct year on year). The share of low-margin channels has increased (trade model), but costs have declined and profitability has been restored. In terms of cost performance, the cost rate during 2024Q1 was 7.0% (-2.3 pct year on year), with sales, management, R&D, and finance expenses ratios of 5.9%/1.4%/1.2%/-1.4% (-0.01/-0.05/+0.06/-2.3 pct year on year), respectively.
Cash flow is under pressure and operating capacity is stable. Net operating cash flow in 2023 was $147 million (year-on-year -$158 million), Q4 was $79 million (year-on-year +$0.23 billion), and 2024Q1 was -0.92 billion yuan (year-on-year +404 million yuan).
In terms of operating capacity, as of 2024Q1, the number of days receivable, payable, and inventory turnover was 58.12, 45.38, and 25.46 days, respectively (-6.27, +5.66, and -9.53 days year-on-year).
Profit forecast: Net profit for 2024-2026 is expected to be 150, 2.0, and 240 million yuan, corresponding to PE of 17.5X, 13.5X, and 10.8X, maintaining the “incremental” rating. The downturn in profit forecasts is mainly due to the company's electric scooter development falling short of expectations. Also, the share of low-margin products increased beyond expectations.
Risk warning: The recovery in demand fell short of expectations, the increase in the penetration rate of electric vehicles fell short of expectations, and raw materials and exchange rates fluctuated beyond expectations.