1Q24 Results Exceed Market Expectations
The company announced 1Q24 results: revenue of 2.56 billion yuan, +54.2% year-on-year; net profit to mother of 136 million yuan, +675.3% year-on-year, net profit of non-return to mother of 142 million yuan, +16874.4% year-on-year. The increase in gross margin of each business line exceeded expectations, driving 1Q24 performance to exceed expectations.
Development trends
1Q24 Revenue growth in various business lines was positive, and electric two-wheelers and new businesses performed well. By business: 1) Self-branded retail scooter sales volume: 151,700 units, revenue +21%, revenue: 303 million yuan, YoY +8%; 2) Electric two-wheeler sales volume: 416,900 units, +126% YoY, revenue 1.90 billion yuan, +119% YoY, bicycle revenue 2,854 yuan, slight decrease YoY; 3) All-terrain vehicle sales volume +94% YoY, revenue of 215 million yuan, +90% YoY; 4) Lawnmower robot sales volume: 31.17% YoY 8 billion yuan, year-over-year + 267%. The launch of second-generation products led to a year-on-year decline in ASP. Direct revenue from ToB products was 422 million yuan, which remained relatively steady year over year.
Gross margin hit a quarterly high, and sales expenses were invested in line with new product promotion and channel expansion. The gross margin of the 1Q24 company was 29.9%, +1.99/month-on-month, and the gross margin hit a quarterly high. We think it was mainly due to the volume of popular high-margin two-wheeler models and the rise in production and sales of all-terrain vehicles and lawnmower robots.
On the cost side, 1Q24 sales/R&D/management expenses were 2.7/1.8/160 million yuan, respectively, +60.2%/32.7%/29.1%, and corresponding rates were 10.7%/7.1%/6.4%, respectively, +0.4/-1.2/-1.3ppt. We believe that the increase in sales expenses was mainly driven by new product promotion and channel expansion. As of April 18, the number of the company's electric motorcycle stores increased to 5,400. All-terrain vehicles and lawnmower robots are also actively exploring new markets and laying out new channels.
New motorcycle products and new battery systems released; independent business growth guidelines are optimistic. The company released a variety of new products in April, such as F2z110, A2z60, M95c, N70c, etc.; released the RideYPower intelligent lead-acid system. The carbon crystal battery cycle life can reach 650 times, and the warranty is upgraded to 3 years. With the intelligent lead-acid battery management system, intelligent management and interaction can be achieved. We believe that the company's motorcycle profits will continue to rise sharply in 2024. As the stock of users grows, the contribution of software fees to gross profit is also expected to gradually be reflected. At the same time, new lawnmower robots and all-terrain vehicles were launched, and sales growth was driven by new markets and channels. We believe that the company has solid technical capabilities and synergistic effects in the short travel category. Scooters and motorcycles are a cash cow business, consolidating the profit base. The all-terrain vehicle and lawnmower robot business is growing rapidly, and profits are expected to gradually be reflected from 2024.
Profit forecasting and valuation
Taking into account improvements in the company's gross margins of various businesses, we raised our 24/25 net profit by 26% and 29% to $10.0 billion and $1.37 billion. The current stock price corresponds to 23x/17x 24E/25E P/E. Maintaining an outperforming industry rating, considering that industry valuations are under pressure, but the company's profit release is accelerating. We raised our target price by 17% to 42 yuan, corresponding to 30x/22x 24E/25E P/E, which has 32% upside compared to the current stock price.
risks
Competition in the motorcycle market intensified; overseas sales of the new business fell short of expectations.