Sales increased steadily in 23 years, driving revenue and profit growth
Yadi Holdings released its annual report. In 2023, Yadi achieved revenue of 34.8 billion yuan (yoy +12%) and net profit of 2.64 billion yuan (yoy +22.2%), mainly driven by steady sales growth. Throughout the year, Yadi sold 16.52 million electric two-wheelers, an increase of 18% over the previous year. We expect net profit for 24-26 to be 30.78/40.57/4.805 billion yuan, respectively, and the EPS after dilution will be 1.04/1.37/1.62 yuan, respectively. Referring to the 24-year average PE 14.77 times the consistent expectations of comparable company Wind, the company will be given a reasonable PE of 14.77 times for 24 years, corresponding to a target price of HK$16.60, to maintain a “buy” rating.
The gross margin of product restructuring declined in '23, and unit prices are expected to rebound after bottoming out. According to the company's announcement, Yadi Classic Series sales accounted for 64%, +7pct year over year, electric bike sales volume was -1.5% year over year, and electric bicycles were +29% year over year, mainly due to changes in consumer preferences. The company adjusted its product structure to cope with market changes, and overall sales increased 18%, exceeding the growth rate of the global electric two-wheeler industry (global growth rate of 13.6%). The company's overall ASP in '23 was 2,104 yuan, -113 yuan year on year, and gross margin fell 1.15 pct year on year to 16.93%. However, the unit price of 23H2 has increased compared to the first half of '23. We believe that under price competition, the market may stabilize at an accelerated pace. In addition, the supercompany released three new models of the Guanneng 6 in '24. The unit price of the product is expected to increase, leading to an increase in gross margin.
The commercialization of sodium battery models is progressing smoothly, and market attention continues to increase. Yadi's commercial application of sodium batteries has begun, and it is in a leading position in the industry. In March '23, Yadi and its Huayu New Energy Technology Co., Ltd. released Huayu's first-generation sodium-ion battery “Extreme Sodium-1”, and launched the sodium battery product Extreme Sodium G25 in '24. This is the first case in the industry. ToC delivery has now begun. Recently, there have been frequent charging safety issues for lithium battery two-wheelers, and considering that improving the cost performance of lithium battery products is facing obstacles, the market is paying more attention to safer sodium batteries. We believe that sodium battery replacement may become a major trend in the future development of two-wheelers. Yadi has a leading layout in sodium batteries, and is expected to enjoy a first-mover advantage and continue to stabilize its leading position in two-wheelers.
The Southeast Asian layout is gradually being implemented, or it may bring in new volume from overseas
The company will accelerate its overseas expansion and is expected to bring in additional volume. In terms of production and research base, the company has planned a base in Bac Giang in Vietnam and a base in Indonesia. The company has continued to promote the localization of overseas business for 23 years. Construction of the second phase of the Vietnam factory has started, with an annual production capacity of about 2 million vehicles; the Vietnamese production base has achieved mass production of the first batch of graphene batteries; the Indonesian production line has also been put into operation, and it is expected that the Vietnamese factory will radiate exports to Southeast Asia in the future. According to Sullivan, the overseas electric two-wheeler market is expected to reach 25.6% CAGR in 23-27, which is higher than the growth rate of the Chinese market. We believe that through its gradual improvement in Southeast Asia layout, Yadi can enjoy the dividends of overseas market development and increase sales volume.
Risk warning: Sales growth of electric two-wheelers falls short of expectations, overseas progress falls short of expectations, research and development of core components such as batteries falls short of expectations, and market demand for high-end products falls short of expectations.