Electric two-wheeler leaders are expected to grow steadily
Emma Technology released its quarterly report. 24Q1 achieved revenue of 4.954 billion yuan, -8.97%, and +38.35%; net profit to mother of 483 million yuan, +1.16%/49.37% year-on-month, net profit of 450 million yuan after deducting non-return to mother, or -3.9%/+41.5% year-on-month. We expect the company's net profit to be 23.13, 27.48, and 3.326 billion yuan, corresponding to EPS of 2.68, 3.19, and 3.86 yuan, respectively. Referring to comparable company Wind's consistent 24-year average PE 15.83 times, considering the industry's return to product power competition, Emma is in the leading position in the industry and is expected to grow steadily in 24 years, giving the company a reasonable PE 15.83 times for 24 years, corresponding to a target price of 42.42 yuan (previous value was 39.15 yuan) to maintain “buy” “Enter” rating.
Under the high base of 23Q1, 24Q1 profitability is still improving
24Q1 revenue was 4.954 billion yuan, -8.97%/+38.35% YoY; gross profit of 893 million yuan, +3.80%/25.05% YoY; gross profit margin 18.04%, +2.22pct/-1.92pct YoY. In terms of bicycles, we estimate that 24Q1 sales volume was about 2.5 million units, or due to extreme weather in February and large-scale national inspection and rectification of terminal stores in March; the average bicycle price was about 2,000 yuan, which was the same; the net bicycle profit was about 190 yuan, up about 10 yuan; the company's 23-year performance was high, and 23Q1 performance increased sharply year on year. On this basis, profitability in the first quarter of this year increased significantly, or due to a reduction in raw material prices and product structure improvements.
The industry is expected to benefit from the “trade-in” policy, which catalyzes replacement demand. Recently, 14 departments jointly issued a document to study and promote the trade-in of electric bicycles by referring to practices related to the trade-in of automobiles and home appliances. We believe that if the “trade-in” subsidy is implemented, it is likely to catalyze an increase in demand for natural replacement of electric two-wheelers. Considering that according to data from the Ministry of Industry and Information Technology, the number of electric bicycles owned in China has reached 350 million, and there is plenty of room for replacement demand. The policy may significantly boost sales. In addition, the National Standing Committee has deployed and carried out a full chain of rectification of hidden safety hazards of electric bicycles, which may further accelerate the clean-up of the industry and increase in concentration under strong supervision. Furthermore, from a comprehensive perspective, we believe that the subsidy policy may be skewed towards qualified and secure enterprises, which will benefit the continued increase in the share of industry leaders such as Emma Technology.
The company has resumed confidence in growth in 24 years, and an inflection point in performance is expected
The company launched a new round of equity incentives at the beginning of the year, with the goal of 24-26 revenue or net profit CAGR of 20%. Considering that Q2 began to be affected by the industry price war last year and the favorable policy + price war basically ended this year, we believe that this goal can be achieved based on continuous optimization of the company's product structure and promotion strategy: 1) Q1 high-end new products (Look Up, Luna) will be launched and sold well. In the future, more than 3,500 products will increase; 2) Strengthen sales of high-end male models; 3) The product strategy uses “low-price products to target the market and add selection to the high-end segment.” Match”. The company's performance is expected to show an upward inflection point in 24 years, supported by the company's management's growth confidence, a low base starting in Q2, and a new mid-to-high-end style of play.
Risk warning: Competition in the industry worsens; raw material prices have risen above expectations; market development falls short of expectations.