Introduction to this report:
The company's first-quarter results were in line with expectations, and the net profit of ASP and bicycles improved year-on-year. It is expected that with the gradual restoration of demand and the focus on promoting new high-end products, profitability is expected to continue to increase.
Key points of investment:
Conclusion: The company's performance achieved steady growth, maintaining the 2024-2026 EPS forecast of 2.67/3.32/3.99 yuan, maintaining the target price of 39.50 yuan, and maintaining the “increase” rating.
The performance was in line with expectations, and bicycle profits increased significantly. The company achieved revenue of 4.954 billion yuan/ -8.97% in 2024Q1, net profit of 483 million yuan/ +1.16%, gross profit margin of 18.04% /+2.22pct, net profit margin 9.87% /+1.02pct. The lower increase in net interest rate was mainly due to the 2024Q1 sales/management/R&D expense ratio of +0.96/+0.53/+0.34pct, respectively. Bike prices and profits improved year on year. 2024Q1's ASP increased 2.4% year on year, and bike net profit increased 12.6% year on year.
Q1 Revenue pressure is mainly affected by external factors and is expected to gradually improve in the future. The heavy snowfall at the beginning of the year and the national inspection had a certain impact on store operations, so Q1 revenue declined year on year, but we think the company's revenue is expected to improve: 1) The pressure on Q1 is due to limited supply rather than pessimistic demand. With the introduction of trade-in subsidies, demand may be released quickly. 2) Large-scale national inspections reflect stricter regulations, which is more conducive to focusing the pattern on the head. The company is expected to gain share based on brand competitiveness.
The product structure is optimized, and profitability is expected to continue to improve. The company successfully promoted new products such as Luna and Yangwang, and the Air Force Snapdragon moved towards a higher price range. It is expected that along with SKU streamlining, it will focus on the promotion of high-end models, and an increase in ASP can be expected. The company plans to invest 3 billion yuan to expand production in Fengxian County, Xuzhou, Jiangsu. Fengxian is a major domestic electric tricycle industry base. It has a complete closed loop, and is expected to rapidly collaborate to contribute to growth. The company sold 430,000 electric tricycles in 2023, with a gross profit margin of 21.6%. Compared with the company's overall gross profit margin of 16.5% in 2023, it is expected that it will take advantage of scale after expanding production capacity. There is still room for improvement in gross margin, which is expected to contribute to increased performance growth.
Risk warning: Core technology or design is imitated by peers; industry price competition squeezes profits.