1Q24 Results Exceed Market Expectations
The company announced 1Q24 results: 1Q24 revenue of 1.35 billion yuan, +0.9% year on month, +34.6% month on month; net profit to mother of 140 million yuan, +89.1% year on year, +158.8% month on month; net profit after deducting non-return to mother of 115 million yuan, +57.3% year on year. High export growth led to steady gross margins. Combined with a year-on-year decline in composite rates and an increase in other earnings, profits increased, and performance exceeded market expectations.
Development trends
The company's independent foreign trade motorcycle exports have grown significantly, and domestic sales are under pressure. According to the Motorcycle Association, a total of 3.19 million 1Q24 two-wheeled fuel-fueled motorcycles were sold, +16% compared to the same period last year. Domestic demand for 1Q24 motorcycles was weak, with exports of 2.294,500 units, up 36.17% year on year. Among them, high-displacement motorcycles (with a displacement greater than 250cc) sold 115,000 units, +6.3% year over year, domestic sales -13.8%, and exports +41.9% year on year; sales of small-displacement (less than or equal to 250cc) motorcycles sold 3.08,000 units, +16.5% year on year. The 1Q24 company achieved sales of 100,000 motorcycles, +8.7% year-on-year, with a steady overall market share; 26,000 high-displacement motorcycles sold, -11.8% YoY, 13,000 units, +142%; small-displacement motorcycles sold 74,000 units, +18.2% YoY; and exported 49,000 vehicles, +92% YoY.
The sales structure changed, but gross margin was steady year over year, reflecting the effectiveness of fee control. In 1Q24, bicycle revenue was 13,400 yuan, -7.6% year-on-year. We judge that this was mainly due to a slowdown in sales growth of high-displacement motorcycles. 1Q24 gross profit margin was 20.0%, +0.67ppt year over year, and gross margin was steady year over year. On the cost side, 1Q24 sales/management/R&D expenses were 4211/5804/70.2 million yuan respectively, which all decreased year-on-year. The total rate for the three categories was 12.7%, or -1.04ppt. In addition, financial expenses - 29.47 million yuan, and other income increased profits by 51.1 million yuan. Financial expenses were mainly interest income, and other income was mainly government subsidies.
Stabilize domestic sales and accelerate the expansion of international markets. On the product side, in 2024, the company successively released new products such as the 550S Contest, the Chase 550, and the Hong150 Smart Edition, and released the ParaPal Surge Intelligent Architecture. According to the company's announcement, the company continues to promote the construction of independent foreign trade channels. In 2023, it opened up more than 20 new markets, and the revenue from independent foreign trade (not exported through a third party) increased 200% year-on-year, accounting for 29% of revenue in 2023. Looking ahead to 2024, the company plans to focus on stabilizing domestic high-displacement sales, exploring differentiated small-displacement models, comprehensively expanding the international fuel motorcycle market, and gradually laying out electric motorcycles to go overseas. We are optimistic that the expansion of independent foreign trade channels will positively drive the company's exports.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 15x/13x 24E/25E P/E. Maintaining an outperforming industry rating, the new logic of industry export growth led to an increase in valuation. We raised our target price by 19% to 21 yuan, corresponding to 20x/17x 24E/25E P/E, which has 33.8% upside compared to the current stock price.
risks
Domestic market competition intensified; exports fell short of expectations.