Matters:
The company released its 2024 quarterly report, achieving operating income of 2.56 billion yuan, +54.2% year-on-year; net profit to mother of 140 million yuan, +675.3% year-on-year.
Commentary:
The 24Q1 electric two-wheel increase contributed significantly, and ToB's direct management channel was steadily repaired. 24Q1 achieved revenue of 2.56 billion yuan, +54.2% year-on-year. Among them, the own-brand channel continued its outstanding performance in 23Q4, while revenue from ToB direct management and customized product distribution channels stabilized. Looking at the 24Q1 single-quarter split channel structure: 1) The 2C independent brand channel was mainly driven by high growth in the electric two-wheel business; 24Q1 electric two-wheeler revenue was 1.19 billion yuan, +119% year-on-year, and electric two-wheelers grew to contribute rapidly to the company's short-term core incremental business; self-branded retail scooters Q1 generated 300 million yuan, +8% year-on-year; all-terrain vehicles and lawnmower robots achieved revenue of 220 million yuan and 180 million yuan respectively, and the long-term growth curve gradually materialized. 2) Distribution channels for direct ToB and customized products have been steadily restored; 24Q1 ToB direct channel revenue growth rate was 7%, and the revenue growth rate in a single quarter was corrected for the first time in '23. We expect the downstream shared skateboard business to recover steadily.
Gross margin increased year-on-year in 24Q1, and the cost ratio narrowed year-on-year during the period, and profit increased sharply. The 24Q1 company achieved net profit of 140 million yuan, a sharp increase of 675.3% over the previous year, achieving a gross profit margin of 30.5%, +2.3 pct year over year, and a year-on-year increase in gross margin in a single quarter. We expect the gross margin of products such as electric two-wheelers and all-terrain vehicles to continue to increase. The 24Q1 sales, management, R&D, and finance expense ratios were +0.4, -1.1, -1.2, and -2.2 pct, respectively. The total cost rate for the period decreased by 4.2 pct year on year. We expect the investment in business expenses mainly for all-terrain vehicles and lawnmower robots to narrow. The net interest rate for the 24Q1 quarter was 5.3%, +4.2pct year on year. We expect the company's profitability to continue to improve in the future.
The growth of electric two-wheeled vehicles is impressive, and the long-term growth curve can be expected to be realized. During the reporting period, the company's electric two-wheelers continued to expand their market share in the middle and high-end markets along with channel expansion and new product launches. It is expected that they will continue to perform well in the next quarter. Electric two-wheelers have now grown into the company's core incremental contribution business. The long-term growth curve for all-terrain vehicles, lawnmower robots, etc. Starting in 24Q1, we expect that expenses may have narrowed significantly. In the future, they will also begin to contribute to revenue and profit growth, and the company's long-term growth curve can be expected to be fulfilled.
Investment suggestions: Product competitive advantages shaped by barriers to production and research, and high-end brand value shaped by product demand establish the company's core competitive advantage. The two-round business has entered a period of performance realization, and expenses for long-term growth businesses such as all-terrain vehicles and lawnmower robots are expected to begin to narrow. We adjusted the company's 2024-2026 net profit forecast to be 7.8/10/1.22 billion yuan (original value 7.2/88/1.07 billion yuan), and the corresponding PE for 24-26 was 33/26/22 times. The company's cash flow is stable. Using the DCF method for valuation, the target price for each CDR is adjusted to 41 yuan, which corresponds to 10 CDRs per share. The company has sufficient long-term growth momentum and maintains a “recommended” rating.
Risk warning: New product launches and market responses fall short of expectations, overseas policies fluctuate, and raw material prices fluctuate.