Key points of investment:

The company released its 2024 quarterly report, and the performance exceeded expectations. The company's 24Q1 revenue was 2,562 million yuan, +54.18% year on year, net profit to mother was 136 million yuan, year on year +119 million yuan (year on year +675.34%), after deducting net profit of non-return to mother was 142 million yuan, or +141 million yuan year on year.

Electric two-wheelers: Continued high revenue growth and increased profit contribution. 24Q1 revenue was 1,190 billion yuan, a year-on-year increase of three digits, with sales of 416,900 units, contributing the main increase. Looking ahead, the trend of high growth will continue in 2024, mainly due to:

1) The price band has sunk. Previously, the card slot was 5,000 yuan+ leading brands, and products were further launched at 3,000 yuan+ in 2024; 2) Stores are still expanding, and the expansion will continue in 2024; the revised version of the new national standard was introduced in 2024 and the trade-in policy supports industry growth. On the profit side, with design cost reduction and scale effect, gross margin continued to increase, and profit contribution continued to increase.

Electric scooters & balance scooters: The TOC side sees an inflection point, and the TOB side contributes incrementally. 1) TOC side: The retail revenue of 24Q1 own-brand scooters was 303 million yuan, a year-on-year increase in single digits. As the leading indicator, terminal activations are still maintaining double-digit growth. The revenue growth rate is expected to rise steadily in 2024. 2) TOB side: 24Q1 TOB side's direct operating revenue was 422 million yuan, and positive growth resumed, at least not hampering the annual results.

New business in the blue ocean: leading intelligent technology, rapid expansion of new business. 1) Robots: 24Q1 revenue was 180 million yuan, an increase of 2.67 times year-on-year, with sales volume of 33,300 units, exceeding expectations. The cost performance ratio of second-generation lawnmower products is outstanding. The market has expanded from Europe to North America, Australia and New Zealand, etc., and channels have expanded from garden tools to offline retail, giving full play to the effects of channel reuse. It is expected to maintain a high growth trend in 2024. 2) All-terrain vehicles: 24Q1 revenue of 215 million yuan and sales volume of 54.87 million units, all of which maintained high double-digit growth. The US market expanded rapidly in 2024, and new 24H2 hybrid all-terrain vehicles were launched. It is expected to maintain a sharp increase in volume and price in 2024; on the profit side, break-even balance was achieved in 2023, and 2024 will enter a profit harvest period.

Product structure changes & scale effects released, gross margin optimization, cost ratio reduction. The 24Q1 company's gross profit margin was 30.5%, compared to +2.3 pct. The main electric two-wheelers and all-terrain vehicles started with sales volume, the scale effect was released, and the gross margin was optimized. The 24Q1 sales/management/ R&D/ finance cost rates were 10.7%/7.1%/6.4%/-1.0%, respectively, compared with +0.4/-1.2/-1.2pct compared to +0.4/-1.2/-2.2pct, mainly due to revenue starting volume and diluted expense ratio. Looking ahead to the future, electric two-wheelers will continue to be released, the Blue Ocean business will gradually enter a period of profit harvesting, and the net interest rate is expected to be optimized!

The pioneer of intelligent short transportation, adhering to the engineer culture, continues to promote technological innovation and product iteration. It has strong commercial monetization capabilities and fast pace, reflecting the company's comprehensive capabilities in consumer demand, market trends, product design and development, supply chain, channel docking, and marketing promotion. We maintain the 2024-2026 net profit forecast of 766/ 10.83/1,468 million yuan, respectively. The current market value corresponds to PE of 40X/29X/21X. The current market capitalization corresponds to PE of 40X/29X/21X. Nvidia's core partners provide valuation flexibility, and still maintain an “increase” rating!

Risk warning: Overseas consumption has declined, and competition for two-wheelers has intensified.