Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 121.10 billion yuan and 3,061 billion yuan, up 6.44% and 6.31% year on year; realized net profit to mother of 10.08 billion yuan and 278 million yuan, up 43.65% and 31.97% year on year, and realized net profit of 9.71 million yuan and 272 million yuan after deducting net income from mother, up 21.78% and 38.70% year on year, with basic earnings per share of 6.70 and 1.84 yuan.
The Q1 revenue growth rate recovered, and profit growth was relatively rapid: 4Q23/1Q24 achieved operating income of 27.24/3.61 billion yuan, a year-on-year change of -0.90%/+6.31%, and realized net profit to mother of 2.06/278 million yuan, an increase of 57.00%/31.97% year on year. 1Q24 revenue growth rate corrected year on year, and profit continued to grow rapidly.
The gross margin decreased year on month, the sales expense ratio fell sharply, and the net margin improved: 1Q24 company's gross profit margin was 32.52%, down 1.64 pct year on year, and 3.01 pct month on month. In terms of the cost ratio for the period, the sales expense ratio decreased by 4.33 pct to 10.40% year on year. We think it was mainly due to high promotional expenses in the US market in 23, which may have decreased in 24 years, management expenses increased 0.44pct to 5.24% year over year, R&D expenses increased 0.23pct to 6.16% year over year, and financial expenses ratio decreased 2.05 pct to -2.15% year on year. Under the combined influence, the company's net interest rate increased 1.97 pct to 9.51% year on year.
The channel layout is constantly being improved, and production capacity construction is advancing: the company continues to expand its stores in overseas markets, has had more than 4,000 retail outlets in 23 years, covering more than 100 countries and regions, and has set up subsidiaries in the US to further expand the market. It has over 800 distribution outlets in China, and municipalities directly under the Central Government and provincial capitals have achieved 100% full coverage, and implemented the “CFMOTO”, “KTMR2R” and “ZEEHO” channel direct management models. Among them, there are more than 500 “CFMOTO” outlets, more than 35 “KTMR2R” outlets, and more than 190 “ZEEHO” outlets. We expect the company's market share to continue to increase as the channel layout continues to improve.
In 23, the company actively promoted the global production capacity layout, and established production bases in China, Thailand, and Mexico. The first phase of the Mexican localization project was completed and put into operation to quickly respond to customer needs with a “territorial” approach. In addition, the company completed the construction and commissioning of the new energy brand “Extreme Core” production line, which has the capacity to produce 100,000 two-wheeled electric vehicles per year. The construction of the Chongqing base is also progressing, with the goal of building an intelligent manufacturing base integrating informatization, flexibility, and automation.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 12.24 billion yuan and 1,523 billion yuan respectively, with year-on-year growth rates of 21.5% and 24.4%. The closing price on May 15 corresponds to 20.7 and 16.6 times PE in 24-25 years. Refer to comparable companies that give the company a 24-year PE valuation of 22-24 times, corresponding to a reasonable value range of 179.08 to 195.36 yuan, giving a “superior to the market” rating.
Risk warning: The cost of raw materials fluctuates greatly, and downstream demand is weak.