Pioneer of intelligent two-wheelers, actively developing new categories
The company's precise positioning and rapid expansion of the two-wheeler business is a leader in the intelligent two-wheeler segment. The adjustment of traditional main business channels has come to an end. It is expected that it will pick up in the future, and the company is actively developing a new growth curve and is expected to enter a harvest period. We expect the company's total revenue for 24-26 to be 136.62/173.44/21.323 billion yuan, and net profit to mother of 8.6/10.56/1.295 billion yuan. The company's overseas brands+channels have a first-mover advantage, and have a synergetic advantage among different business segments. It is expected to continue to develop incremental markets, superimpose multiple business growth curves and develop in parallel, giving the company a 40% valuation premium, corresponding to 35.13 times PE valuation in 2024 (comparable to the company Wind's consistent forecast average of 25.09 x), and the corresponding target price is 42.36 yuan/share, giving a “gain” rating.
Two-wheeler products are differentiated, and profitability is expected to continue to improve under the scale effect. The company's two-wheeler business is expected to continue to improve with accurate target customer group positioning, focusing on high-end products, and combining outstanding “true intelligence” attributes. Through product differentiation, two-wheeler sales grew rapidly. Sales in 22/23 grew 94%/75% year-on-year (adjusted). Furthermore, benefiting from the smooth progress of de-labeling at the lower end, combined with the trade-in policy introduced this year, the industry is expected to maintain a high level of prosperity. The company actively lays out channels and expands offline stores. According to the company's announcement, there were more than 5,000 stores by the end of March. Future sales are expected to maintain a high growth rate, or drive scale effects, continuously improve profit margins, and drive the company's overall performance growth.
Channel adjustments are nearing completion, and the own-brand business is expected to improve
The company's traditional business balance scooters and scooter performance is under pressure in the short term, but we expect the impact of channel adjustments to gradually bottom out, and the business growth rate is expected to pick up after the launch of our own brands. Considering that custom-side sales are more likely to be disrupted by macro factors, and compared to ToC's own brands, profit margins are lower. The company actively removed the Xiaomi channel after listing, leading to a decline in performance. In terms of revenue share, since 2021, the share of Xiaomi's distribution (that is, customized product) channels and ToB channels has continued to decline. 23Q4's share has dropped to 1%/20%, and we think it may have bottomed out. Considering the 24Q1 independent brand revenue of 1,888 billion yuan, +64% year over year, it is expected to reach an inflection point.
Multiple businesses develop collaboratively, or gradually enter a harvest period
The company is actively developing new categories, such as intelligent service robots and all-terrain vehicles. Relying on existing technology and brand channel accumulation, the company has already entered many overseas markets, and is expected to expand and enter a period of profit harvesting. In '23, robot revenue was +125% (adjusted), and gross margin was as high as 53%. Considering that the overseas mowing robot industry is in a period of rapid transformation, the company's products are technologically advanced, and demand is expected to continue to grow. In addition, the company aspires to be a short-range smart mobile “thing” service provider. It has cooperated with Nvidia to develop commercial robots, and the business layout is expected to continue to expand in the future. In terms of all-terrain vehicles, the company released the Super VillainsX20t Hybrid SSV product in '23 and expanded the North American market. The product matrix was further improved, and sales increased 41% in '23. We believe sales are expected to maintain high growth in the future.
Risk warning: Competition in the industry worsens; raw material prices have risen above expectations; market development falls short of expectations.