Zhongjin reported that since 2024, the price war of electric two-wheeled vehicles has slowed down, and industry competition has returned to a benign state; the recent industry policies have been frequent, focusing on stabilizing demand and regulating the industry ecology. With stricter industry management mechanisms, higher standards of product production, and longer chains of responsibility, the market structure is expected to further concentrate on the head. Looking forward, we expect the further implementation of the "new national standard" to propel supply-side reform, improve the market structure, and drive leading enterprises to benefit first. Recommended head companies include Aima Technology (603529.SH), Jiuhao Corporation (689009.SH), Yadea Holdings (01585), Niu Technologies(NIU.US).

CICC's main points are as follows:

In 2019, the new national standard drove new demand and a new structure, digging into the "grassroots industry".

In 2019, the new national standard for electric bicycles was introduced, redefining product and technical standards, with far-reaching implications for industry sales and structure. On the one hand, non-standard vehicles have brought incremental volume, and the industry's annual sales have gradually increased to more than 50 million vehicles. On the other hand, with the improvement of production and manufacturing, sales management thresholds, lithium battery penetration rate improvement and intelligent trends, the advantages of leading companies in procurement scale effects, product power, and brand power are increasingly highlighted, and the concentration of the industry is increasing. The two-wheeler industry sectoral market appeared in 2020 to early 2021, and subsequent rounds of small cycles, with individual stock performance accounting for the main driving force.

Stable demand, product upgrades, and the strong winning.

Zhongjin pointed out that after experiencing several years of rapid growth, as of the end of 2023, the domestic inventory of electric bicycles is about 350 million, supporting the central demand for replacement, and a conservative estimate of more than 50 million vehicles. In addition, new purchases, 2B demand, etc., it is expected that the domestic sales volume of electric two-wheeled vehicles still has a stable growth momentum. From the perspective of price, Jiuhe and Niu can be used as the "anchor" of the unit price ceiling, and there is still room for the price increase of the popular brand. In terms of the structure, the core competitive factors of electric bicycle companies lie in channels, products, and brands. The advantages of head enterprises are expected to continue to expand, driving steady increase in market share, and the certainty of duopoly structure is stronger.

New policies bring marginal positive effects, and attention is paid to the intensity of supply-side reform in the long-term industry leading companies with high dividend potentials. Maintain the company's profit forecast unchanged and maintain an outperform rating. The current stock prices of Aima, Jiuhao, Yadea, and Niu correspond to 12.3x/26.7x/10.2x/8.8x P/E in 2024. Considering that the sales volume of Jiuhe's two-wheeled vehicles is strong, the target price of Jiuhao Corporation increases by 17% to 49 yuan, and the target price corresponds to 17x/35x/16x/10x P/E in 2024 The corresponding upward space is 36%/30%/55%/12% compared to the current stock price.

In recent years, electric bicycle safety accidents have occurred frequently, and government departments have attached great importance to them. Multiple industry policies are being intensively introduced, focusing on optimizing the supply side reform. The "standard conditions" and "management measures" published earlier this year as guidance documents have clearly proposed to raise the industry access threshold, establish a list of regular companies, and we judge that the revision of the "new new national standard" may affect production, products, business models, and are expected to be executed more strictly than the previous version.

Profit forecast and valuation

Bullish on the marginal catalytic effect of policies and the high dividend potential of long-term industry leading companies. Maintain the company's profit forecast unchanged and maintain an outperform rating. Aima, Jiuhao, Yadea, and Niu are currently priced at 12.3x/26.7x/10.2x/8.8x P/E in 2024. Considering that the sales volume of Jiuhe's two-wheeled vehicles is strong, the target price of Jiuhao Corporation increases by 17% to 49 yuan, and the target price corresponds to 17x/35x/16x/10x P/E in 2024 The corresponding upward space is 36%/30%/55%/12% compared to the current stock price.

Risk factors: The pace and intensity of policy landing are lower than expected; industry demand is lower than expected.