occurrences

On June 24, 2024, the company released the 2024 semi-annual results forecast and investment points

Net profit due to mother in 2024 is expected to increase by 23-38% year-on-year

According to the company's performance forecast, 2024H1 is expected to achieve net profit of 165 million to 185 million yuan, an increase of 23-38% over the previous year; the performance forecast center is 175 million yuan, an increase of 30% over the previous year. H1 is expected to achieve net profit of 162 million to 181 million yuan after deduction, an increase of 26-40% over the previous year. We expect a high increase in the company's H1 profit mainly due to the start of new products such as golf carts and electric bicycles. Traditional categories of products such as electric scooters are growing steadily on Amazon and Walmart channels. The company is a leading recreational vehicle in North America. It has the dual advantage of “North American Brand+Made in China”, and is optimistic that the new and old categories will continue to resonate in 2024.

Accelerating the construction of overseas production bases is expected to further improve product competitiveness. On June 20, a coalition of American personal vehicle manufacturers such as Club Car applied for a “double reverse” investigation on specific low-speed manned vehicles in China. We believe that the application for this double anti-investigation reflects the remarkable global competitiveness of domestic electric low-speed vehicle companies represented by the company. The company currently has two factories in Vietnam and the US, and is expected to take the opportunity to accelerate the expansion of overseas production capacity and gradually increase the proportion of manufacturing and supply chains in North America and the world. The company has strong North American resource endowments, the advantages of famous North American brands such as Gotrax and Denago, and supply chain and channel advantages. We judge that the subsequent industry will be interpreted as being strong and strong. As an overseas enterprise with the ability to transfer North American brands, channels and supply chains, the company's market share and profitability are expected to further increase.

New products such as leading recreational vehicles in North America and electric low-speed vehicles are being sold, and Second Curve Company is launching new products such as electric golf carts, electric bicycles, and high-displacement all-terrain vehicles.

Electric golf carts: The company's own DENAGO brand products were well received by many participants at the world's top golf PGA exhibition. At present, it has expanded to 120 high-end dealers, with plans to expand to 200 by the end of 2024; at the same time, it has settled in more than 300 stores in TSC supermarkets, and plans to expand to more than 1,000 stores in the future.

High-displacement all-terrain vehicle: In 2024, the company's high-displacement all-terrain vehicle, the 300ATV, has obtained EU T3B certification, and in-hand orders have been produced and shipped, and will mainly enter the European market; the 550 UTV has obtained EPA certification and will enter the US market; the small-displacement all-terrain vehicle is scheduled to enter the North American high-end dealer network in 2024.

Electric bicycles: The dual-brand multi-channel strategy has deployed more than 300 high-end dealers, and has entered large supermarkets such as Walmart, Target, Bestbuy, Academy, and Kohl's. The product ranked high in the e-bike category on Amazon in North America.

Profit forecasting and valuation

We expect the company's revenue in 2024-2026 to be 32.6, 49.0, and 6.86 billion yuan, up 52%, 50%, and 40% year on year; net profit to mother will be 4.0, 5.3, and 73 million yuan, up 43%, 31%, and 38% year on year, corresponding PE 16, 12, and 9 times. I am optimistic that the company will accelerate performance growth and maintain a “buy” rating due to new product sales and channel advantages.

Risk warning: 1) New product release falls short of expectations; 2) Sales channel expansion falls short of expectations