Emma Technology has been deeply involved in the electric vehicle industry for 20 years, with production exceeding 10 million vehicles and the number of terminal stores exceeding 0.03 million. The company was founded in 1999 and first listed on the main board of the Shanghai Stock Exchange in June 2021. The company's main business is R&D, production and sales of electric two-wheelers, etc. The company issued an equity incentive plan. Assuming that the minimum performance assessment requirements are met, revenue or net profit will increase by 20%/20%/20% year-on-year in 24/25/26.

The domestic market is on the rise, and leaders are expected to benefit from the trend of industry concentration. ① Volume: Demand for electric two-wheelers in China is expected to remain relatively stable in 2024-2026, focusing on the demand for replacement brought about by strengthened supervision + “trade-in” policy incentives after the revision of the new national standard. The market is concerned about the mismatch between overstandard vehicle replacement, natural stock renewal, and new consumer penetration. Combined with the high base brought about by post-pandemic sales, the total demand in the 2025 and subsequent markets is weak. However, we think we need to focus on the efficient use of electric two-wheelers in point-to-point personalized short trips. Currently, there are no alternatives. National standard renewal round and the epidemic New demand stimulated by the stimulus is gradually entering a renewal cycle; ② Price: The industry is gradually shifting from “quantitative increase” to “qualitative increase”, and the market pattern is stabilizing. After the new national standard, manufacturers' production and compliance costs are further increased, and the intensity of price competition is expected to weaken. Combined, leading brands actively carry out product iterative upgrades and vertical extension of the industrial chain, and average price and profitability are expected to show an upward trend. Electric two-wheelers have white electric-like properties. Compared horizontally in the air conditioning industry, there is still room for improvement in leading share and profitability. Emma's market share is expected to increase further after launch by speeding up production capacity layout, continuously optimizing product structure, and strengthening channel construction. In 2023, it was fully upgraded to IPD. In-depth collaboration from the planning stage, decision-making stage, development stage and subsequent stages is conducive to the rapid development of products that meet market needs on the premise of controlling costs.

Overseas markets are booming, and Emma's forward-looking layout is expected to benefit. Driven by “oil to electricity” overseas, especially in Southeast Asia, the market demand for electric two-wheelers is rapidly expanding. The company set up a dedicated marketing team to expand the international sales network according to the regional characteristics and consumption habits of major markets. The international business revenue in 2023 was 0.226 billion yuan, up 2.21% year on year, and has great potential for long-term growth.

Profit forecast and investment suggestions: We expect the company to achieve net profit of 2.26/2.67/3.23 billion yuan respectively in 2024-2026, up 20.0%/18.3%/20.8% year-on-year, respectively. The PE corresponding to the current stock price is 10.12X/8.55.7X/7.08X, respectively. Considering the company's leading national brand and medium- to long-term domestic and overseas development potential, the first coverage was given a “Highly Recommended” investment rating.

Risk factors: risk related to regulation, increased market competition, risk of large fluctuations in raw material prices