Incidents:

Chunfeng Power released its 2024 semi-annual report on August 15, 2024: From January to June 2024, the company achieved operating income of 7.529 billion yuan, an increase of 15.73% over the previous year; net profit to mother was 0.709 billion yuan, an increase of 28.49% over the previous year. Among them, all-terrain vehicles sold 0.0814 million units, up 2.6% year on year; motorcycle sales were 0.1539 million units, up 55.9% year on year.

Investment highlights:

The motorcycle business performed well. >250CC sales reached the top of the domestic H1 in 2024. The company achieved motorcycle revenue of 3.248 billion yuan, an increase of 41.95% over the previous year, and the overall performance was impressive.

In the domestic market, the company achieved domestic sales of 0.068 million units, with revenue of 1.446 billion yuan, an increase of 38.25% over the previous year. According to the company's 2024H1 financial report, >250CC sales reached the top of the industry; it has accumulated more than 600 channels, while actively arranging new media promotion. In overseas markets, the company achieved export sales of 0.0858 million units and revenue of 1.802 billion yuan, an increase of 45.07% over the previous year; with a cumulative network of more than 1,500 dealers, the overseas market grew steadily.

The product spectrum continues to expand, and companies with strong R&D capabilities are vigorously developing product innovations. Fuel two-wheelers launch new products such as 250CLC and 450CLC single-seater, and update and iterate 24 models; various models of the “450CC” superplatform sell well in domestic and foreign markets, and their influence is comparable to that of leading brands. The four-wheeler completed R&D and innovation of products such as the CFORCE 1000 TOURING, and realized the iterative upgrade of high-power, high-displacement technology. Five new products have been launched in the field of electric vehicles, which are competitive in the fields of high-end electric motorcycles and high-end electromobility.

Brand power has gradually accumulated, leading the world's top racing companies to implement accurate brand communication, and CFMOTO DAY brand day events have been successfully held in Romania and other places. In the first half of 2024, the company excelled in the world's top motorcycle race MotoGP, was the only Chinese manufacturer in the Moto3 category, and won the first Chinese manufacturer championship trophy in race history. The company achieved a record of nine races and six crowns in events such as Qatar, France, and the US, leading the season standings.

Equity incentives show confidence in development. The company announced an equity incentive plan on August 6, 2024. It plans to grant 1,310 people, including core management and core technical (business) personnel, 3.3725 million stock options and reserve 0.1775 million shares; a total of 3.55 million stock options, accounting for 2.34% of the total share capital. The corresponding revenue assessment targets for 2024-2026 were 14/16.5/20 billion yuan, respectively, +15.6%/17.9%/21.2% year-on-year.

The profit forecasting and investment rating company's motorcycle business has performed well. The product spectrum continues to expand, and brand potential is gradually accumulating. The company's 2024-2026E revenue is estimated to be 14.485/17.169/20.458 billion yuan, respectively, +19.61%/+18.53%/+19.16%; net profit to mother was 1.365/1.706/2.092 billion yuan, respectively, +35.53%/+24.91%/+22.63%; EPS was 9.02/11.26/13.81 yuan, respectively, corresponding PE was 14.97/11.98/ 9.77X; It is expected that the company's motorcycle business will continue to grow rapidly, and the all-terrain vehicle business will grow steadily, maintaining a “buy” rating.

Risks indicate that downstream demand falls short of expectations, increased risk of industry competition, risk of overseas recession, product promotion falling short of expectations, risk of rising sea freight rates, risk of exchange rate fluctuations, etc. The profit forecasting and investment rating company's motorcycle business has performed well. The product spectrum continues to expand, and brand potential is gradually accumulating. The company's 2024-2026E revenue is estimated to be 14.485/17.169/20.458 billion yuan, respectively, +19.61%/+18.53%/+19.16%; net profit to mother was 1.365/1.706/2.092 billion yuan, respectively, +35.53%/+24.91%/+22.63%; EPS was 9.02/11.26/13.81 yuan, respectively, corresponding PE was 14.97/11.98/ 9.77X; It is expected that the company's motorcycle business will continue to grow rapidly, and the all-terrain vehicle business will grow steadily, maintaining a “buy” rating.

Risks indicate that downstream demand falls short of expectations, increased risk of industry competition, risk of overseas recession, product promotion falling short of expectations, risk of rising sea freight rates, risk of exchange rate fluctuations, etc.