Key points of investment

Key points of the announcement: 2024Q2's total revenue was 4.468 billion yuan, +23.2%/+46.0% year-on-month; realized net profit of 0.431 billion yuan, +26.4%/+55.4% year-on-month; realized net profit without return to mother was 0.415 billion yuan, +28.0%/+52.5% year-on-month, respectively.

Chunfeng Power's Q2 performance is in line with expectations: 1) Revenue side: ① Four-wheel business: The company continues to optimize its omni-channel inventory. 2024H1 has sold 0.0814 million all-terrain vehicles, +2.6%/+21.1%, respectively. The revenue from all-terrain vehicles was 0.0434 million yuan, or -4.10%/-0.01%, respectively. ② Motorcycle business: The company continued to cultivate the consumer segment, and launched new products such as 250CLC, 450CLC single-seat, and 450MT in the first half of the year, further enriching and improving the product system. The 2024H1 achieved a total sales volume of 0.1539 million two-wheelers, +55.9%/+56.6% year-on-month, and two-wheeler bicycle revenue of 0.0211 million yuan, respectively. Among them, 2024H1 exported 0.0858 million vehicles, +68.9% over the same period last year. The overseas dealer network has accumulated more than 1,500 companies, and the overseas business is steadily expanding. ③ Electric two wheels: 2024H1 ZEEHO successfully launched new AE2 and AE4 series products, upgraded AE8 S+ and CITY products, covering a full range of product lines from high-end electric motorcycles to high-end electric motors. Currently, the Extreme Nuclear brand focuses on core markets such as Jiangsu and Guangdong in the domestic market, while actively expanding international channels. The products have covered more than 30 countries and regions including Europe, Asia and South America. The 2024H1 has sold 0.0204 million electric vehicles, achieving sales revenue of 0.116 billion yuan. 2) Cost side: International shipping rates have risen a lot since May. The China Freight Forwarder Freight Index (China-North America) Q2 increased 37.8% month-on-month, and transportation costs increased. In addition, due to product restructuring, the company's Q2 gross sales margin was 30.82%, -0.52/-1.70pct, respectively. 3) Expense side: The cost rate for the Q2 period was 18.18%, +0.5/-1.5pct compared to the previous month, respectively. The month-on-month improvement was significant. The company's export sales account is relatively high, and its products are mainly settled in US dollars. Since Q2, the overall exchange rate of the US dollar against the RMB has not fluctuated much, and the financial expenses rate has remained stable from month to month. Furthermore, due to the deduction of the company's R&D expenses and the increase in US promotional expenses, the company's Q2 income tax rate was lower, increasing the company's profits. 4) In the end, the company achieved net profit of 0.431 billion in Q2, and achieved significant year-on-month growth.

Profit forecast and investment rating: Considering the impact of the market environment, we raised the company's net profit forecast for 2024/2025/2026 to 1.19/1.54/1.93 billion yuan (originally 1.11/1.53/1.87 billion yuan), which corresponds to PE 16/13/10 times. In view of the fact that the company's motorcycle business relied on excellent product strength and brand strength to successfully grasp the new trend of domestic consumption upgrading, with all-terrain vehicle experience and channels, the global market share of R&D+product+channel three-wheel drive all-terrain vehicles has steadily increased, and channel inventory optimization has been completed. We still maintain a “buy” rating.

Risk warning: risk of instability in the global trade environment; risk of new models falling short of expectations; risk of fluctuations in freight rates/exchange rates, etc.