The company announced 2024H1 results:

24Q2: Operating income of 5.64 billion (+18.1%), net profit due to mother 0.47 billion (+12.1%); net profit without return to mother 0.44 billion (+21.4%).

24H1: operating income 10.59 billion (+3.7%), net profit due to mother 0.95 billion (+6.2%); net profit after deducting non-return to mother 0.89 billion (+7.2%).

In addition, the company announced a cash dividend of 0.3 yuan (tax included) per share for 24 years, corresponding to a dividend rate of 30% for the first half of the year.

Q2 Revenue exceeded expectations for a single quarter and was in line with expectations. However, excluding equity incentive expenses of about 50 million, actual net profit to mother was +24% compared to the same period.

Revenue analysis: both volume and price increased in Q2

Volume and price split: According to our tracking estimates, the company's two-wheeler sales in a single quarter were about 2.8 million units, up more than 10% year on year; ASP was about 2005 yuan, +120 yuan year on year, and the growth rate was +6%, which was basically the same compared to Q1; bicycle net profit increased slightly by about 165 yuan year on year, and about 20 yuan year on year after excluding the impact of incentive costs. We expect that the company's Q2 two-wheeler sales will be better than expected, and the ASP improvement will mainly benefit from the increase in the share of new high-end models such as Yeo Sang.

H1's overseas business revenue was 0.12 billion yuan, +41% year over year, accounting for 1%. Channel expansion in Southeast Asia opened a new chapter in overseas.

Profit analysis: continuous improvement as scheduled

Q2 gross margin was +2.3 pct/month-on-month -0.4 pct, and sales/management/R&D/finance rates were +0.9/+0.6/0.3/0.9 pct year over year respectively, mainly investment in new product development and marketing;

After excluding equity incentive fees, the Q2 net profit margin was +0.4 ct/month-on-month -0.6 pct. Under the low base of price competition during the same period, the profit side recovered as scheduled.

Investment advice: It is expected to meet the 20% incentive target

Our point of view:

Focus on follow-up catalysis: the “new national standard+trade-in” dual policy on the industry side promotes domestic demand recovery and further increases the concentration of leaders; the company-side's performance is more flexible under the low base effect during the same period, and it is expected to achieve the equity incentive target of 20% revenue/net profit during the whole year.

Profit forecast: Referring to equity incentives, we expect the company's 24-26 revenue of 23.6/27.2/30.5 billion yuan, and net profit to mother of 2.2/2.7/3.2 billion yuan, +17%/20%/19% year over year. If the impact of equity incentive expenses is excluded, it will be +22%/19%/18% year over year, respectively, corresponding to PE10/9/7X, maintaining a “buy” rating.

Risk warning:

Demand and new products fell short of expectations, industry competition intensified, and policy changes in the two-wheeler industry exceeded expectations.