Incident: The company released its semi-annual report. 24H1 achieved operating income of 10.59 billion yuan, an increase of 3.66%; net profit to mother of 0.95 billion yuan, an increase of 6.24%; net profit after deducting non-attributable net profit of 0.89 billion yuan, an increase of 7.16%.

Looking at a single quarter, 24Q2 achieved operating income of 5.64 billion yuan, an increase of 18.07%; net profit to mother of 0.467 billion yuan, an increase of 12.06%; net profit after deducting non-attributable net profit of 0.443 billion yuan, an increase of 21.38%.

24H1's consolidated gross margin was 17.83%, an increase of 2.25pct. The cost rate for the period was 7.92%, an increase of 2.49pct. Among them, the sales/management/ R&D/ finance ratio was 3.89%/2.73%/2.78%/-1.48%, respectively, with a year-on-year change of +0.99pct/+0.59pct/+0.38pct/+0.53 pct.

Policies are favorable to industry regulations, leading companies have a clear first-mover advantage. 24H1, the Ministry of Industry and Information Technology, the State Administration of Market Supervision and Administration and the State Fire and Rescue Administration jointly issued the “Electric Bicycle Industry Specification Conditions” and the “Electric Bicycle Industry Specification Notice Administrative Measures”, and the “Safety Technical Specification for Lithium Ion Batteries for Electric Bicycles” issued by the State Administration of Market Supervision and Administration put forward higher safety requirements for industry production standards and lithium battery usage standards. At the same time, the country is actively formulating new mandatory national standards for electric two-wheelers, and continues to promote the high-quality development of the industry.

Profit forecast and rating: We expect net profit for 24-25 to be 2.23 and 2.7 billion yuan, respectively. The current stock price is 11/9 times PE for 24/25, 17-19 times PE for 24, and a reasonable value range of 44.0-49.1 yuan/share, giving a “superior to the market” rating.

Risk warning: The demand side falls short of expectations, increased competition in the electric two-wheeler industry, fluctuating raw material prices, and cross-market valuation risks.