Incidents:

On August 23, 2024, Yadi Holdings released its 2024 annual report: H1 in 2024, the company achieved operating income of 14.41 billion yuan, -15.4% year-on-year; net profit to mother of 1.03 billion yuan, or -12.9% year-on-year.

In 2024 H1, the company sold a total of 6.383 million electric bicycles and electric scooters, -22.3% year-on-year; the average price was 1533.2 yuan/unit, +3.0% year-on-year.

Investment highlights:

The volume of electric bicycles and scooters fell and increased, and the company's performance phase weighed on H1 in 2024. The company's electric bicycle business achieved revenue of 6.24 billion yuan, -18.3% year over year, sales volume of 4.483 million units, -19.1% year over year, average price 1391.9 yuan/unit, +0.9% year over year; electric scooter business achieved revenue of 3.55 billion yuan, -22.5% year on year, sales volume 1.9 million units, -28.9% year on year, average price 1866.7 yuan/unit, year-on-year + 9.0%

It was the first to enter the market, benefiting from the development of industry standards in 2024 H1. Government departments continued to strengthen the supervision of the electric two-wheeler industry by introducing new industry standards and updating existing standards. On August 22, 2024, the Ministry of Industry and Information Technology announced the first batch of companies that met the “Electric Bicycle Industry Specification Requirements”. Among the 6 companies, the company occupied 3 seats and is expected to benefit from the development of industry standards.

The three-fee control was good, and profitability continued to improve in 2024. The company's gross profit margin was 18.0%, +1.1% year over year, mainly due to product portfolio optimization and the price increase of battery and electric drive products; the cost ratio for the period improved. The 2024 H1 sales/management/R&D expenses ratio was 4.2%/2.9%/3.4%, respectively, a year-on-year change of -0.6/+0.1/+0.2 pct; achieved a net profit margin of 7.2%, +0.2 pct year on year.

Profit forecasts and the performance of investment rating companies are under pressure in the short term, and it is expected that performance will improve after the implementation of the new regulations. The company's 2024-2026E revenue is forecast to be 32.557/37.583/43.465 billion yuan, a year-on-year change of -6.35%/+15.44%/+15.65%; net profit to mother was 2.635/3.228/3.817 billion yuan, respectively, a year-on-year change of -0.20%/+22.51%/+18.23%; the corresponding PE was 10.68/8.72/7.37X, respectively. The electric two-wheeler industry has ushered in standardized development, and the company is expected to take the lead in benefiting and maintaining a “buy” rating.

Risks indicate the risk of changes in industry regulatory policies, increased risk of industry competition, downstream demand falling short of expectations, product development falling short of expectations, profitability falling short of expectations, etc.