Incident: The company announced its 2024 interim results. In the first half of 2024, the company achieved main business revenue of 14.414 billion yuan, -15.4% year-on-year, and net profit to mother of 1.034 billion yuan, or -12.9% year-on-year.

Comment:

Revenue declined year over year, and gross margin improved year over year. The company achieved main business revenue of 14.414 billion yuan in the first half of 2024, -15.4% year over year, and net profit to mother of 1.034 billion yuan, -12.9% year over year. The decrease in revenue was mainly due to a brief weakening in market demand and distributors' inventory removal cycle, which led to a decline in sales of electric two-wheelers.

In the first half of 2024, the company's gross margin was 18.0%, +1.1 pct. There was a slight increase in gross margin, mainly due to product portfolio optimization and rising prices for battery and electric drive products. In the first half of 2024, the company's sales volume, revenue, and profit all declined, but sales gradually picked up in May and June 2024, and the trend is positive.

Product structure optimization led to the upgrading of ASP, and the acquisition of Lingbo Electronics further improved the industrial layout. The company's sales volume of electric two-wheelers in the first half of 2024 was 6.38 million vehicles, -22% year-on-year, but in ASP, the first half of 2024 was 2,258 yuan, an increase of 183 yuan over the previous year, mainly due to the optimization of the product structure. In the first half of this year, the company launched the Guaneng 6th generation. Through the upgrading of the three core technologies, it achieved further breakthroughs in battery life, safety, and intelligence. In March of this year, a subsidiary of Yadi Holdings acquired 100% of the shares of Wuxi Lingbo Electronic Technology Co., Ltd. for 0.352 billion yuan. Ling Bo is a leading company in R&D, production and sales of electronic control systems for high-power electric motorcycles. The technical threshold and barriers in this field are high. This acquisition further enhances Yadi's industrial layout in the field of electric two-wheelers.

New national standard regulations are gaining strength, and the share of leading companies is expected to increase further. Affected by the safety incident in the first half of this year, relevant government departments continued to strengthen the supervision of electric two-wheelers by introducing new national standards and updating existing standards, including various aspects relating to charging facilities and batteries. On July 30, 2024, the Ministry of Industry and Information Technology announced the first batch of companies that met the requirements of the electric bicycle industry. Among the six listed companies, Yadi occupied three seats.

The list will become an important reference factor for consumers to buy electric bikes, and help the company further increase its market share.

Profit forecast, valuation and rating: Considering the overall pressure on the electric two-wheeler industry, we lowered the company's 24-25 profit forecast and added a 26-year profit forecast. The company is expected to achieve net profit of 2.637/3.241/3.953 billion yuan in 24-26 (25% down/ 26% down/increase). The current stock price corresponds to the 24-26 PE of 11/9/7 times. Considering the continuous improvement of the company's brand power, channel power, and product strength, I am optimistic that the company will continue to increase its market share, continue to maintain its leading position in the industry, and maintain a “buy” rating.

Risk warning: Risk of new product promotion and sales falling short of expectations; risk of market competition increasing risk; risk of rising raw material costs.