Revenue in the first half of the year bucked the trend, and profitability was stable. In the first half of 2024, the company's revenue was 2.53 billion yuan (RMB, same below), up 3.2% year on year. Among them, electric bicycle revenue increased 25.1% year on year to 1.55 billion yuan, and ASP and sales volume were -5.4%/+32.2% year on year, respectively. The company strictly controlled expenses. In the first half of the year, the marketing expense rate/management fee rate/R&D expense ratio were 6.0%/2.1%/3.6%, respectively, and the overall cost rate fell 0.4 percentage points to 11.6% year on year. Net profit increased 9.6% year over year to 65.99 million yuan; gross margin/net profit margin was 12.0%/2.6%, respectively, which was basically the same as the same period last year.

Multi-dimensional channel layout, strong sales growth rate for corporate and institutional customers. The company strengthens online and offline collaboration to enhance end-to-end retail capabilities. By the end of June 2024, the company's offline distribution had 1,210 dealers and more than 13,000 offline retail stores. Online channels have set up online stores on mainstream e-commerce platforms such as Tmall and JD. The company is actively expanding various corporate and institutional customers, and has established partnerships with Hello Bike, Didi Qingqu, and Meituan. In the first half of the year, the company's sales volume to corporate and institutional customers reached about 0.42 million units, exceeding the sales volume for the full year of 2023. In terms of production capacity, the company is building a plant in Chongqing. It is expected that after the plant is put into operation, production capacity will increase to 2 million units per year in 2026.

The implementation of the new national standard and trade-in policy may drive a recovery in sales in the second half of the year, and the company was selected for the first batch of white lists. Affected by the transition between old and new national standards, the overall sales volume of the industry declined in 2024; with the implementation of the new national standard and the two-wheeler trade-in policy, the two-wheeler industry is expected to recover. Recently, the Ministry of Industry and Information Technology announced the first batch of 6 e-bike whitelisted companies, including Yadi, Luyuan, and TaiLing. We believe that the company, as one of the first companies to be selected on the white list, will benefit from the implementation of the new national standard and the recently announced trade-in policy. It is expected that the company's performance will grow year on month in the second half of the year.

Stay neutral. We maintain our revenue and profit forecasts, and maintain a target price of HK$6.24, which corresponds to 14 times the price-earnings ratio of 2024. Considering that the current stock price has limited room to rise compared to our target price, and overall competition in the two-wheeler industry is intensifying, the company still needs a large investment in marketing and R&D to maintain its competitive advantage, and profit growth will ease in the short term, so maintain a neutral rating.