The company issued an announcement: 24H1, the company achieved operating income of 2.534 billion yuan, an increase of 3.2% year on year; net profit to mother was 0.066 billion yuan, an increase of 9.6% year on year.

By product, in 24H1, the company's electric bicycles achieved revenue of 1.546 billion yuan, an increase of 25.09% over the previous year.

Electric scooters (referring to electric motorcycles and electric light motorcycles) achieved revenue of 0.345 billion yuan, a year-on-year decrease of 39.62%. The battery achieved revenue of 0.512 billion yuan, a year-on-year decrease of 4.38%. Electric motorcycle components achieved revenue of 0.104 billion yuan, an increase of 27.15% over the previous year.

The increase in e-bike revenue was mainly due to the company's leading R&D and customization capabilities, which improved product competitiveness, thereby increasing e-bike sales by about 32.2%, especially to corporate and institutional customers. The decline in electric scooter revenue is mainly due to the continued impact of the “Electric Bicycle Safety Technical Specification” implemented in 19, leading to a continuous decline in consumer demand for electric light motorcycles, which led to a decrease in sales of electric light motorcycles by about 29.9%. Changes in battery revenue are mainly due to changes in product structure.

24H1's gross margin was 12.0%, which remained stable, mainly due to the successful application of core technology, which improved product competitiveness and production efficiency. 24H1 company's sales expense rate/management expense rate/R&D expense rate/financial expense ratio were 5.93%/2.06%/3.62%/-0.54%, respectively. Sales and marketing costs have remained relatively stable. The increase in administrative expenses was mainly an increase in share payments and consulting expenses, while the increase in R&D costs was mainly due to an increase in share payments and an increase in the number of R&D personnel. On July 15, the company announced its intention to repurchase no more than 0.043 billion shares (no more than 10% of the number of issued shares) on the open market.

On July 3, the company awarded 3.2125 million share awards to 107 people at HK$5.88 per share, demonstrating confidence in long-term development. The company also has a pre-listing equity incentive plan, which rewards 108 people, corresponding to a total of 16.736 million shares, binds core employees, and boosts confidence in long-term development.

In 2024, the Ministry of Industry and Information Technology began revising the new national standard. The “Electric Bicycle Industry Specification Conditions” and the “Safety Technical Specification for Lithium-ion Batteries for Electric Bicycles” were released one after another, putting forward higher safety requirements for industry production standards and lithium battery usage standards, which helped increase industry concentration. As one of the first 4 industry standard enterprises to meet the “Electric Bicycle Industry Specification Requirements”, Luyuan has a clear first-mover advantage. It is expected that it will use Dongfeng to standardize the industry to further demonstrate its competitive advantage.

Profit forecast and rating: We lowered the company's net profit for 24-25 from 0.17/0.19 billion yuan to 0.16/0.18 billion yuan, which currently corresponds to 17/15xPE. Referring to comparable companies, the PE valuation was 17 to 19 times in 24 years, corresponding to a reasonable value range of HK$6.96 to HK$7.78 (exchange rate: RMB 1 = HK$1.1086), giving it an “superior to the market” rating.

Risk warning: Competition in the electric motorcycle industry is intensifying, demand side falls short of expectations, raw material prices fluctuate, and cross-market valuation risks.