The company announced 2024Q3 results:

24Q3: Operating income 4.24 billion (+34.75%), net profit to mother 0.37 billion (+139.1%), net profit not attributable to mother 0.35 billion (+160.1%).

24Q1-3: Operating income of 10.91 billion (+44.9%), net profit due to mother 0.97 billion (+156.0%), net profit of non-return to mother 0.94 billion (+169.5%).

The Q3 revenue and profit are in line with our outlook.

Revenue analysis: the overall trend of high growth continues in all categories

Two-wheelers: Self-controlled channel inventory during the policy transition period. Revenue in a single quarter was 2.59 billion +57% year over year, sales volume +54% year over year. ASP is expected to continue to explore the industry at about 2,765 yuan, or +56 yuan month-on-month. We expect the bicycle profit to be around 300 yuan (+7 yuan compared to the previous month). Two-wheeler revenue growth slowed marginally, but the 9th still outperformed the industry by a large margin.

Scooters: Independent brands remained flat. In a single quarter, 2C revenue for independent brands was -1% YoY, sales volume -3% YoY; ASP is expected to be -2% YoY; 2B shared scooters were -34% YoY, and some shipments were delayed until Q4.

All-terrain vehicles: Growth decelerated slightly, revenue 0.26 billion +35% year over year, sales volume +25% year over year, and ASP is expected to be +8% year over year.

Lawn mowers: Strong acceleration, revenue of 0.15 billion in a single quarter was +625%. The benefits were not poor in the off-season, but profits were slight. With the launch of third-generation products, it is expected to improve month-on-month in Q4.

Profit analysis: two-wheelers contribute to core profit

On a year-on-year basis: overall gross and net margins in Q3 were +3.3/+3.9 pct, and sales/management/R&D/finance rates were +1.4/-0.3/-0.9/-1.3 pct, respectively, an overall improvement.

Month-on-month breakdown: The net interest rate for Q3 is higher than Q2, -2.4 pct, but it is still increasing from the beginning of the year. The change is mainly due to the fact that two-wheelers are expected to contribute more than 60 million in profit, but the profit of lawn mowers decreased by more than 0.1 billion month-on-month due to seasonal changes, and exchange losses of 20 million yuan, which weakened month-on-month.

We split the profit for a single quarter: it is estimated that two-wheelers and scooters each contribute about 7:3 to profit, all-terrain vehicles make a small profit, and lawn mowers lose a small amount.

Investment advice: keep buying

Our point of view:

The first source of profit is the healthy development of two-wheelers, and profits have increased due to the combined scale effect of ASP; profits have fluctuated and increased since the 23Q4 lawnmower lost money. Currently, the investment period is still high, and forward profit flexibility is high. We expect the contribution of new all-terrain lawn mowers to increase in 25 years; scooters are mainly stable.

Profit forecast: We slightly adjusted our profit forecast. We expect the company's revenue for 2024-2026 to 13.8/17.4/20.6 billion yuan (previous value 13.4/16.7/20.1 billion yuan), +35%/+26%/+19% YoY, net profit 1.13/1.46/1.82 billion yuan (previous value)

1.12/1.41/1.73 billion yuan), +89%/+29%/+24% year over year; corresponding to PE 31/24/19X,

Maintain a “buy” rating.

Risk warning:

Industry sentiment fluctuates, industry competition intensifies, and new products fall short of expectations.