Incident Overview

The company released its 2024 three-quarter report.

Analytical judgment:

Two-wheelers continued to increase and lawnmowers surpassed expectations. The Q3 revenue side continued its rapid growth trend 2024Q1-3. The company achieved operating income of 10.905 billion yuan, +44.90% year over year. Of these, Q3 achieved revenue of 4.239 billion yuan, +34.75% year over year. Against the backdrop of a high base during the same period, the rapid growth trend continued. By product, in independent brand retail, 2024Q1-3 electric two-wheelers (China region), retail scooters, all-terrain vehicles, and lawnmower robots achieved revenue of 59.08, 17.24, 7.65, and 595 billion yuan, respectively, compared with +87%, +11%, +61%, and +379%, respectively; of these, Q3 electric two-wheelers (China), retail scooters (autonomous), all-terrain vehicles, and lawnmower robots achieved revenue of 25.92, 6.93, 2.59, and 145 million yuan, respectively. At 35% and +625%, electric two-wheelers were the main revenue growth point for Q3. 0.9376 million units were shipped in the third quarter, slightly lower than market expectations; the year-on-year growth rate of lawn mowers in Q3 increased sharply, exceeding market expectations. Looking ahead to Q4 and 2025, with the rapid expansion of channels and the rapid introduction of new products into the market, the company's electric two-wheelers, all-terrain vehicles, and lawnmower robots are expected to continue the rapid volume trend. Combined, scooter shipments will improve markedly, and the company's revenue side is expected to continue its rapid growth trend.

The gross margin increased and the expense ratio declined rapidly. The profit level increased sharply in Q3 2024Q1-3. The company's net profit to mother was 9.70 million yuan and 937 million yuan, respectively, +155.95% and +169.52%, respectively. The 2024Q1-3 company's net interest rate to mother and net interest rate after deducting non-return to mother were 8.89% and 8.60%, respectively, compared to +3.86pct and +3.98pct, respectively.

1) Gross profit side: 2024Q1-3's gross sales margin was 29.68%, +3.06pct compared to the company's interim report. Referring to the company's interim report, we believe this is mainly due to the increase in the share of high-margin lawn mowers on the one hand, and the continuous increase in gross margin of products such as electric two-wheelers and all-terrain vehicles on the other. 2) Cost side:

The 2024Q1-3 company's expense ratio for the period was 19.02%, -1.24pct year on year. The scale effect further drove the increase in net interest rate. Among them, sales, management, R&D and financial expense ratios were +1.16, -1.19, -1.19, and +0.98pct, respectively. As the scale continues to expand, the company's profit level is expected to increase further.

Among them, Q3 net profit to mother and net profit not to mother were 3.74 million yuan and 355 million yuan, respectively. They continued to grow rapidly, and still performed well, with a month-on-month decline. We speculate that the main reason: the decline in net profit due to the month-on-month decline in seasonal revenue from Q3 high-margin lawn mowers was the biggest influencing factor; exchange losses, and the Q3 financial expense ratio was +0.98pct month-on-month, which affected profit-side performance to a certain extent.

New products such as all-terrain vehicles and lawnmower robots are being launched at an accelerated pace, and the company's growth space continues to open up.

While consolidating traditional advantages such as electric scooters and balance scooters, the company continues to expand its products to open up room for growth. 1) Electric two-wheelers: As of 24H1, more than 6200 stores (estimated at the end of Q3), the cumulative domestic shipment volume has exceeded 4 million units, and various strategic products such as Bmax, F, A+, MMAX, EVA, and MIX series have been released; 2) All-terrain vehicles: The company's all-terrain vehicles have successfully entered the European market, and UTV and SSVs have successfully entered the US market, and the products have quickly been recognized by users and dealers. In 2023, the company continued to improve its product system, covering the three series ATVSnarler, UTV-Fugleman and SSV-Villain, and launched the world's first hybrid all-terrain vehicle; 3) Robots: The company's lawnmower robot products have been successfully sold to more than 30 countries around the world, becoming the first cordless lawn mower brand with 0.03 million+ user activations. Furthermore, the No. 9 robot mobile platform (RMP) cooperated closely with Nvidia. The robot chassis used in the Isaac AMR was based on the RMP Lite 220 robot mobile platform. The Nova Cater AMR, which was jointly developed, debuted at CES 2024 in January 2024. The two work closely together to empower the global service robot industry. 4) Ebike:

Segway e-Bike Xyber and Segway e-Bike Xafari were released, and both products received widespread attention from users around the world. In the same year, many e-bike products entered the global market one after another.

Investment advice

We maintain our 2024-2026 revenue forecasts of 14.133, 18.279, and 22.47 billion yuan, respectively; slightly adjusted 2024-2026 net profit of $10.68, 14.87, and 2.03 billion yuan (original values were $10.68, 1,480, and 1.99 billion yuan), respectively; +79%, +39%, and +35%, respectively; EPS for 2024-2026 was 14.90 and 20.75, respectively and 27.95 yuan (the original value was 14.91, 20.66, and 27.86 yuan). The closing price of 48.38 yuan on October 28, 2024 was 32, 23, and 17 times PE, respectively. In view of the company's outstanding growth, the “gain” rating was maintained.

Risk warning

New product expansion fell short of expectations, overseas markets declined, and the competitive landscape deteriorated.