Performance summary: The company released its 2024 three-quarter report. In the first three quarters of 24 years, the company achieved revenue of 1.79 billion yuan, +15.1% year on year; realized net profit of 82.591 million yuan, or -13.6% year on year; realized deducted non-net profit of 74.478 million yuan, or -11.5% year over year. Looking at a single quarter, Q3 achieved revenue of 0.71 billion yuan, +37.8% year on year; realized net profit of 26.549 million yuan, or -37.7% year on year; realized net profit of 25.477 million yuan after deduction, or -32.1% year over year.

The gross margin is declining, and the cost ratio is relatively stable. The company's overall gross margin for the first three quarters of 24 years was 13.6%, -1.2pp year on year, 13.3% for single Q3, and -3.7pp year on year. In terms of cost ratio, the company's total cost ratio was 8.3%, +0.3pp year on year. Among them, sales expenses rate/ management expense rate/ financial expense rate/ R&D expenses ratio were 6.7%/1.3%/-0.9%/1.2%, respectively, and +0.5pp/-0.4pp/+0.3pp/ -0.1pp. According to the single-quarter data, the Q3 expense ratio was 9%, -0.2pp. Among them, the sales expense rate/management expense rate/financial expense rate/R&D expense ratio were 6.4%/1.1%/0.5%/1%, respectively, and -0.1pp/ -0.5pp/+0.9pp/ -0.5pp year-on-year, respectively. Taken together, the company's net interest rate for the first three quarters was 4.6%, -1.5pp year on year; single Q3 net interest rate was 3.7%, -4.5pp year on year.

Improve overseas sales layout and develop independent brands. Currently, the company is mainly based on the ODM production model, supplemented by OBM; the sales area is mainly export sales, supplemented by domestic sales and online sales. As of 24H1, products have covered Europe, America and other regions, and exported to more than 80 countries. In order to reduce trade risks, the company is improving its competitiveness by improving its overseas sales layout and strengthening its own brand building. The company established a subsidiary in the US to expand into new markets such as Indonesia, India, and the Czech Republic, and sell bicycle parts and semi-finished products instead of complete vehicles. In response to the current situation where export sales are relatively high, the company is actively exploring the domestic market, especially in the field of strollers and adult mopeds, and is committed to building a high-end luxury brand image and gradually increasing the domestic market share. The company is also strengthening online sales, using cross-border e-commerce platforms such as Amazon, eBay, and AliExpress to develop B2B and B2C business, and is building its own online sales platform to create professional online bicycle and accessories fairs to enhance its online business strength.

The product matrix has been expanded, and production capacity needs to be further released. Currently, the company's main business covers the design, manufacture, sales and after-sales service of bicycles. The company not only focuses on producing high-quality traditional bicycles, but is also continuously expanding its business in market segments such as electric bikes, mountain bikes, and folding bikes. In April of this year, the date for the company's fund-raising investment project “Intelligent Manufacturing Project with an Annual Production of 1 Million Bicycles and 1 Million Electric Mopeds” to reach the expected state of use was extended from February 26, 2024 to December 31, 2024. After the completion of the project in 2025, self-production capacity will be further guaranteed.

Profit forecasting and investment advice. EPS is expected to be 0.46 yuan, 0.55 yuan, and 0.61 yuan respectively in 2024-2026, corresponding PE is 23 times, 19 times, and 17 times, respectively. Maintain a “hold” rating.

Risk warning: the risk of large fluctuations in raw material prices, the risk of large exchange rate fluctuations, the risk of increased international trade friction, the risk of increased industry competition, and the risk of new capacity projects falling short of expectations.