[Table_Summary]

Core views:

Yadi is a leader in the electric two-wheeler industry, selling more than 16 million vehicles in 23 years. According to the company's financial report, the company was founded in 2001, has been deeply involved in the field of electric two-wheelers for more than 20 years, and produced and sold more than 16 million vehicles in 2023. Currently, the company's business covers various fields such as electric bicycles, scooters, batteries, etc., with revenue of 34.8 billion yuan in 2023, and net profit of more than 2.6 billion yuan to mother.

The industry will benefit from the implementation of new policies and subsidies in the short term, and there is still room for improvement in long-term demand. (1) In the short term: The revision of the “New National Standard” in '19 accelerated stock exchange, driving industry growth and concentration. In '24, the “New National Standard” ushered in a new round of revisions. Stricter industry supervision, and in line with trade-in subsidies, it is expected to drive a new round of accelerated replacement of existing vehicles and increased industry concentration. (2) In the long run, there is room for improvement in both C-side and B-side demand in the domestic market. Overseas markets are still a blue ocean. Driven by factors such as subsidies and anti-motorcycle policies, the market is expected to develop rapidly. According to Frost & Sullivan data, sales of electric two-wheelers in overseas markets are expected to reach 53.9 million units in '27.

The company's competitive advantage is obvious and the overseas layout is leading. Short-term performance is expected to resume growth, and the long-term leading edge is expected to continue to expand. As an industry leader, Yadi leads the industry in terms of cost, supply chain, channels, and brands. Although 24H1's performance has declined, with the implementation of new industry regulations and subsidies, and the end of the dealer inventory removal cycle, performance is expected to resume growth. In the long run, the company is actively expanding the upstream industrial chain vertically, and has already laid out motor and battery links; it is rapidly going overseas horizontally, and production capacity and channels in Southeast Asia are gradually improving, and it is expected to seize opportunities in overseas markets.

Profit forecast and investment advice: The company is a leading electric two-wheeler company, benefiting from the implementation of new regulations and subsidies in the industry. Net profit to mother is expected to increase by -0.1%, 21.7%, and 15.2% in 24-26. The latest closing price corresponds to the 25-year PE11.7x. Referring to comparable company valuations, the 25-year PE valuation is 15 times, corresponding to a reasonable value of HK$17.14 per share, giving an “increase in holdings” rating.

Risk warning: industry policy risk, product development risk, increased risk of market competition, risk of material price fluctuation, channel management risk.