Taotao Auto Industry focuses on outdoor leisure and entertainment, as well as transportation products for short distances. The company focuses on the development of recreational vehicle products, and its medium- to long-term goal is to become a leader in the low-speed vehicle industry.

Taotao is deeply involved in the US market, and most of its product demand is in the US. Looking at revenue by region in 2023, US revenue was 1.53 billion yuan, YOY +41.3%, accounting for 71.3% of revenue and 40.9% gross margin. The company's localized operations mainly include a localized team that has been deeply involved in North America for many years, warehouse-style sales integrating geographical and time efficiency, and a full-process pre-sales and after-sales service system that responds quickly.

Golf carts: Launch cost-effective products, open up demand and are classified as low-speed vehicles in the US. The usage scenarios are golf courses/closed community roads, and usually do not require a driver's license. Demand in the US market is strong, and it is divided into field electric vehicles and low-speed electric vehicles for community use. The main brand of Taotao golf carts is Denago. The company has two separate channels for high-end dealer networks and supermarkets. On the price side, the Nomad XL costs $7,995 and the Rover XL $9995 under the Denago brand. Compared with peers, Taotao products are more cost-effective and are expected to open up demand space.

In terms of users, electric golf carts are loved by the middle class, the new rich, the elderly in the community, families, etc. The US launched a “double anti-investigation” against LSPTV from China. Tao Tao actively dealt with trade frictions, and overseas production capacity was accelerated to avoid risks. The Vietnamese factory has already completed production of a small number of all-terrain vehicles, and the US factory can already be manufactured in the US in October.

All-terrain vehicles: Mainly small-displacement ATVs. From small-displacement to large-displacement Taotao products focus on small-displacement engines, mainly ATVs, and the main target groups are children and young people.

Most small-displacement TV products cost less than 1,000 US dollars, with a variety of styles and affordable prices. The private brand Tao Motor focuses on practicality, while the high-end brand Denago pays more attention to professionalism. High-displacement ATV models have been mass-produced, UTV products are also planned to enter the US market, and the product line continues to expand.

Company advantages: brand power, local team operation & cost advantage

The company has two main brands, targeting different consumers. The company carries out refined operation of segmented brands, maintains relative independence, can cover more consumer groups, balance scale and profit, and has complementary advantages.

The company has major brands DENAGO and GOTRAX, which are positioned in different markets, and their own brands account for more than 60% of sales. The company's channels include large supermarket chains, own websites, third-party e-commerce platforms, wholesale retailers, dealers, etc. In terms of cost, the company makes its own core components, and the operating framework is continuously improved to improve production efficiency.

Profit forecasting and valuation

The company's revenue for 2024-2026 is expected to be 3.31, 4.11, and 4.99 billion yuan, up 54%, 24%, and 22%; net profit due to mother is 0.4, 0.51, 0.63 billion yuan, with the same increase of 43%, 27%, and 24%. Considering the company's growth and the valuation level of companies of the same type, PE 18x in 2025 is given, corresponding to a stock price of 83.6 yuan, for the first time coverage, and a “buy” rating.

Risk warning: trade frictions, development of new categories falling short of expectations, declining market demand, sharp rise in raw material costs, exchange rate fluctuations, etc.