Key investment points

Leading domestic electric scooter motors, the performance is under pressure in the short term. The company is the largest supplier of electric scooter motors in China. It has been deeply involved in the field of electric bicycles for 20 years, and has a mature global layout, mainly in the European and American markets.

24Q1-3 revenue 1.01 billion yuan, -24.9% YoY, net profit to mother 0.05 billion yuan, YoY -57.5%, gross profit margin 25.6%, YoY -1.7pct, YoY net interest rate 5.1%, YoY -3.9 pct; of these, 24Q3 revenue was 0.33 billion yuan, -24.2%/-14.4% YoY, net profit to mother 0.001 billion yuan, -98.2% YoY, gross profit margin 21.3% YoY- 2.6/-5.7pct, net interest rate 0.2% to mother, -3.5/-8.6pct year-on-month.

Expense rates have risen, and cash flow needs to be improved. The company's expense ratio for the 24Q1-3 period was 20.3%, +4pct year over year, of which the 24Q3 period cost ratio was 23.3%, +5.0/+6.3pct; 24Q1-3 net operating cash flow was 0.05 billion yuan, -88.8% year over year, of which Q3 operating cash flow was 0.004 billion yuan, -96.0%/-92.8% year on month; 24Q3 final inventory was 0.22 billion yuan, compared to the end of Q2.

Short-term backlog inventory is gradually being digested, and the long-term market is broad. In the short term, due to factors such as the Russian-Ukrainian war and inflation, demand in Germany and the Netherlands, where electric scooters are mainly consumed, is sluggish, and dealer channel inventories are high. The company actively participated in international exhibitions and launched mature solutions for multiple scenarios. With the gradual digestion of inventory within the channel, the current overall inventory level will tend to normalize. Looking at the long term, the current penetration rate of electric bicycles in the European and American markets is still low, and demand still exists. The company has complete products, and technology such as torque sensors have high barriers, and it is expected that the performance will gradually recover as demand recovers.

Profit forecast and investment rating: Considering high downstream channel inventory and slow recovery in terminal demand, we expect the company's net profit to be 0.07/0.094/0.123 billion yuan in 2024-2026, -45%/+34%/+31%, corresponding PE is 80x, 60x, and 45x, respectively. Considering the current low penetration rate of electric bicycles in the European and American markets, the first coverage gave a “gain” rating.

Risk warning: risk of international trade friction, raw material price increases exceeding expectations, demand from Europe and the US falls short of expectations.