With trade-in and the implementation of the new national standard, industry demand is expected to return to a rapid growth range. The industry is expected to sell 56/61.75 million vehicles in 2025/2026, +12%/+10% year-on-year, and steady future industry demand is close to 65 million vehicles. The main benefits are: 1) Strong subsidies from the trade-in policy. As of April 8, 2025, the country sold 3.341 million old and new electric bicycles each, with an average bicycle subsidy amount of 688 yuan. According to monitoring by the China Cycling Association, the industry's output in the first quarter was +25%, which had a significant stimulating effect, and subsequent demand for replacement is expected to be released at an accelerated pace. 2) The 2024 version of the new national standard will be implemented in September this year. Requirements for fire protection and battery tampering will be added, the weight requirements for lead-acid batteries will be reduced, and the entry threshold for the industry will be raised. It is expected that the industry's demand for Q2-Q3 old national standard models will remain strong.
Industry pattern: Leading car companies have obvious advantages, and their market share is expected to rise steadily in the future. Leading companies, Yadi/Emma, have a clear advantage in terms of product price bands and channels, and are far ahead of their peers in market share. In 2024, they sold 13.02/10.7 million units respectively, corresponding to a market share of 26%/21%, for a total market share of 47%.
Looking forward to the future, the commuting scene (accounting for about 50%) and the entertainment scene (30%) form the core basic market for electric two-wheeled customers. Among them: 1) The commuting scenario is dominated by immediate demand and is highly sensitive to product cost performance, battery life and channel convenience. We expect Yadi and Emma to build a moat with large-scale manufacturing to reduce costs, sink channel networks and long battery life technology to form an absolute dominant position; 2) The entertainment scene pays more attention to brand tone, design and intelligent experience. Users are willing to pay personalized premiums. New forces such as the No. 9 brand have First-mover advantage, while Yadi, Emma, etc. Traditional car companies are also rapidly iterating through models and marketing methods to close the gap.
The company experienced aggressive expansion in the early stages and deep adjustments in 2024, and sales volume and profitability are expected to recover quickly. 1) On the channel side, the company was affected by the new national standard in 2024. The old models were cleared and put out of storage, causing a lot of pressure on the channel. Since 2025, with the implementation of the new national standard and the advancement of trade-in, we expect the company's terminal channel to return to a healthy state, combined with the launch of new product series such as Modern, and the potential for subsequent sales growth is expected to resume. 2) In line with sales trends, bicycle profitability is expected to recover quickly as the industry price war eases and the company's scale effect is re-reflected. 3) With the “24 Month Real Exchange” technology brand, the subsidiary Huayu Battery has strong demand for external supply, sales are expected to grow rapidly, and further enhance the company's performance.
Profit forecast and valuation: The company's net profit for 2025-2027 is estimated to be 2.93/3.55/ 4.11 billion yuan, respectively, and the corresponding PE is 12.1/10.0/8.6 times, respectively, covered for the first time, giving a “buy” rating.
Risk warning: Industry demand falls short of expected risk, price war exceeds expectations risk, new models fall short of expected risk, calculation assumes related risks.
