Performance summary: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2.01 billion yuan (-15.6% YoY); realized net profit to mother of 110 million yuan (-36.6% YoY); and realized deducted non-net profit of 90 million yuan (-40.8% YoY). Looking at a single quarter, 2023Q4 achieved revenue of 450 million yuan (-10.4% year over year); realized net profit of 0.1 billion yuan (-22.7% year over year); and realized net profit of 10 million yuan after deduction (-13% year over year). 2024Q1 achieved revenue of 530 million yuan (+8.7% year over year); realized net profit of 0.2 billion yuan (+55.1% year over year); realized net profit of 20 million yuan after deduction (+77.6% year on year). 2024Q1 achieved positive year-on-year revenue growth, and profitability continued to improve.
Gross margin was restored in 2023, and the overall expense ratio increased slightly. In 2023, the company's overall gross margin was 15%, +1.5pp year on year; 2023Q4 gross margin was 15.7%, +1.6pp year on year. By product, the gross margin of adult bicycles is 20.1% (+4.8pp); the gross margin of children's bicycles is 24.6% (+6.1pp); the gross margin of power electric bicycles is 11.2% (-0.4pp); and the gross margin of accessories is 13.2% (+0.9pp). By sales model, the gross margin of the OBM model is 23.5% (+1.9pp); the gross margin of the ODM model is 15.3% (+1.7pp); and the gross margin of the trade model is 10.0% (+1.0pp). In terms of the cost ratio, the company's total expense ratio was 9.4%, +3.4pp. Among them, sales expense ratio/management expense ratio/financial expense ratio/R&D expenses were 7.3%/1.6%/-1%/1.5%, respectively, +0.7pp/+0.3pp/+1.8pp/+0.5pp. The increase in financial expenses ratio was mainly due to the year-on-year decrease in exchange earnings. Taken together, the company's net interest rate was 5.3%, -1.8pp year on year.
2024Q1 gross margin was 12.8%, +0.1pp year on year; the total cost ratio was 7%, -2.3pp year on year, mainly due to the increase in exchange earnings year over year. 2024Q1 net margin was 4.1%, +1.2pp.
Weak overseas demand has put pressure on sales in various categories, and strollers are more resilient. By product, adult bicycle revenue in 2023 was 330 million yuan (-41.6%); child bicycle revenue was 380 million yuan (-6.9%); helped electric bike revenue reach 330 million yuan (-29.4%); accessories revenue reached 620 million yuan (-22.6%); and revenue from other products reached 320 million yuan (+177%). Affected by weak consumption in Europe, insufficient demand, and high inventory from channel customers, the company's sales in various categories are under pressure. Among them, the revenue of traditional adult cars and power-assisted electric bicycles dropped significantly, and children's bicycles declined relatively little due to the rapid renewal frequency and the relatively high share of the company's own brands. Revenue from other products achieved high growth, mainly because the company relied on existing customer resources to expand the range of categories in the trade model. By region, in 2023, export revenue was 1.97 billion yuan (-14.8%), and domestic sales revenue was 37.84 million yuan (-43.4%). With the marginal restoration of overseas demand and the elimination of channel inventory, the company's orders are expected to improve marginally.
OBM is growing steadily, and production capacity is steadily expanding. In 2023, the company's OBM/ODM/trade model revenue was 430 million yuan/80 million yuan/770 million yuan respectively, +3.8%/-34.7%/+4.9% year-on-year. The company developed B2B and B2C businesses through various channels such as AMAZON, AliExpress, eBay, Alibaba, self-built websites, etc., and its own brand business grew steadily against the backdrop of weak market demand. As the production of electric moped products increases, the company's electric moped products will also increase cross-border e-commerce sales, and the cross-border e-commerce category is expected to be further enriched. In terms of production capacity, after the company's Deqing fund-raising project and production capacity at the new Tianjin plant are implemented, it is expected that the company will gradually expand its own production capacity for electric bicycles, increase the production capacity of high-end bicycle products such as mountain bikes, and further guarantee its own production capacity. In terms of production technology, Deqing Jiusheng, a wholly-owned subsidiary of the company, introduced dozens of automated welding robots to automate the welding process and further promote cost reduction and efficiency.
Profit forecasting and investment advice. EPS is expected to be 0.64 yuan, 0.83 yuan, and 1.02 yuan respectively in 2024-2026, and the corresponding PE will be 19 times, 15 times, and 12 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.