Incident: The company released the 2002 annual report and the first quarter report of 2023. The company achieved revenue of 1,766 million yuan in 2022, -12.5% year on year, and achieved net profit of 206 million yuan, -15.0% year on year; in the first quarter of 2023, the company achieved operating income of 349 million yuan, -5.0% year on year, and achieved net profit of 35 million yuan, +21.7% year on year.
The gross margin of product structure upgrades increased steadily, and 23Q1 performance increased 21.7%. The decline in the company's 2022 performance was mainly due to the impact of tight shipping and poor market sales expectations on 2021H2, which led to large inventories at the end of 2021.
Looking at the split, the company's main products are electric scooters, all-terrain vehicles and electric balance scooters, which accounted for 38.91%, 28.99%, and 16.45% of total revenue respectively. In 2022, electric scooters and scooters recorded revenue of 687 and 290 million yuan respectively, up 6.63% and 24.04%, respectively. All-terrain vehicles recorded revenue of 512 million yuan, a year-on-year decline of 34.10%, mainly due to the decline in demand for ATVs overseas, especially in North America. In terms of gross margin, the company's overall gross margin in 2022 was 35.75%, up 2.78 percentage points from the previous year. Looking at the split, the gross margin of smart electric low-speed vehicles was 39.35%, an increase of 4.93 percentage points over the previous year, mainly due to product structure upgrades and an increase in the share of online sales; the gross margin of special vehicles was 33.87%, an increase of 3.33 percentage points over the previous year. Among them: the gross profit margin of all-terrain vehicles was 34.12%, an increase of 2.81 percentage points over the previous year, and the gross profit margin of off-road motorcycles was 29.62%, an increase of 4.09 percentage points over the previous year.
Deeply involved in localized operation in North America, and the layout of new energy tracks is accelerating. In 2022, the company accelerated the deployment of new energy sources and continued to deepen “electrification+intelligence”. Looking at the racetrack segment, the company will focus on the booming electric bicycles, electric golf carts and high-displacement all-terrain vehicle tracks in the future; looking at brand building, its own brand sales accounted for 60% + in 2022, and already owns the three major brands TAOMOTOR, GOTRAX and DENAGO. Looking at channel construction, the number of dealers in the North American market has exceeded 100 in 2022. In 2023, the company plans to develop 300 electric bicycle dealers, 150 electric golf cart dealers, and 100 all-terrain vehicle dealers. In addition, the company has locations in large supermarket chains (3900 WALMART, 1802 TARGET, 259 ACADEMY, BESTBUY 175), online channels (third party e-commerce platforms such as Amazon, Walmart, EBAY, etc.), wholesale/retailer (with more than 600 wholesalers and retailers in North America, including large wholesalers and retailers that are competitive in Europe, including SOFLOW, LOGICOMS.A, etc.).
Business synergies can be expected, and the product structure can be upgraded. Looking ahead, the new track+high-end is the company's main goal in the future. We believe that the company's overall layout of recreational products has a strong synergistic effect, and using a comprehensive overseas channel layout will open up room for sales growth. Furthermore, we believe that the company's high-end brand DENAGO has great potential for development. As the North American offline brand experience center continues to be launched, the company's products will continue to be upgraded.
Investment advice: The company's net profit for 2023-2025 is estimated to be 3.12/357/475 million yuan respectively, EPS is 285/3.26/4.34 yuan respectively, and the price-earnings ratio is 16.51/14.44/10.84 times, respectively. It is covered for the first time, giving it a “buy” rating.
Risk warning: Market competition intensifies, exchange rate fluctuations exceed expectations