The company is a leader in outdoor leisure scooters going overseas. The company was founded in 2015 and initially focused on the production and sale of all-terrain vehicles and motorcycles. Since 2018, the company's main business has focused on R&D, production and sales of motorcycles, electric vehicles and their accessories and supplies with outdoor leisure and entertainment and short-distance transportation functions. The company's main products have passed the US EPA, CARB, CPSC, and European e-mark and CE certifications. In 2020, the company's electric scooter products ranked high in the Amazon website sales rankings, and once ranked in the top ten sales lists of similar products. According to the company's prospectus, citing the “December 2021 Production and Sales Update” issued by the Motorcycle Branch of the China Association of Automobile Manufacturers, the company ranked first in export volume and second in export value of all-terrain vehicle (ATV) products in 2021.

Thanks to the core competitiveness on the cost manufacturing side and brand channel side, the company's performance has shown a relatively rapid growth trend in recent years. The company strengthened its core competitiveness on the cost manufacturing side and brand channel side. Sales of products such as electric scooters and electric bicycles grew steadily on Amazon and Walmart, and sales of electric golf carts gradually increased as production capacity improved and channel optimization. In 2018-2022, the company's revenue had a compound growth rate of 30.09%, and net profit to mother had a compound growth rate of 51.60%. According to the company's performance report, the company's revenue in 2023 is estimated to be 2.147 billion yuan, +21.62% year on year, and net profit to mother is 281 million yuan, +36.24% year over year. Revenue for the fourth quarter was 800 million yuan, +42.61% year on year, and net profit to mother was 77 million yuan, +10.00% year over year. The estimated net profit for the 24Q1 quarter was 47 million yuan to 51 million yuan, +34.78% to +46.25% year over year. Based on the performance forecast center, net profit to mother for the 24Q1 single quarter was 49 million yuan, +40.52% year over year.

The company's new product business lines such as electric bicycles, electric golf carts, and high-displacement all-terrain vehicles are expected to provide strong growth impetus. The company continues to step up R&D efforts and technological innovation in the fields of electric bicycles, electric golf carts, and high-displacement all-terrain vehicles, accelerate the layout of new energy tracks, and spawn new development momentum. 1) Electric bicycles: In 2023, the company first developed and launched a high-performance off-road electric mountain bike equipped with a mid-mounted motor, which can provide high torque and high power output. It innovatively developed cargo electric bikes and hunting electric bikes to meet consumer needs for short-distance cargo and wild hunting. 2) Electric golf cart: The company's second-generation electric golf cart has been developed and put into trial production. At the same time, the company plans to increase capital to the wholly-owned subsidiary Tao Holding LLC using the total amount of overfunded capital of no more than 540 million yuan to build a “smart electric low-speed vehicle construction project with an annual output of 30,000 units” and a “marketing network construction project”.

3) High-displacement all-terrain vehicles: Entering the field of medium- and large-displacement all-terrain vehicles, the 300 ATV was successfully launched as a milestone model in the company's “breaking the wall” high-displacement all-terrain vehicle development. The 500 ATV and UTV completed research and development and entered small-batch trial production one after another. At the same time, they closely followed the new energy development trend of “oil to electricity” and further moved in the direction of electrification.

Steady industry growth: The off-road recreational vehicle industry has shown a good growth trend in recent years, and the domestic market space is broad; the motorcycle market for medium displacement scooters and high-displacement recreational motorcycles continues to expand, and its share is gradually increasing.

1) Off-road recreational vehicle industry: According to Allied Market's forecast in the company's 22nd annual report, ① All-terrain vehicles: Since 2012, global ATV and UTV sales have grown from 772,000 units to 1.01 million units in 2021, with a compound annual growth rate of 3.03%. The global all-terrain vehicle market will continue to grow and is expected to reach $141 billion by 2025. ② Electric scooters: The total global output value of electric scooters reached US$1.21 billion in 2020, with a compound growth rate of 12.35% in 2021-2027. According to Taotao Auto Industry's 2022 annual report, global sales of electric scooters reached 6.231 million units in 2021, an increase of 41.58% over the previous year, and the market volume potential is huge. ③ Electric scooter: Global electric scooter shipments reached 10.32 million units in 2020, an increase of 23.7% over the previous year. ④ E-bikes: According to Markets and Markets, the global e-bike market size is US$49.7 billion in 2022, and is expected to reach US$80.6 billion in 2027, with a compound growth rate of 10% in 2027.

2) Motorcycle industry: With the continuous development of the national economy, the improvement of people's living standards and consumption upgrades, the market for medium-displacement scooters and large-displacement recreational motorcycles continues to expand, and its share is gradually increasing. In 2018, China imported 34,000 motorcycles, an increase of 61.9% over the previous year. Among imported motorcycles, 79.4% had a displacement of 250cc or more, and 40.1% had a displacement of 800cc or more. As China's motorcycle leisure and culture industry enters a period of rapid development, there is an increase in leisure and entertainment models with novel design, stronger technology, and mainly 250cc or above in domestic motorcycle consumption. China's 250cc and above high-displacement motorcycle market still has a lot of room for development. In 2020, the production and sales volume of motorcycles with a displacement of 250 cc or more (excluding 250 cc) was about 208,800 units, an increase of 13.32% over the previous year, an increase of 14 times compared with 2013 (13,000 units). Judging from the total motorcycle market in China, high-displacement motorcycles still account for only about 3%. As residents' income levels continue to rise, the middle and upper income groups continue to expand. It is expected that in the future, high-displacement motorcycles will account for 10% of the total domestic motorcycle market.

Profit forecasting and valuation. We expect the company to achieve operating income of 21.46/28.14/35.67 billion yuan in 2023/2024/2025, up 21.6%/31.1%/26.7% year on year; net profit to mother will be 2.80/3.51/443 million yuan, up 35.8%/25.3%/26.2% year on year. The average PE valuation of comparable companies in 2024 is 18.14 times. We consider that the company has a clear cost advantage. The gross profit margin and net margin are higher than those of comparable companies. At the same time, the company is still in the early stages of development. The product is cost-effective and has channel advantages, large development space, and good growth. The reasonable value range is 70.62-80.25 yuan/share (the company's EPS is estimated to be 3.21 yuan in 2024), and the reasonable market value range is 77-88 billion yuan. “Better than the market” rating. Referring to the PB valuation, according to our reasonable value range, the company's 2024 PB was 2.24-2.54 times higher than the comparable company average (average PB value of a comparable company in 2024 was 1.71). Considering that the company's growth is good, the valuation is reasonable.

Risk warning: the risk of macroeconomic fluctuations, the company's release of new products falling short of expectations, increased risk of industry competition, etc.