An overview of the incident. The company disclosed the 2023 annual report and the report for the first quarter of 2024. Revenue for 2023 was $12.11 billion, +6.4% year over year; net profit to mother was $1.01 billion, +43.7% year over year; net profit after deducting non-return to mother was 970 million yuan, +21.8% year over year. The company's 2024Q1 revenue was 3.06 billion yuan, +6.3% YoY, +12.4% month-on-month; net profit to mother was 280 million yuan, +32.0% YoY; +35.0% month-on-month, exceeding expectations.
The 24Q1 results surpassed expectations, and there was a triple resonance of volume, price and profit. 1) Revenue side: In 2023, domestic and foreign sales of the company's two-wheeled motorcycles fully blossomed, with sales volume of 9.9/98,000 units, respectively, with sales volume of +8.6%/+70.2% year-on-year. We estimated ASP of 22/23,000 yuan respectively; the four-wheeler structure continued to be optimized, and ASP increased to 44,000 yuan in 2023, +8.3% over the same period. We expect the share of the U/Z series to increase mainly (the unit price is about twice that of ATVs). In 2024Q1, the company achieved year-on-month revenue growth. We believe this was due to the company's two rounds of rapid export growth plus four rounds of inventory removal. 2) Profit side: The company's net profit in 2023 was 1.01 billion yuan, which is at the center of the previous performance forecast. The company's 23Q4 net profit was 210 million yuan; 24Q1 net profit to mother was 280 million yuan, +32.0% YoY and +35.0% month-on-month, exceeding expectations. We believe this is due to four-round structural improvements+declining shipping fees+increased net profit from exchange earnings (positive revenue of $49 million in 2023). 3) Expense side: 2024Q1 sales/management/ R&D/ finance cost rates were 10.4%/5.2%/6.2%/-2.2%, respectively, +3.3/+0.3/-4.9/-1.5pct, respectively.
Motorcycles: The long-term logic of the CUHK platoon will not change to speed up the export process. 1) Domestic sales: According to data from the China Motorcycle Chamber of Commerce, the company sold 39,000 250cc+ models in 2023, +54% year-on-year. The proportion of large displacement continued to increase, and the market share increased to 11.8%, up to +5.4 pcts year on year. On the product side, new products such as 675SR, 500SR, and 450MT will be launched in 2024, focusing on boosting subsequent sales and optimizing the product structure. 2) Exports: The company's motorcycle exports increased by nearly 70% in 2023, with the vast majority of models being 250cc (inclusive) and above. According to data from the China Motorcycle Chamber of Commerce, the company exported a total of 16,000 vehicles from January to January 2024, +70.8% over the same period. We expect to maintain rapid growth throughout the year.
All-terrain vehicles: Dig deeper into the US market and continue to optimize the product structure. The US is the world's largest all-terrain vehicle market. In recent years, the company has concentrated resources to develop the US market. The company's all-terrain vehicle product structure continues to be optimized, and the sales share of high-value-added products is steadily increasing. It is optimistic that the company will expand its product line (U/Z series) and continue to increase its market share in the medium to long term due to cost performance advantages. Furthermore, the inventory removal process for the company's all-terrain vehicle products has come to an end, so it is recommended to pay attention to marginal changes in wholesale data.
Investment advice: Long-term optimism about the sales boosting effect brought about by the company's strong brand power+matrix expansion, and the volume-price increase opportunities brought about by the all-terrain vehicle business+cost performance advantage+channel expansion+structural improvement. We expect the company's 2024-2026 revenue of 150.2/185.5/22.90 billion yuan, net profit to mother of 12.68/16.03/1,974 billion yuan, and EPS of 8.43/10.65/13.12 yuan. Corresponding to the closing price of 140.00 yuan/share on April 15, 2024, PE was 17/13/11 times, respectively, maintaining the “recommended” rating.
Risk warning: competition in the domestic motorcycle market intensifies; overseas four-wheel demand falls short of expectations; exchange rate fluctuations; the company's new product sales fall short of expectations, etc.