The company's recent situation

1Q24 industry and company sales data released.

reviews

Exports have driven a year-on-year increase in sales in the fuel motorcycle industry, and exports of 150 series and high-displacement motorcycles have increased significantly. According to data from the China Motorcycle Chamber of Commerce, the production and sales of the fuel motorcycle industry in 1Q24 were 3.4853 million units and 3.5053 million units respectively, +10.6%/9.7% year-on-year, mainly driven by exports. 1Q24 total motorcycle exports were 2.294,500 units, up 36.17% year on year, continuing the positive growth trend of motorcycle exports since 2023. Among them, 150 series (125 ml 250 ml) motorcycles increased 41% year on year. By displacement segment, the 150 series sold 994,200 units, +31.8% year over year, making it the highest growth segment; high-displacement motorcycles sold 115,500 units, +5.9% year over year, achieving a positive overall growth rate. We believe that in the context of increasing competitiveness of Chinese motorcycle companies' products and pressure on domestic demand, motorcycle exports will gradually usher in a harvest period to actively boost overseas markets, and 1Q24's export growth rate will outperform the industry. According to the China Motorcycle Chamber of Commerce, 1Q24 sold 100,181 vehicles, +8.7% year over year, of which 62,130 vehicles were exported, +100.92% year over year. Looking at the breakdown, 1Q24 exported a total of 40,103 vehicles in the 110-150ml displacement segment, +144% year-on-year; 1,3034 high-displacement motorcycles were exported, +142% year-on-year. We believe that, benefiting from the rapid expansion of independent foreign trade channels and the improvement of product layout, the company's export performance showed a strong α on the basis of industry beta. The export growth rate of 1Q24 high-displacement and small-displacement models was higher than that of the industry.

Overseas market revenue and profit contributions are expected to increase significantly in 24 years, and the company's export business is booming. In 2023, the company's overseas revenue was 2,066 billion yuan, +2.2% year on year, gross profit margin 27.8%, and +3.6ppt year on year, partly hedging the downward pressure on domestic revenue and gross margin year on year. Looking ahead to 2024, we believe that benefiting from the company's development of new overseas channels and new markets, we have obtained orders and are expected to support export sales to maintain a high growth rate; at the same time, we judge that the profitability of independent foreign trade channels is superior to the original overseas channels and also superior to the domestic market, so the profit contribution is worth looking forward to. Looking at the medium term, we believe that the overseas fuel motorcycle market may maintain steady growth. Chinese motorcycle companies are strengthening their overseas market layout, and there is still room for improvement in market share; the company's export base is low, new brands and products (QJMOTOR, Benelli), new markets (Africa, Middle East, etc.), new channels (independent foreign trade), and new categories (all-terrain vehicles) are expected to drive the company's export growth rate to further outperform the industry. In the domestic market, we believe that the recovery in demand for high-displacement motorcycles is related to the restoration of consumer income expectations and the stabilization of the price system, and sales are expected to rise steadily from 23 to 24.

Profit forecasting and valuation

Considering the rapid growth rate and excellent profitability of the export business, we raised the 2024/25E profit forecast by 13%/13% to 63/750 million yuan. The current stock price corresponds to 17.8x/15.1x 2024/25E P/E, maintaining an outperforming industry rating, and export growth drives the motorcycle sector's valuation repair. We raised our target price by 28.6% to 27 yuan, corresponding to 22.5x/19.1x 2024/25E P/E, with 27% upside compared to the current stock price.

risks

Export growth fell short of expectations; domestic sales recovery fell short of expectations.