Incident: On August 21, the company stated in an investor Q&A: “As inventory within the channel is gradually digested, the overall inventory level will tend to normalize.”

Comment:

Since 2023, the company's overall performance has been under pressure due to high inventory levels in the industry and slowing demand for terminals. In 2023, after experiencing a two-year sales boom in 2021-2022, due to the combined effects of high inventory, extreme weather, geopolitics, and inflation in the industry, demand for electric bikes in Europe slowed overall. Sales of electric scooters in major countries, Germany and the Netherlands all declined. Sales in 2023 were 2.1 million/0.453 million vehicles, respectively, a decrease of 4.55%/6.79% year-on-year.

With the normalization of inventory levels, the company's performance is expected to continue to pick up.

In the medium to long term, demand for electric bikes is safe. European market: As low carbon or even zero carbon emissions advance, more countries support electrification of travel by increasing subsidies and infrastructure investment, etc., and the electric bicycle market can be expected to grow; US market: electric bike products started late, current penetration rate is low, and have great potential for future development; domestic market: In July 2023, the Ministry of Industry and Information Technology issued the “Light Industry Steady Growth Work Plan (2023-2024)”, which proposes to carry out actions to transform and upgrade sports and leisure bicycles, accelerate the promotion of sports and leisure bicycles and other products, which have advantages such as green, safety, and energy saving Sporty electric bicycles are expected to usher in development opportunities.

Brand building is advancing at an accelerated pace, and the level of after-sales service continues to improve. In 2023, the company participated in important exhibitions held in many countries, including the China International Bicycle Show (Shanghai, China), Eurobike European Bike Show (Frankfurt, Germany), The Cycle Show (London, England), Sea Otter Classic (California, USA), etc., and showcased eCity city commuter vehicles, EMTB dynamic mountain bikes, eCargo transport loaders, eRoad ultra-light road vehicles and many other mature drive system solutions at the exhibition . In 2023, the company launched and actively promoted the DDS (direct-to-dealer service) direct dealer service system project, which aims to provide customers with more efficient and flexible after-sales service. The company's dealer website was officially opened to the public and has been introduced to many customers, and the company's after-sales service level is closer to world-class brands.

Profit forecast, valuation and rating: Considering the relative weakness of overseas demand, we lowered the company's profit forecast for 24-25 and added a profit forecast for 26 years. The company is expected to achieve net profit of 0.146/0.211/0.245 billion yuan in 24-26 (73% down/70% /increase). The current stock price corresponds to a PE of 29/20/17 times for 24-26. Considering the gradual digestion of inventory within the channel, the overall inventory level will tend to normalize. The company's 24H2 performance is expected to improve significantly compared to 24H1. In the medium to long term, the trend of increasing the penetration rate of electric scooters in overseas markets will not change, maintaining the “increase” rating.

Risk warning: Market competition intensifies risks, and European and American demand falls short of expectations