Incident: The company discloses its 24-year semi-annual report. The company's 24H1 revenue was 1.391 billion yuan, +77.23% year on year, net profit to mother was 0.182 billion yuan, +35.36% year over year, 24Q2 revenue was 0.871 billion yuan, +99.76% year over year, and net profit to mother was 0.131 billion yuan, +31.67% year over year.

Profitability declined year over year, and 24Q2 net interest rate rebounded month-on-month. In 24H1, the company's gross margin and net margin were 35.92%/13.09%, with year-on-year change of -5.37pct/-4.05pct; among them, 24Q2's single quarter gross margin/net margin was 34.99%/15.06%, -6.25pct/-7.79pct, and -2.49pct/+5.27pct month-on-month, respectively.

The overall control of the fee rate was good, and the increase in the financial fee ratio was mainly due to the year-on-year decrease in exchange earnings. The cost rate for the 24H1 period was 18.56%, -2.82pct year-on-year. Among them, the sales/management/finance/R&D expense rates were 12.03%/4.43%/-1.79%/3.9%, respectively, with year-on-year changes of -4.95pct/-1.2pct/+3.77pct/-0.44pct. Among them, the cost rate for the 24Q2 period was 14.79%, a year-on-year change of +0.94 pct. Among them, the sales/management/finance/R&D expense rates were 9.53%/3.67%/-1.27%/2.85%/, respectively, with year-on-year changes of -7.78pct/-2.06pct/+12.96pct/-2.18pct. The year-on-year increase in financial expense ratios was mainly due to a year-on-year decrease in exchange gains and losses. 24H1 exchange earnings were 114.866 billion yuan, a year-on-year decrease of 23.106 million yuan.

Cash flow improved and inventories increased year over year. The company's operating cash flow for 24H1 was 0.288 billion yuan, +32.71% year over year, and 24Q2 operating cash flow was 0.037 billion yuan, or -35.78% year over year; as of June '24, the company's inventory was 0.832 billion yuan, +12.87% year over year.

Sales of electric golf carts are strong, and the market share continues to increase. By business, 1) Electric golf carts: revenue of 0.371 billion yuan, a year-on-year increase of 1200.82%. More than 60 new dealers have been added, and the total number has been expanded to more than 120, achieving full coverage of the US core market area. 2) All-terrain vehicles: revenue of 0.369 billion yuan, up 47.25% year on year; DENAGO brand all-terrain vehicles added more than 30 high-end dealers, building dealers from leading brands in the industry; 3) Electric scooters: revenue of 0.296 billion yuan, up 15.24% year on year, achieving double growth in sales and sales in North America; 4) Electric bicycles:

Revenue was 0.126 billion yuan, an increase of 110.02% over the previous year. The new HOVERFLY brand was launched on the AMAZON channel, forming differentiation and complementarity with the existing GOTRAX brand, helping to rapidly rise to the top of the market share and achieve sales of over 10,000 units with a more cost-effective advantage.

Accelerate the deployment of overseas production capacity and actively respond to international competition and challenges. 1) Overseas sales: 24H1's overseas revenue was 1.391 billion yuan, +77.23% year over year, mainly driven by the three major regions. US/America (excluding the US and Canada)/Asia (excluding China) revenue was +105.88%/389.84%/45.36%, respectively. 2) Overseas factory progress: The construction of the first phase of the Vietnam factory has entered the final stage, and small-batch trial production has begun; the construction of the three major electric golf cart factories in the US is progressing smoothly, and the company is gradually implementing the “Made in North America +” strategy.

Profit forecast: We expect the company to achieve operating income of 2.942/3.787/4.522 billion yuan in 2024/2025/2026, up 37.2% 28.7% 19.4% year on year; net profit to mother is 0.362/0.441/0.524 billion yuan, up 29.1%/21.7%/18.9% year on year. Comparatively, the company's average PE valuation in 2024 is 20 times. We consider the company's rapid release of new products, high cost performance and channel advantages, and good growth. The company was given a 17-18 times PE valuation in 2024. The reasonable value range was 56.10-59.40 yuan/share (the company's EPS is expected to be 3.30 yuan in 2024), and the reasonable market value range is 6.2-6.5 billion yuan, giving it a “superior to the market” rating. Referring to the PB valuation, according to our reasonable value range, the company's PB in 2024 was 1.87-1.98 times (the average PB value of a comparable company in 2024 was 3.39). 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, the risk of tariffs and trade friction, the risk of increased competition in the tariff industry, etc.