CFMOTO Stock Rising Nearly 7% Indicates A “Spring Breeze” for Large Displacement Motorcycles
On October 21, CFMOTO stock (603129) (603129.SH) opened and traded high, rising to 149.87 yuan/share, up 6.87%, reaching a total market value of 22.492 billion yuan. On the evening of the 20th, CFMOTO released financial results, which showed that the company’s third quarter revenue, net profit both hit the highest level since listing.
According to the financial report, CFMOTO achieved 8.629 billion yuan of operating revenue in the first three quarters, a year-on-year increase of 51.71%; Net profit attributable to the parent company reached 570 million yuan, up 78.20% year on year. In the third quarter, it achieved operating revenue of 3.726 billion yuan and net profit attributable to the parent company of 265 million yuan. For the growth of revenue and net profit, CFMOTO said the main reason is the expansion of the company scale, the increase of sales revenue and the increase of exchange income.”
CFMOTO was founded in 1989, with large displacement motorcycles’ water-cooled power as the core technology, and products focus on ATVs and large displacement motorcycles. According to the China Chamber of Commerce for Motorcycles, in the third quarter of 2022, the company sold 42,500 two-wheeled motorcycles and 40,700 four-wheeled ATVs, respectively up 75.4% and 0.4% year-on-year, and up 45.6% and 3.6% quarter-on-quarter. According to CFMOTO, although motorcycle sales grew faster in the third quarter, the total revenue of ATVs is still higher than that of motorcycles because ATVs are generally priced higher.
An analyst from West China Securities (002926) thinks that the revenue growth of CFMOTO significantly outpaced its sales growth. In addition to the benefit of exchange rate, the growth is mainly driven by the upgrading of product structure: first, the company’s high value-added four-wheeler products have increased; second, two-wheeler business is upgraded to focus on larger displacement models. In addition, the company started large-scale delivery of the 450SR in the third quarter
Indeed, motorcycles’ recreational function has revitalized the seemingly “sunset” motorcycle industry. Zheshang Securities (601878) has pointed out in a research report that in the past five years, the domestic sales CAGR of 250cc and above two-wheel motorcycle reached 56%. CFMOTO also expressed that, in recent years, due to the rapid growth of residents income and the subsequent consumption upgrading, people’s demand has shifted from motorcycle being a transport means to an entertainment companion, The domestic motorcycle recreation and culture industry gradually formed, indicating huge potential in the recreational large displacement motorcycle market. There is likely to be similar development prospects for large motorcycles as in the Europe and US. At present, the market demand in Europe and the United States is mainly for sports bikes, super bikes and touring bikes with a medium-to- large displacement and cool look, with a high ownership and a large market space.
In the third quarter of 2022, CFMOTO’s gross margin reached 26.39%, the highest since the third quarter of 2020, but its net profit rate of 7.45% was lower than that of the second quarter of 2022, which may be caused by the high selling expenses. The company’s sales expenses reached 315 million yuan in the third quarter, exceeding the amount (307 million yuan) of the first half of the year,according to the financial statement. In this regard, CFMOTO explained that in the third quarter, the company stepped up domestic and foreign brand promotion and promotion of core products, resulting in a rapid increase in sales expenses. In the future, the company will carry out reasonable cost control based on business needs. With the expansion of the company’s product lines and the gradual implementation of brand promotion, the relevant expense ratio will gradually decline in the medium and long term, and the company’s profit margin will gradually increase with the subsequent scale effect.
In the third quarter of 2022, LOF bought in 97,000 CFMOTO shares, with its shareholding ratio reaching 2%, while another Fullgoal fund reduced stock by 290,000 shares. In addition, the basic pension insurance funds portfolio 16022 bought in 490,000 shares. The northbound capitals (Shanghai and Shenzhen stocks) also became CFMOTO’s top ten shareholders. It is worth mentioning that CFMOTO’s “old neighbor”, the shareholder ROBAM significantly reduced 1.3471 million shares in the third quarter, reducing its shareholding ratio to 3.16%. From July 1 to September 30, 2022, the lowest price of CFMOTO was 109 yuan/share, and the highest was 173.60 yuan/share, with an average price of 141.72 yuan/share. In October 2015, on the eve of CFMOTO’s listing, ROBAM subscribed to increase capital to the company, holding 7.43% of the CFMOTO shares after its listing.
On October 20, CFMOT issued equity incentives, which planned to grant 1,064,400 stock options to 547 core management and technical personnel, with the exercise price of 112.90 yuan per share. The performance assessment targets of the two exercise periods are respectively that the operating revenue in 2022 should not be less than 9.827 billion yuan, and the cumulative operating revenue of 2022 and 2023 should not be less than 20.675 billion yuan.
(Source: http://www.chmotor.cn )
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