Yadea Group Holdings Ltd (1585 HK): Two-wheeled is as good as four-wheeled
- Buy Entry – 15.6 Target – 19 Stop Loss – 14
- Yadea Group Holdings Ltd. is an investment holding company principally engaged in the development, manufacture and sales of electric two-wheeled vehicles and related accessories. The company’s main products include electric scooters, batteries and chargers, electric bicycles and electric two-wheeled vehicle parts.
- The company just announced a positive profit alert where 1H21 net profit growth will be no less than 40% YoY, attributable to the increase in the sales of electric two-wheeled vehicles.
- Electric vehicles have been the main investment theme. The company’s main product is a subsegment of the theme. As the market leader of the electric two-wheeled vehicles, the company dominates around 25% of the domestic market in terms of sales volumes. The company has a target to achieve 35% market share in the next couple of years. The revenue and net profit CAGR over the past five years was 23.8% and 17.3% respectively. Hence, the company is still in an expansionary mode.
- Range bound trading. Shares have been trading range bound between HK$15 and $20 since March this year. Technically, the stock has formed a support at HK$15.
- Consensus estimates. Market consensus of net profit growth in FY21 and FY22 are 69.6% YoY and 39.3% YoY, which implies forward PERs of 28.3x and 20.3x. Bloomberg consensus average 12-month target price is HK$31.1.