Summary of Longxin General's Conference Call Company Overview - Longxin General is deeply engaged in the motorcycle industry, maintaining a strong foothold in the low-end market while rapidly growing in the high-end market, particularly with its Wujie brand in the large-displacement motorcycle segment [2][4][20]. Key Points and Arguments Market Performance - Domestic sales of large-displacement motorcycles have seen over 20% year-on-year growth, with exports expected to increase by over 50% this year [2][4]. - The overall motorcycle business revenue reached approximately 12.6 billion yuan in 2024, marking a 34% year-on-year increase [4][20]. - In the first half of 2025, revenue grew nearly 25%, with profits approaching 1 billion yuan, reflecting over 80% year-on-year growth [4][24]. Brand Development - The Wujie brand, launched in 2019, focuses on mid-to-high-end leisure motorcycles and has seen significant sales growth, with exports of about 80,000 units last year [2][6]. - The introduction of popular models like the 525 has enhanced brand reputation, competing with high-end brands such as Chuanfeng and Qianjiang [2][6]. International Cooperation - Longxin General has partnered with BMW since 2005, which has significantly enhanced its capabilities in manufacturing large-displacement engines and complete vehicles [7]. Market Trends - The domestic fuel motorcycle market is declining, but the large-displacement segment is experiencing robust growth, driven by expanding domestic demand and export opportunities [10][11]. - The penetration rate of large-displacement motorcycles in China is still low, at around 10%, compared to over 20% in some developing countries, indicating substantial growth potential [12][16]. Competitive Landscape - The concentration of the domestic large-displacement motorcycle market is increasing, with the CR2 reaching approximately 60% in the first half of 2025 [13]. - Consumers prioritize brand strength, powertrain technology, vehicle design, and marketing channels when purchasing large-displacement motorcycles [14]. Additional Important Insights - Longxin General plans to expand its product matrix and strengthen its overseas market presence, with new models set to launch by the end of 2025 [21]. - The company aims to increase its market share in Europe, particularly in Spain and Italy, where it has already made significant inroads [22][18]. - Future revenue projections indicate that motorcycle business revenues will reach 15 billion, 18 billion, and 21 billion yuan from 2025 to 2027, with a growth rate of about 20% annually [25]. Financial Outlook - Longxin General's profit is expected to reach 1.8 to 1.9 billion yuan in 2025, with a projected increase to 2.2 to 2.3 billion yuan in 2026 [26]. - The company is seen as a quality investment with both growth and dividend potential, maintaining a recommended rating [26][27].

Core Viewpoint - The company is initiating coverage on Longxin General with a "Buy" rating and a target price of 18.40 yuan, corresponding to a 20x PE for 2025, highlighting its strategic shift from low-end OEM to self-owned mid-to-high-end brands [1] Group 1: Company Strategy and Market Position - Longxin has transformed its business model, with the "Wujie" brand contributing nearly 20% of revenue by 2024, enhancing pricing power and value chain positioning in the motorcycle business [1] - The acquisition of a controlling stake by Zongshen in 2024 is expected to create the largest motorcycle manufacturer in the industry, with a projected market share of 17% [1] - The complementary product lines and platforms of Longxin and Zongshen are anticipated to generate strong synergies, further boosting growth potential [1] Group 2: Market Demand and Product Performance - The demand for large-displacement motorcycles is rising, with domestic sales expected to increase by 20% year-on-year to 396,000 units in 2024, raising the market share of large-displacement motorcycles to 8.6% [2] - Longxin's "Wujie" brand has successfully captured market opportunities, launching competitive products like CU525, which has helped increase its market share to 14% in 2024 [2] - The company is projected to increase its market share to 16.2% within three years, with expected sales growth of 15%/10%/9% from 2025 to 2027 [2] Group 3: Export Growth and Future Prospects - The export business of "Wujie" is thriving, with a compound annual growth rate (CAGR) of 71% over the past four years, driven by partnerships with quality local agents and differentiated product offerings [3] - Europe and Latin America are identified as key growth regions, with expectations to capture 5% market share in Europe by 2027 and 2% in Latin America within three years [3] - The company anticipates maintaining a robust total sales growth rate of nearly 40% from 2025 to 2027 [4] Group 4: Financial Forecast and Valuation - Revenue is projected to grow by 15.3%/17.6%/18.4% from 2025 to 2027, with net profit expected to increase by 69%/24%/21%, reaching 1.90 billion, 2.36 billion, and 2.85 billion yuan respectively [6] - The average PE for comparable companies is estimated at 20x for 2025, leading to a target price of 18.40 yuan for Longxin [6] Group 5: Market Concerns and Growth Potential - Despite market concerns about saturation in the domestic large-displacement motorcycle sector, there remains significant growth potential compared to markets like Italy, Japan, and Brazil [5] - The company plans to expand its product offerings to fill gaps in engine platforms and segmented categories, which could further enhance its domestic market share [5]

Core Viewpoints - The growth of the motorcycle market is driven by two key factors: exports and large-displacement motorcycles, with the latter transitioning from a tool to a consumer product [2][8][11] - The domestic market for large-displacement motorcycles is expected to grow significantly, with a projected CAGR of 12% from 2024 to 2030, reaching 800,000 units by 2030 [3][77][80] - The overseas motorcycle market presents a substantial opportunity for Chinese brands, with an expected market size of 932 billion yuan in 2024, and a significant growth potential for large-displacement exports [4][8][11] Group 1: Market Overview - The annual motorcycle sales in China range from 19 to 20 million units, with small-displacement models dominating the market [2][15] - The motorcycle industry has undergone three phases: popularization, decline, and differentiated growth, with a notable shift towards large-displacement motorcycles since 2020 [2][19][20] - The domestic sales of fuel motorcycles are projected to decline from 7.71 million units in 2019 to 5.44 million units in 2024, while large-displacement motorcycle sales are expected to grow from 110,000 to 400,000 units during the same period, reflecting a CAGR of 28.8% [3][32] Group 2: Large-Displacement Motorcycle Market - The penetration rate of large-displacement motorcycles in China is expected to increase from 1.5% in 2019 to 7.5% in 2024, indicating a growing consumer interest in this segment [3][41] - The market for large-displacement motorcycles is being driven by rising outdoor sports demand and the development of motorcycle culture, with a significant increase in motorcycle events and clubs [3][48][56] - By 2024, the share of 400-500cc models is expected to rise to 46%, indicating a trend towards higher performance and larger displacement motorcycles [3][63] Group 3: Export Opportunities - The overseas motorcycle market is projected to exceed 40 million units in 2024, with large-displacement motorcycle sales estimated at 3.44 million units, representing a significant growth opportunity for Chinese manufacturers [4][8] - In 2024, Chinese motorcycle exports are expected to reach 11.02 million units, with a 25.7% share of the overseas market, highlighting the potential for further growth in large-displacement exports [4][8] - The export of large-displacement motorcycles is accelerating, with a CAGR of 67.6% from 2022 to 2024, as domestic brands enhance their international presence [4][8] Group 4: Key Players - The leading companies in the large-displacement motorcycle market include Chunfeng, Longxin, and Qianjiang, with Chunfeng expected to become the market leader in 2024 [5][9] - Chunfeng's motorcycle sales are projected to grow from 45,000 units in 2019 to 308,000 units in 2024, with a focus on large-displacement products [5][9] - Longxin's large-displacement motorcycle sales are expected to increase from 21,000 units in 2019 to 108,000 units in 2024, reflecting a CAGR of 38.6% [6][9]