Key takeaway

The company released its 1H26 report. Revenue grew rapidly and earnings increased steadily in 2Q26, mainly driven by higher sales volume and average selling prices for all-terrain vehicles, growth in domestic and overseas motorcycle sales, and continued strong growth in electric two-wheelers. However, tariffs, exchange rates, R&D investment, and supplementary social security contributions put short-term pressure on profitability. Looking ahead to 2H26, demand for all-terrain vehicles, motorcycles, and two-wheelers is expected to improve, while new products will be launched across all categories. Coupled with the diminishing impact of external factors, the company is expected to sustain strong sales growth, with profit margins stabilizing and recovering.

Event

On August 17, 2026, CFMOTO released its 1H26 report. In 1H26, the company recorded revenue of RMB13.386bn, up 35.82% YoY, and net profit attributable to shareholders of the parent company of RMB1.065bn, up 6.26% YoY. Its net margin was 7.95%, down 2.21 pcts YoY. In 2Q26, the company recorded revenue of RMB8.027bn, up 43.22% YoY, and net profit attributable to shareholders of the parent company of RMB642mn, up 9.41% YoY. Its net margin was 8.00%, down 2.47 pcts YoY.

Quick Take

1. Revenue analysis: four-wheeler + two-wheeler advantage consolidates; ZEEHO electric scooter shipments growth accelerated

1) All-terrain vehicles: The company continued to strengthen its brands, products, and sales channels. In 1H26, sales volume reached 131,100 units, up approximately 30%, while the average selling price was RMB54,500, up approximately 17%. Revenue reached RMB7.146bn, up 51.05%. In 2Q26, sales volume reached 79,000 units, up more than 40%. In 1H26, the company launched new product series including the Z10-4, C4, C5, and G5. A higher sales mix of premium models such as the U10 PRO and Z10-4 in North America drove up the average selling price. The company successfully joined the ranks of mainstream brands in the US market, standing alongside global industry leaders such as Polaris, BRP, and Honda. In Europe, it retained the largest market share through the coordinated operation of its two brands. In emerging markets such as Asia-Pacific and Latin America, the company continued to expand its dealer network, driving steady sales growth.

2) Motorcycles: The company continued to pursue a strategy that places equal emphasis on domestic and international markets while enhancing its product portfolio. In 1H26, sales volume reached 196,400 units, up 30.62%, while the average selling price was RMB20,400, down 8%. Revenue reached RMB4bn, up approximately 20%. In 2Q26, sales volume reached 130,000 units, up more than 30%. The company continued to expand its domestic and overseas sales networks. Domestic sales: New premium and mass-market products generated incremental sales through broader channel distribution and stronger retail sales. H1 sales volume reached 98,400 units, up 24% YoY. The average selling price was RMB17,100, down 20% YoY, and revenue was RMB1.6 85bn, down 1% YoY. Overseas sales: The company optimized and expanded its sales channels in mature European and US markets and emerging markets such as Latin America and Asia. H1 sales volume reached 98,000 units, up 37% YoY. The average selling price was RMB23,600, up 2% YoY, and revenue was RMB2.315bn, up 40.41% YoY. The company has accurately targeted the daily commuting segment in emerging markets, gradually expanding its brand from recreational to mass-market positioning, and its export scale is expected to achieve a breakthrough.

3) Electric two-wheelers: The company continued to diversify its product portfolio, covering female consumers, premium electric motorcycles, high-performance models, and utility models. H1 sales volume reached 338,000 units, up 35% YoY. The average selling price was RMB3,438, down 1% YoY, and revenue was RMB1.162bn, up 33.15% YoY. Of this, 2Q sales volume reached 238,000 units, up 54% YoY. The company is expanding ZEEHO's electric vehicle business globally. Its domestic channel network maintained rapid growth. The total number of outlets exceeded 2,600 in H1, achieving 100% coverage of key cities. Coverage density continued to improve in key tier-one to tier-three cities. ZEEHO’s global market share is steadily increasing, becoming the company’s third major growth driver.

4) Parts and other businesses: H1 parts revenue was RMB665mn, up approximately 6% YoY. Revenue from other businesses was RMB413mn, up 48.28% YoY.

II. Profitability analysis: Net margin stabilized QoQ, with room for long-term improvement

1) Gross margin and expense ratios: Tariffs and the business mix weighed on gross margin in the short term, while exchange rate fluctuations drove up expense ratios

Gross margin: Gross margin was 27.26% in 1H26, down 1.12 pcts YoY. Gross margin was 26.29% in 2Q26, down 1.05 pcts YoY and 2.41 pcts QoQ. This was mainly due to tariff disruptions and a higher revenue contribution from the ZEEHO business. Expenses: The total operating expense ratio rose by 1.31 pcts YoY in 1H26. The sel ling expense, administrative expense, R&D expense, and finance expense ratios changed by -0.51/-0.60/+0.30/+2.12 pcts YoY, respectively. In 2Q26, the total operating expense ratio rose by 0.69 pcts YoY. The selling expense, administrative expense, R&D expense, and finance expense ratios changed by -0.98/-0.75/+0.69/+1.72 pcts YoY, respectively. The main reasons were: 1) The company maintained reasonable inventory levels and reduced advertising and promotional expenses; 2) R&D investment increased; 3) Exchange rate fluctuations led to higher foreign exchange losses. Looking ahead to the second half, improving demand for all-terrain vehicles and motorcycles, new product launches, and the gradual emergence of economies of scale in the ZEEHO business are expected to stabilize the company's sales volume and gross margin. Meanwhile, as the impact of exchange rate fluctuations eases, the increase in the company's finance expense ratio is expected to narrow in 3Q26.

2) Net margin: Short-term pressure on net margin, with continued profitability improvement expected

Net margin was 7.95% in 1H26, down 2.21 pcts YoY. Net margin was 8.00% in 2Q26, down 2.47 pcts YoY and up 0.11 pct QoQ, mainly due to the lower gross margin and higher expense ratio. As domestic and overseas demand improves further in 2H26, the regional and product mix is optimized, gross margin stabilizes, and the expense ratio gradually returns to a normal level, the company's net margin is expected to continue improving.

Investment recommendation: The power sports industry is on a fast-growth track, driven by consumption upgrading and rising leisure demand, which enhance the penetration of ATVs and mid-to-large-displacement motorcycles. Cfmoto enjoys a clear cost-performance advantage and has launched a globalization, intelligence, and electrification strategy to capture industry tailwinds and expand new growth drivers. We forecast net profit attributable to shareholders of the parent company of RMB2.316bn/RMB3.009bn/RMB3.755bn for 2026 –2028, corresponding to EPS of RMB15.09/RMB19.61/RMB24.47. The current share price implies P/E ratios of 19.35x/14.89x/11.93x. We maintain our “Buy” rating.

Risks

1) Lower-than-expected overseas demand: The overseas sales proportion of two-wheelers and four-wheelers is increasing, with two-wheeler exports mainly to emerging markets in Asia, Africa, and Latin America, and four-wheeler exports mainly to mature markets in Europe and the U.S. If overseas economies face downturns or inflation worsens, Chinese motorcycle companies' overseas sales will be impacted.

2) Freight and FX rate fluctuations: With an overall increase in the proportion of export income, Chinese motorcycle companies are significantly affected by freight and FX rates. A sharp increase in freight rates will raise transportation costs, negatively impacting GPM and hindering exports, affecting overall business operations. Secondly, long-term exchange rate fluctuations will affect the pricing and business strategies of foreign trade enterprises. The US dollar exchange rate has experienced significant short-term volatility, with the current USD to RMB spot exchange rate hovering around 6.7.

3) Trade friction and tariff risks: Chinese companies have rapidly increased their market share in the ATV sector in recent years, taking market share from North American and Japanese brands. Currently, ATVs exported to the U.S. face tariffs, and if market share is further captured in the UTV sector, with trade friction intensifying or tariff policies tightening, the competitiveness and profit margins of Chinese companies will be affected.