Key takeaway

The company reported better-than-expected revenue and earnings growth in 4Q25 and 1Q26. This was mainly driven by steady growth in traditional strong categories such as small-displacement ATVs, off-road motorcycles, and electric scooters, with market share continuing to increase. Meanwhile, emerging categories including electric low-speed vehicles, large-displacement ATVs, and electric bicycles delivered rapid growth and contributed incremental revenue. Looking ahead to 2026, new products such as electric low-speed vehicles and large-displacement ATVs will further ramp up in volume. Sales scale and contribution are expected to continue increasing. Overseas channels and production capacity will also keep expanding, and profitability is expected to remain stable.

Event

On March 30, 2026, TAO TAO released its 2025 annual report; on April 28, 2026, TAO TAO released its 1Q26 report.

In 2025, the company recorded operating revenue of RMB3.941bn (+32.41%), net profit attributable to shareholders of the parent company of RMB0.816bn (+89.29%), and a net margin of 20.71% (+6.22pct). Among this, 4Q25 operating revenue reached RMB1.169bn (+54.49%), with net profit attributable to shareholders of the parent company of RMB0.21bn (+61.49%), and a net margin of 17.95% (+0.78pct). In 1Q26, operating revenue reached RMB1.059bn (+65.66%), net profit attributable to shareholders of the parent company was RMB0.176bn (+104.50%), and net margin was 16.65% (+3.16pct).

Brief analysis

I. Revenue analysis: Traditional strong categories remain solid, emerging categories contribute incremental growth

1) Electric mobility products: Revenue reached RMB2.787bn in 2025 (+47.64%), accounting for 70.72% of total revenue, with gross margin at 46.14% (+9.89pct).

Electric low-speed vehicles:Estimated sales volume was around 43,000 units (+about 90%), with an average selling price of around RMB45,500 (+about 30%). Revenue reached nearly RMB2.0bn (+140.98%), with gross margin exceeding 50%. According to the company’s announcement, only three years after entering the North American market, the company’s electric low-speed vehicle sales have already ranked among the global leaders. In 2025, sales revenue ranked first globally, with a global market share of about 10.9%. In terms of channels and production capacity, the DENAGO brand added 100 high-quality dealers during the reporting period, bringing the total to more than 270 dealers and covering 47 states in the United States. Channel development has begun to take shape, and the brand has also achieved initial breakthroughs in golf course vehicle scenarios. Meanwhile, the U.S. factory has achieved stable mass production, with production efficiency and delivery capability continuously improving; in terms of brands, in September 2025, the company officially launched the second electric low-speed vehicle brand, TEKO. Together with DENAGO, it forms a dual-brand structure with clear positioning and coordinated pricing. It effectively complements DENAGO, enabling deeper penetration into broader customer segments and regional markets, significantly enhancing overall brand coverage and market share.

Electric two-wheeled vehicles:Generated revenue of about RMB830mn, down double digits YoY. According to the company announcement, electric bicycle businessachieved remarkable results in channel expansion, successfully introduced multiple models into Walmart and delivered strong sales performance, becoming an important source of growth, while on the Amazon platform the company focused on promoting new products and continued to consolidate leading rankings in niche categories, while organic traffic and the user base of its proprietary website kept growing; electric scooter business maintained competitive advantages across diversified channels, and RIVAL scooters under related product lines on the Amazon platform delivered outstanding market performance with sales ranking among the top in comparable products; electric self-balancing scooter business developed product series that combine practicality and aesthetic value, with steadily improving market recognition. Its products have long ranked among the leading positions in their categories on the Amazon platform and maintained Best Seller certification. On Walmart, they have been selected for the annual product recommendation homepage for four consecutive years and have ranked first in category sales for three consecutive years.

2) Powersports products:In 2025, revenue reached RMB943mn (+1.95%), accounting for 23.92%, with gross margin of 31.89% (-1.01pct).

All-terrain vehicles: In terms of market expansion,the company has gradually integrated into local high-quality dealer networks in the North American market relying on the DENAGO brand. It has now expanded to more than 100 partners, laying a channel foundation for the subsequent introduction of UTVs and high-end ATVs; in markets outside North America, the company leverages its core advantages in small-displacement all-terrain vehicles, steadily advancing the development and deployment of mid- to large-displacement products while continuously strengthening market penetration and user awareness. In terms of product portfolio, the company has achieved small-batch production of the 650CC UTV. The 350CC ATV and 500CC ATV have entered a stable mass production stage. The 300CC ATV, with outstanding reliability and all-terrain adaptability, has become an important growth driver in markets outside North America. At the same time, the company continues to improve its small- and mid-displacement product lines by upgrading the design and performance of models including the 200CC, 250CC, and electric ATVs, thereby consolidating coverage and competitiveness in the mainstream mass market.

Off-road motorcycles:The company further improved its channel, brand, and product presence. It successfully entered North American specialty retail chains such as TSC and has established stable cooperation with more than 100 high-quality dealers in North America. The DENAGO brand has formed a dual-track product structure with both mass-market and high-end lines, and its brand recognition and terminal penetration continue to rise. The company focuses on integrating power performance, lightweight design, and all-terrain capability, while also treating electrification as an important direction for the R&D and upgrading of off-road motorcycle products. Related youth electric models have been launched successively.

3) Accessories and other businesses:Revenue in 2025 reached RMB212mn (+28.85%), accounting for 5.37%, with a gross margin of 22.83% (-9.36pcts).

In 1Q26, the company recorded revenue of RMB1.059bn (+65.66%), with a gross margin of 40.90% (+3.67pcts). The growth was mainly driven by incremental contributions from emerging categories such as electric low-speed vehicles, all-terrain vehicles, off-road motorcycles, and e-bikes. Among them, electric golf carts achieved sales of around 12,000 units, with both sales volume and revenue doubling, and their revenue contribution has already exceeded 50%.

II. Profitability analysis: Rapid growth of golf carts drives margin expansion, long-term net margin expected to remain stable within a range

1) Gross margin and expense ratio: New product volume expansion lifts gross margin, exchange losses affect profits

In terms of gross profit, the gross margin in 2025 was 41.48% (+6.49pcts). The gross margin of electric mobility products was 46.14% (+9.89pcts), while that of power sports products was 31.89% (-1.01pct). Among them, the gross margin in 4Q was 39.50% (+8.43pcts), and the gross margin in 1Q26 was 40.90% (+3.67pcts). The continuous improvement in gross margin mainly benefited from sustained rapid growth of electric low-speed vehicles with high unit prices and high margins.

In terms of expenses, the expense ratio in 2025 decreased by 3.09pcts YoY. Among them, the expense ratio in 4Q increased by 5.96pcts YoY. The selling/administrative/R&D/financial expense ratios changed by -0.53/-1.88/-1.80/+10.17pcts YoY, respectively. In 1Q26, the expense ratio decreased by 0.67pct YoY. The selling/administrative/R&D/financial expense ratios changed by -4.03/+0.05/-1.63/+4.93pcts YoY, respectively, mainly affected by increases in employee compensation, intermediary consulting service fees, and exchange losses.

Looking ahead to 2026, as the scale of electric low-speed vehicles and all-terrain vehicles continues to expand, and with price increases of electric low-speed vehicles passing through costs and expenses, the company’s gross margin is expected to remain at a relatively high level. Meanwhile, as the impact of exchange rate fluctuations gradually diminishes, the company’s expense ratio may remain stable.

2) Net margin: Net margin rises in the short term and is expected to remain stable in the long run The net margin in 2025 was 20.71% (+6.22pcts). Among them, the net margin in 4Q was 17.95% (+0.78pct), and the net margin in 1Q26 was 16.65% (+3.16pcts). Based on the outlook for gross margin and the expense ratio, the company’s net margin level is expected to remain stable.

Investment recommendation: The smart mobility industry is on a fast growth track. The company maintains a clear cost-performance advantage in traditional categories and holds a leading market share in North America. It has also proposed a development strategy of larger displacement + premiumization + intelligence + transition from fuel to electric, opening up new categories and growth curves such as electric low-speed vehicles, large-displacement all-terrain vehicles, and intelligent products. Revenue scale is expected to double. We estimate the company will achieve net profit attributable to shareholders of the parent company of RMB1.167bn/RMB1.614bn/RMB2.067bn in 2026–2028, with EPS of RMB10.70/RMB14.81/RMB18.96. Based on the current share price, the corresponding PE is 24.82x/17.94x/14.01x. We maintain a “buy” rating.

Risks

1) New category ramp-up below expectations:2026 will be a key year for the ramp-up of emerging categories such as electric golf carts and large-displacement all-terrain vehicles. If new products fail to meet customer needs, or if product competitiveness and cost performance are weaker than competing products, sales may underperform and affect the company’s results for the year.

2) Declining demand for traditional categories:Affected by factors such as inflation in the European market, demand for optional products such as electric scooters has declined significantly. In addition, competition in traditional categories is fragmented, and TAO TAO holds a relatively low market share. If demand in Europe remains weak and other leading brands increase their investment, the sales scale of the company’s traditional categories may face further decline.

3) Freight rates and exchange rate fluctuations:The company’s business mainly focuses on exporting intelligent electric low-speed vehicles and specialty vehicles. Overseas sales account for more than 95% of revenue, so the business is highly sensitive to freight rates and exchange rate fluctuations. First, current freight rates are generally at a low level. If shipping costs rise sharply, it will increase transportation costs and negatively affect gross margin. It may also create resistance to exports and affect the company’s overall operations. Second, long-term exchange rate fluctuations may affect the operating strategies of foreign trade enterprises. The USD exchange rate has shown significant short-term volatility.