Gotion Earnings: Decent Volume Offset by Margin Pressure Amid Price Competition

No-moat Gotion reported mixed first-quarter 2024 and full-year 2023 results. For the first quarter, the firm recorded 5% revenue growth year over year but a 9% net profit decline. Gross margin narrowed 1.1 percentage points in the quarter from last year, indicating increasing margin pressure amid price competition. For 2023, revenue and net profit were up 37% and 2 times year over year, respectively, both at the midpoints of the company’s preliminary announcement. We tweak our assumptions, slightly increasing our 2024-25 revenue and profit forecasts, leading to a marginal rise in our fair value estimate to CNY 17.30 from CNY 17.10 per share. Our fair value implies a forward price/earnings ratio of 67 times, fairly valued, in our view, with shares trading in 3-star territory.