3Q21 performance is lower than we expected.
The company announced 3Q21 results: 3Q21 income 37.212 billion yuan, year-on-year-11.71%, month-on-month-11.00%; return to the mother net profit of 120 million yuan, year-on-year-85.19%, month-on-month-85.96%. The income of 1-3Q21 is 121.251 billion yuan, + 12.04% compared with the same period last year, and the net profit is 1.627 billion yuan, + 24.03% compared with the same period last year. Due to the higher-than-expected decline in profitability, 3Q21's performance was lower than we expected.
Development trend
Under the influence of the business policy of the mainframe factory, the customer maintenance expenditure of superimposed stores has increased, and the gross profit margin of many sectors has declined compared with the previous month, resulting in profit pressure. 3Q21 gross profit margin is 8.45%, year-on-year-0.03ppt, month-on-month-1.70ppt. From a business point of view, the gross profit margins of 3Q21's new car sales, maintenance services, commission agency business and car rental business are-2.04ppt,-4.24ppt,-1.54ppt,-3.39ppt to 2.8%, 33.7%, 72.2%, 46.9%, respectively. On the new car sales side, although terminal store discounts have narrowed and increased sales prices, we expect that some mainframe factories have not yet adjusted their sales targets in their business policies, resulting in a decline in rebates and offsetting the increase in gross profit margin brought about by higher prices. We believe that if the mainframe factory does not adjust its business policy in time in the fourth quarter, the rebate will still be uncertain in the short term.
The scale effect of operation and management decreased, the operating cost of superimposed single store was more rigid, and the expense rate increased significantly compared with the previous period. The cost rate of 3Q21 sales increased by 1.0ppt to 5.2% compared with the same period last year. We estimate that the main reasons for the increase in sales and management expenses include: 1) the company launched a number of service activities during the epidemic, increasing store operating expenses, and 2) revenue declined in the third quarter compared with the previous quarter, but the labor costs and rents of store operations were more rigid. affected the level of expense during the period. In addition, the company has higher financing costs, issuing US dollar bonds with an interest rate of 9.125% in the third quarter, pushing the financial expense rate in the third quarter to 1.9% higher than the previous quarter.
The structure of the store is continuously optimized, waiting for the subsequent release of elasticity. In the first three quarters of 2021, the company added 14 new stores through new construction and acquisitions, mainly in the southwest and northwest regions. At the same time, due to strategic adjustment, the company reduced 35 stores, including 22 own property stores and 13 leased property stores. We expect that the company's continued adjustment of store layout will help the company to strengthen its distribution advantages to all regions of the country.
Profit forecast and valuation
Due to the decline in the profitability of the company, we cut the net profit of 2021Unix by 38.4% of the net profit of 2022 by 26.1% to 2.029 billion yuan / 2.842 billion yuan. The current share price corresponds to a price-to-earnings ratio of 11.5 / 8.2 times 2022. Taking into account the strong inventory expectations of the automotive industry, we maintain an outperform industry rating and a list price of 3.30 yuan, corresponding to 13.2 times 2021 price-to-earnings ratio and 9.4 times 2022 price-to-earnings ratio, which is 15.0% higher than the current stock price.
Risk
Profitability fell faster than expected, and financing pressure increased.