New car sales pressure may continue in the first half of the year
-Revenue fell 8% and net profit fell 43%, in line with the previous announcement by Yingjin Police - New vehicle revenue fell 9%, gross margin fell 0.9 percentage points to 2.3% - After-sales revenue fell 13%, gross margin fell 0.3 percentage points to 44.8% - adjusted valuation and target price to HK$6.73
Yongda announced results for fiscal year 22.
Revenue fell 8% and net profit fell 43%. In 2022, Yongda achieved revenue of 72,024 billion yuan (-8% YoY) and net profit of 1,425 million yuan (-43% YoY), both in line with Yingjian's announcement. In the second half of the year, Yongda's revenue increased 9%, while net profit fell 43%. This was mainly due to a 2.7 percent year-on-year decline in gross margin to 8.1% in the second half of the year.
New vehicle revenue fell 9% in 2022, while profit margins also declined. In 2022, revenue from new car sales fell 9% to RMB 58,192 billion, and gross margin of automobile sales fell 0.9 percentage points to 2.3%. In the second half of the year, competition in the Chinese automobile market intensified, and Yongda Auto's gross sales margin fell to 1.9% (1H21/2H21/1H22 was 2.6%/4.0%/2.9%, respectively).
After-sales revenue fell 13% in 2022, and profit margins declined slightly. In 2022, after-sales service revenue fell 13% to 5,573 billion yuan, and gross margin was 44.8% (-0.3 percentage points year over year). In the second half of the year, after-sales service gross margin fell further to 44.5% (1H21/2H21/1H22 was 45.5%/44.8%/45.2%, respectively).
Our view: In the conference call, management emphasized the growth of the used car market and independent NEV brands. We have full confidence in management's determination, but we don't think these two parts are currently significant. We believe that promotional activities in some cities will delay consumers' willingness to buy cars in the short term and will further reduce dealers' profit margins for new cars. We've lowered our earnings forecast to reflect the latest developments. Our latest target price is HK$6.73 (previously HK$7.35). Based on a price-earnings ratio of 8 times FY23, we still maintain our long-term position rating.
Risks: 1) Luxury brand fuel vehicle sales fall short of expectations; 2) Economic recovery is weaker than expected