Main points of investment
The only auto financing company with dealer background in China
The company was established in China in March 2015 with a registered capital of 500 million yuan, with a 95% and 5% stake held by Zhengtong Motor and Dongfeng Motor respectively. On May 27, 2017, the company was approved by the China Banking and Insurance Regulatory Commission to increase its registered capital from 500 million yuan to 1.6 billion yuan. H shares are still controlled by Zhengtong Motor after listing, with original shareholders Zhengtong and Dongfeng accounting for 71.04% and 3.74% respectively, and public shareholders accounting for 25.22%. The company is the only auto financing company in China controlled by auto dealers. The CBRC grants auto financing licenses to carry out auto loans and related business.
The auto finance market is still blue, and the competition is good for companies in the future.
There is still room for improvement in national car ownership and the gradual upgrading of the car consumption structure, and the expansion of the luxury car market is accelerating. The domestic auto finance market is developing rapidly, and the current scale has exceeded one trillion yuan. The penetration rate of auto finance is relatively low compared with developed countries (40% in China and 86% in the United States). There is still potential and space for development in the future. In the traditional auto finance market pattern composed of commercial banks, auto finance companies, financial leasing companies and Internet finance companies, financing costs and business extensibility become the key to the profitability of the industry, and the company holds the core license resources. the competition pattern will be better in the future.
The company's main car loan business is growing rapidly along with the channel.
The company's main loan business includes car retail loan business and car dealer loan business. Among them, the automobile retail loan business is developing rapidly (retail revenue increased by 73% in 2018 compared with the same period last year), and the car dealer loan business helps the company to expand its sales channel network. The company's sales channel is composed of Zhengtong automobile dealers (internal dealers) and external dealers. The external and internal dealer network has been formed and is still expanding. By the end of 2018, there are 113stores in internal channels and 1167 external dealers.
The formation of corporate barriers, capital, business, operation and risk control have core advantages I) the company has a financial license to carry out peer lending with commercial banks, the source of funds is abundant and the interest rate is low; II) joint promotion products with a number of Zhengtong car dealers and automakers; III) standardized approval process promotes efficient business operation, and information technology combined with high and new technology strongly drives operation. IV) the prudent and comprehensive risk management system under the strict supervision of the China Banking and Insurance Regulatory Commission, combined with strict risk management implementation, ensures the stable development of the company's loan business.
Investment suggestion
With the steady growth of the auto finance market, the company has turned the license advantages into diversified service content, and further expanded the market penetration. It is estimated that the company's operating income from 2019 to 2021 will be 10.8 shock 16.3 / 2.39 billion yuan respectively, the corresponding interest-bearing loan assets 134.8max 21.57 billion RMB 345.1 billion, the net return to the mother 7.4 pm 1.72 billion (the year-on-year growth rate is 63%, 52%, 49%, respectively), and the EPS 0.34, 0.52, 0.78 (about 0.40, 0.61 and 0.90 Hong Kong dollars) respectively. Corresponding to PE 4.9max 3.2max 2.2 times.
The company belongs to the diversified financial sector of Hong Kong stocks, and its valuation is significantly undervalued relative to the industry hub. Since June 2019, the multiple financial sector central valuation (PE TTM) of Hong Kong stocks has fluctuated between 8.4% and 25.1 times. At present, the market may be in a period of market volatility, with a sector valuation of 15.3 times; the company's PE TTM is only 9.0 times, and the forecast compound growth rate of more than 50% in the next three years (2019-2021) is significantly undervalued. Given that there are still many uncertainties in macroeconomic growth forecasts, the sector risk premium is difficult to release, giving the company 10 times PE in 2019, with a target price of HK $4.00.
Risk tips: the risk of monetary contraction leads to a rise in the cost of capital; the penetration of loan business to external dealers is not as expected; the bad debt rate of interest-bearing loans increases the risk; the rapid expansion of assets leads to asset impairment risk.