Introduction to this report:

The company's credit scale for new vehicles and new energy vehicles has increased significantly, driving the company's high performance; the company continues to develop financial technology, actively lay out low-tier cities, and has broad room for future growth.

Summary:

Maintain the company's “increase in holdings” rating and maintain the target price of HK$1.82, corresponding to 0.67 xP/B in 2023. The company's profitability continued to improve in the first half of 2023. Achieved operating income of 2,844 billion yuan (RMB, same below), an increase of 16% over the previous year; adjusted net profit of 413 million yuan, an increase of 25% over the previous year, in line with expectations. Maintain the company's target price of HK$1.82, corresponding to 0.67 xP/B in 2023, and maintain the company's “increase in holdings” rating.

The company's credit business for new vehicles and new energy vehicles has improved markedly, driving a high increase in performance. The business revenue of 2023H1's trading platform was 2.144 billion yuan, an increase of 14% over the previous year. It was the main driving force of performance growth, contributing 69% to revenue growth. Among them, service revenue from other platforms increased 65% year over year, contributing 52% to revenue growth. The increase in service revenue from other platforms is mainly due to the increase in guarantee service revenue due to the increase in the number of guarantee customers. In 2023H1, revenue generated by the company's guarantee service reached 414 million yuan, an increase of 83% over the previous year. In the first half of 2023, the company had 312,000 transactions, an increase of 17% over the previous year, of which new cars accounted for 58%, an increase of 14 pct over the previous year; the volume of new car transactions reached 180,000 units, an increase of 55% over the previous year. The rapid increase in the scale of new vehicle financing is mainly due to the fact that more OEMs are using direct price cuts or discounts in price competition in place of traditional interest rates, so that the company can compete on an equal footing with OEMs. At the same time, the company is actively expanding the scope of risk appetite and expanding services to customers in the new car market. Furthermore, the scale of NEV credit has grown rapidly and has become an important growth pole for the company. As the NEV penetration rate continues to rise, the company's NEV financing transaction volume increased 236% year-on-year to 39,000 vehicles.

The company continues to advance financial technology, actively lays out low-tier cities, and has broad room for future growth. There is a demand for fintech solutions in the automotive market. The company continues to develop fintech services. The SaaS business has increased by 101%, and the fintech business is actively expanding into the new energy and used car markets.

Currently, the company operates in more than 340 cities in China, maintains cooperative relationships with more than 50+ automobile manufacturers, 80+ financial institutions, and 36000+ dealers, and actively develops low-tier cities. As new energy vehicles become more and more attractive to consumers in low-tier cities and rural markets, the company's advantages will become more obvious. Through the diversified business model of new energy vehicles and the company's extensive layout in low-tier cities and strong innovation capabilities, the company has great potential in the NEV market and broad scope for future growth.

Catalyst: The NEV financial market is growing rapidly.

Risk warning: The company's used car finance business fell short of expectations; the overdue rate increased.