Leading domestic distribution group, performance is expected to gradually recover
The company is mainly engaged in automobile sales, providing after-sales service, and providing car operation and leasing services. We believe that the company's luxury car business is stable, demand is resilient, and profit recovery is expected as the price war slows down. At the same time, the company is actively expanding the used car business and increasing the layout of the new energy business and related after-sales service, which is expected to become an important growth point outside of new car sales in the future. We expect the company's net profit to be 7.9/12.8/1.66 billion yuan in 23-25 years, which is comparable to the company's average 24E PE 5.8x, giving the company 24E 5.8x PE, corresponding to the target of HK$4.16, to maintain the “purchase”.
Stabilize the luxury car base and continuously improve the efficiency of the main business
In terms of traditional fuel vehicles, the leading position of leading luxury car brands continues to be consolidated and enhanced. 23H1 sold 85,759 new vehicles, up 11.7% year on year. Among them, the Porsche brand sold 5,220 new cars, up 6.4% year on year, and the BMW brand sold 36,732 new cars, up 1.7% year on year. However, the decline in new car prices in the first half of the year led to a decline in the gross margin of new cars. 23H1 gross margin of new cars was 0.4%, down 3.09 pct from the previous year. The company promptly adjusted its short- and medium-term strategies in response to the current business environment: 1) speed up sorting out agency brands and promote the closure of mergers and acquisitions of some brand stores with poor profitability; 2) strictly controlling costs and expenses, using digital means to accelerate business collaboration and integration, and continuously improve the operating efficiency of the enterprise.
The used car business is accelerating and is expected to create a new growth point
In addition to the sales business, the company's used car business is also becoming the engine for the growth of its main automobile service business.
The domestic used car market showed strong growth potential in '23: According to the China Automobile Association, the number of used car transactions nationwide from January to November '23 was 16.7523 million units, up 14.65% year on year, and the total volume increased by 2.141,000 vehicles year on year. As the world's leading dealer group for Porsche and BMW brands, the company has rich brand-certified used car resources, and continues to promote retail capacity building for officially certified used cars and Yongda certified used cars, forming a new business pattern of distribution, retailing and digitalization. 23H1 achieved a total of 41,084 used car trading units, an increase of 74.3% over the previous year.
Domestic independent new energy leading brands have been formed, and the after-sales business is growing rapidly. The company further lays out the independent new energy brand business: among existing brands, high-end independent new energy brands with core product competitiveness are adjusted on the network; at the same time, independent supermarkets are gradually reduced, and independent new energy sales stores are integrated into the automobile business district. Thanks to the above layout, the company 23H1 Independent New Energy achieved sales volume of 7,687 units, an increase of 169.8% over the previous year. At the same time, in terms of after-sales service, the company continued to pay attention to new industry trends and forward-looking layout of the battery recycling industry and sheet spray maintenance sharing center. 23H1 maintenance revenue was 70.83 million yuan, an increase of 81.2% year on year, which is expected to become a pillar of after-sales business growth.
Risk warning: Demand for passenger cars falls short of expectations; profit improvement falls short of expectations.