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YONGDA AUTOMOBILES(3669.HK):NEW CAR GPM MAY BE HURT MORE THAN EXPECTED

招银国际 ·  Feb 5

We project Yongda's 2H23E net profit to fall 53% HoH to RMB189mn amid a deteriorating new-car GPM. We cut our FY24E net profit by 45% to RMB670mn, due to slower-than-expected new car GPM recovery given fiercer competition from premium NEV models to traditional luxury brands. Yongda's shares are now trading at 5x FY24E P/E, which is undemanding given a dividend yield of 8%.

We project 2H23E net profit to be RMB189mn. We project Yongda's new-car sales volume to rise 11% HoH to about 95,000 units in 2H23E, with average selling price falling about 7% HoH amid the price war. Therefore, we expect Yongda's new-car sales revenue to rise 4% HoH to about RMB28bn in 2H23E. We estimate 2H23E new car GPM to fall 0.7ppt HoH to -0.2%, taking higher discounts and OEMs' rebates into account. We project after-sales service revenue to rise 13% HoH to RMB5.9bn in 2H23E, with a GPM of 43%. We project its other income to drop 7% HoH in 2H23E due to a high comparison base caused by gains from a subsidiary disposal and SG&A ratio to widen by 0.4ppt HoH to 8.7% due to higher incentive costs for sales personnel. Accordingly, we forecast Yongda's 2H23E net profit to fall 75% YoY and 53% HoH to about RMB189mn.

Porsche and after-sales services key to FY24E. We project Yongda'snew-car sales volume to drop 3% YoY to about 176,000 units (excluding those under agency model) in FY24E, given potential market share loss for traditional luxury brands and mass-market foreign brands amid China's electrification. We are of the view that the sales growth for NEV brands cannot offset the sales decline from the traditional brands at Yongda in FY24E. We expect new-car GPM to be flat YoY at 0.1% in FY24E, as the improvement from Porsche's could offset the deterioration from other brands'. We project FY24E after-sales service revenue to rise 4% YoY, mainly driven by a larger customer base. Its SG&A ratio may continue to increase amid competition this year. Accordingly, we project Yongda's net profit to rise 13% YoY to RMB670mn in FY24E.

Valuation/Key risks. We maintain our BUY rating but cut target price from HK$5.00 to HK$2.80, still based on 7x our revised FY24E EPS. We believe Yongda's valuation is undemanding with a dividend yield of 8%. Key risks to our rating and TP include lower sales and/or margins, slower after-sales service growth than our expectation, as well as a sector de-rating.

The above content is for informational or educational purposes only and does not constitute any investment advice related to Futu. Although we strive to ensure the truthfulness, accuracy, and originality of all such content, we cannot guarantee it.
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