After Tourover Auto Maintenance released its 2023 Yingxi announcement, on February 26, CICC released a performance review. The company held an industry performance rating. The target price was HK$31.8, compared with the closing price of HK$20.35 on February 27, implying 56% room for growth. Previously, CICC analysts predicted that Tourover's net profit after deduction in 2023 would be 336 million yuan. Based on the adjusted net profit of not less than 450 million yuan for the full year of 2023 disclosed in the Yingxi announcement, Tourover's performance exceeded CICC analysts' expectations by at least 30%.
CICC pointed out that Tourover's profitability has been steadily recovering, and profit margins are on an upward channel, mainly due to three reasons: 1. The factory store network has expanded, the customer base continues to grow, the economies of scale have improved, and the premium capacity for the upstream supply chain has been enhanced; 2. The product structure continues to improve, the proportion of high-margin proprietary products and exclusive products has increased, the revenue structure of the maintenance business has increased, and the structural optimization of the service category portfolio has promoted an increase in gross margin; 3. Lean management has been promoted, and operational efficiency has been improved.
Furthermore, up to now, Tourover has nearly 6,000 factory stores, and is in the process of expanding the market from Tier 1 to 2. In response to the sinking market, Tourover introduced preferential franchise policies to achieve franchise fee relief and management fee relief by providing start-up subsidies, reduce the operating pressure on franchisees, and promote coverage in target markets. CICC said that stores in low-tier provinces are lower than in higher-tier cities in terms of customer unit prices and early investment, and are expected to gradually contribute to performance growth points.
CICC also believes that compared with the new car market, the stock car market, whether in the growth stage or maturity stage, shows certain anti-cyclical characteristics, and is a racetrack with a long snowy slope. However, Tourover's car maintenance is positioned in the stock car market and is less affected by the new car sales cycle, so the development of Tourover car maintenance is also somewhat anti-cyclical. CICC pointed out that Tourover car maintenance can provide full life cycle services, which gives it more room for growth in the current environment where car ownership is rising.
Furthermore, compared with its peers, Tourover has built an online and offline integrated car service platform, which has leading advantages in product pricing, service categories, supply chain management, and store control. CICC anticipates that as Tourover scales steadily and optimizes product services and operational efficiency, its market share is expected to increase steadily.