We maintained our “buy” investment rating and raised our target price to HK$67.08, which is equivalent to 14.5 times the 2024 price-earnings ratio. Auto Home's revenue in 2023 increased 3.5% year over year to RMB 7.18 billion, and shareholders' net profit increased 4% year over year to RMB 1.88 billion, in line with our previous expectations. The company has repurchased a total of $200 million worth of shares by the end of 2023. Due to market uncertainty, we slightly lowered our 2024-2025 revenue forecast by about 2.7%, but due to lower operating expenses expectations, the overall net profit forecast remains basically unchanged. We expect earnings per share for 2024-2026 to be RMB 4.19, RMB 4.52, and RMB 4.82, respectively.

The wholesale sales volume of automobiles reflects the expansion of domestic demand. According to statistics from the Passenger Federation, passenger car sales in China increased 22% in 2023, with a 19.6% month-on-month increase in the fourth quarter, indicating strong domestic demand. With current cost control capabilities, the price of 800V fast charging new energy vehicles is expected to drop to the level of RMB 200,000, which may boost the growth of automobile sales in China in 2024.

Autohome is using data and technology-driven products to boost the rapidly growing used car market. Its “one-stop car price check” service is used more than 1 million times a month, providing comprehensive price data for the entire industry, while the “sales crown artifact” has increased customer engagement at more than 10,000 car dealers. In addition, Auto Home has also launched a used car version of “Auto Dealer Exchange” to provide dealers with comprehensive information management services through a cloud platform. Currently, Auto Home has covered more than 20,000 car dealers.

Auto Home is facing industry uncertainty, but its growth initiatives and generous dividend policy have shown the company's potential for growth. Autohome paid out impressive dividends of $0.58 and $1.15 per ADS share in 2023.

Furthermore, Auto Home announced plans to continue to pay dividends every six months from 2024 to 2026, ensuring at least RMB 1.5 billion in annual dividends.

Key risks: 1) China's automobile sales fall short of expectations; 2) intense competition in the industry; 3) macroeconomic slowdown.