Key points of investment
At the current valuation level, the market is concerned about the uncertainty of the company's growth: the decline in store openings may affect single-store revenue, and the path to increasing profit margins is not very visible. In terms of long-term logic, there are also investors who are concerned about the growth rate of the automotive aftermarket, the increase in the penetration rate of new energy vehicles may reduce the value of bicycle maintenance, and competitive barriers in franchisee channels.
On the other hand, we believe that the automotive aftermarket service space is broad. Of the 680,000 auto parts service providers, CR5 is only 5.6%. The company's 6,000 stores have a low base, and there are fewer Tourover factories per million vehicles in second-tier cities. We believe that with the guarantee of the same stores, the annual increase of 1,000 stores is highly reliable. On the profit side, we are optimistic about improving the company's product structure, increasing the efficiency of scale in upstream bargaining, and gradually increasing the share of private brands, leading to an increase of 1-2 pct of gross margin per year; the cost side is refined personnel management, digital management system upgrades, and reduced marginal fulfillment costs brought about by FDC/RDC, contributing 1-2 pct per year to a lower cost rate of 1-2 pct per year, thus leading to rapid release on the profit side.
Industry level: IAM demand is expanding, and the chain rate needs to be increased. Lithium electrification is expected to reshape the pattern. The upward trend in car ownership continues unabated, and the number of passenger cars owned by 1,000 people is still expected to grow by 6.3%. 6-7 years is the critical point for cars to enter the post-service market. As the age of vehicles in China increases, automobile after-sales service expenses are expected to grow rapidly. The warranty period offered by 4S stores is usually between 1-3 years. After that, for vehicles that are not covered by the warranty period, 4S stores usually have higher prices and fewer stores, so Tourover's share of the IAM channel is expected to increase.
Under the trend of increasing penetration of new energy vehicles, the share of battery maintenance costs is increasing. At this time, mid-tail manufacturers will actively seek leading IAM cooperation in order to improve service capabilities, and the separation of battery manufacturers and OEMs also makes it possible for IAM manufacturers to directly connect with battery manufacturers to hedge against the impact of falling non-battery maintenance costs.
Company level: The flywheel effect is evident, and profitability is expected to boost the company's growth logic is the scale effect brought about by customer growth and increased stickiness. The company uses an innovative business model of online and offline integrated platforms. More stores reach marginal customer traffic, enhance brand power and strengthen repurchases, procurement negotiations form a front-end price advantage, accumulate data to further optimize customer understanding and operational efficiency, and finally form comprehensive brand competitiveness to achieve a customer-centered flywheel effect.
Profit forecasting and valuation
We expect the company to achieve revenue of 154.35/175.38/19.773 billion yuan in 2024-2026, +13.62%/+12.74% year-on-year, net profit of 7.01/11.33/ 1,741 billion yuan, or -89.54%/+61.51%/+53.69% year-on-year, corresponding to PE 30X/18X/12X. We are optimistic about the company's mid-term growth and ability to improve profits. We covered it for the first time and gave it a “buy” rating.
Risk warning
Profits fall short of expectations; NEVs redistribute value chains; competitive landscape deteriorates