Compared to the four major auto parts chains in North America, there is still plenty of room for growth in Tourover's market share and gross margin
The North American auto parts chains AutoZone, O'Reilly, Advance Auto Parts, and NAPA CR4 had a market share of 49% in 2021, and the competitive landscape was highly concentrated.
AutoZone is positioned as a “community store”, with the largest number of directly managed stores, with DIY accounting for over 70%;
O'Reilly adheres to a dual customer strategy, benefiting from the high growth rate of the DIFM business, surpassing the first place in market capitalization;
Advance Auto Parts has been plagued by brand integration for many years, slowing down the trend of store expansion and poor performance;
NAPA started with the Auto Parts Alliance to create repair integration, and DIFM accounts for about 80%.
The business model of the four major chains in North America focuses on auto parts sales with integrated supply chains, while Tourover can provide car repair services after parts are sold. The service chain is longer and more difficult to manage, more like the NAPA model. Considering that the share of domestic auto repair 4S stores is expected to shift to IAM, Tourover has more room for growth and a better competitive pattern. We maintain our profit forecast for 2024. Since the company's future store layout focuses on sinking cities, the revenue of stores in low-tier cities will be lower than in high-tier cities, and the net profit from 2025-2026 will be reduced to 1,464/1,974 billion yuan (the original value was 19.03/2.574 billion yuan), and EPS was 1.3/1.8/2.4 yuan. Corresponding to the current stock price PE is 18.9/13.3/9.8 times, maintaining a “buy” rating.
The four major auto parts chains have been reinstated: Highly concentrated after the big wave, and the target customer structure of the four major auto parts chains with a gross margin of 50% or more for after-sales parts is different. AutoZone FY2023 accounts for 73.6% of DIY revenue, while NAPA has 17,000+ cooperative maintenance stores, and DIFM accounts for 80% of revenue. One reason for the high market share of the four major chain stores is that they continue to compete in mergers and acquisitions. The gross margin of AutoZone and O'Reilly was over 50% in 2023. In addition to the cost advantage brought about by the scale effect, it was also due to high-margin proprietary products accounting for more than 50% of revenue. Compared to Tourover, the number of stores and GMV accounted for less than 1% in 2022. The gross margin in 2023 was 24.7%, and the revenue from its own products was 25.9%. Compared in terms of market share and gross margin, there is still plenty of room for improvement in Tourover's revenue and profitability.
Risk warning: competition increases risk, risk of automotive technology advancement, risk of franchisee default, store expansion falls short of expectations