Matters:
On June 3, 2024, the company issued the “Notice Concerning the Controlling Shareholder's Plan to Increase Shareholding” and the “Notice Concerning the Plan for Some Directors, Supervisors and Senior Management of the Company to Increase Their Shareholding”.
Commentary:
The majority shareholders and directors and supervisors plan to increase their holdings in the company and are confident that it will continue to develop in the future. Based on recognition and confidence in the long-term value of the company, the controlling shareholders and directors and supervisors plan to use their own funds to increase their holdings and promise not to reduce their holdings during the increase period and the statutory period: 1) The controlling shareholder Guanghui Group plans to increase their holdings by no less than 50 million yuan and no more than 10,000 yuan, accounting for 32.5% of their shares before increasing their holdings; 2) Eight directors, supervisors and senior management, including Chairman Ma Xiangjiang and CEO Wang Sheng, held 0.1% of the total shares. A copy, not owned by anyone else Company shares.
Competition in the market is fierce, and the announcement of an increase in holdings by major shareholders and directors shows confidence in the company's continued development in the future.
In '24, the company will promote brand structure optimization and further lay out new energy and used cars overseas. In 2024, the company will promote renovation and revitalize weak brands and inefficient stores. In '23, it has closed 50 inefficient stores, converted 17 brands, and laid out 245 ultra-luxury and luxury brand outlets. In addition, the company will actively integrate resources and expand the coverage of new energy brands. It has applied for 54 new energy store licenses in 23 years to establish close contacts and communication with more than 20 new energy brands such as Cyrus, Avita, and Xiaopeng. In terms of used cars, it has obtained export qualifications for 23 years, and the company will actively expand parallel export business. Auto Street, a used car trading platform in which the subsidiary Guanghui Baoxin is a shareholder, is listed on the Hong Kong stock market, and may be reverse empowered by the business. Furthermore, the company will focus on building an efficient financial management system to continuously achieve “cost reduction and efficiency” through financial sharing mechanisms and group procurement.
Price competition in the car market is fierce, and traditional dealer groups are in a transformation stage. The automobile market is increasingly competitive for shares of autonomy and joint ventures, new energy and fuel. On the basis of large-scale price competition already in 2023, this trend will continue in 2024. On the other hand, the impressive growth rate of vehicle exports and the country's promotion of trade-in and gradual utilization of the automobile market are all new growth points for the development of the domestic automobile market. Traditional car dealer groups are mainly joint venture brands, and their market share and performance are currently under pressure. Leading dealer groups are seeking active transformation, targeting the new energy and used car markets. After the industry pattern stabilizes, the dealer model is expected to help leading car companies complete the sinking channel layout. At that time, dealership performance is expected to return to a growth trajectory.
Investment advice: Major shareholders and directors and supervisors plan to increase their holdings, and the value of the dealer model is yet to be re-evaluated. Considering the current state of market competition, we adjusted the company's 24-25 profit forecast and introduced the 2026 forecast: 1) Revenue:
1,449/1519.16/158.9 billion yuan, +5%/+5% YoY; 2) Net profit to mother: 5.8/8.1/1.17 billion yuan, +48%/+40%/+45% YoY; 3) EPS: 0.07/0.10/0.14 yuan.
The company is in a phase of business transformation, and profits are under pressure in the context of fierce market competition. Combined with the valuation level of the past 2 years, we have valued PB 0.3 times for 2024, with a target market value of 11.9 billion yuan. The target price was lowered to 1.46 yuan to maintain the “Recommended” rating.
Risk warning: price competition exceeds expectations, joint venture brand share falls beyond expectations, automobile demand falls short of expectations, etc.