With the double protection of the issuance of the pauper version and the routine callback, the market cap of Auto Street (02443) on the first day of listing reached HKD 10.8 billion, meeting the 95% market cap red line, and its entry to the stock connect is bound to happen. It is predicted that in the adjustment in September 2024, 28 stocks are expected to be included in the Hong Kong stock connect, and Auto Street is among them.
As soon as the news came out, Autohome (02443) faced a massive sell-off. As of the close of July 2nd, Autohome's stock price was HKD 8, down 18.53%.
Why did the price drop so much?
According to the observation by the Wisdom Finance APP, from the sales volume, there was no significant increase for Autohome from June 24th to 28th, with cumulative transactions of 700,400 shares and a total transaction amount of about HKD 7.0699 million for the five trading days. On July 2nd, volume of Autohome plummeted with a total of around 544,000 shares traded for the whole day and a total transaction amount of about HKD 4.5192 million.
I attempted to interpret from the perspective of position cost distribution. After all, no matter how the stock price develops, the chip movement displays its changing but fixed pattern on the position cost distribution, which depends on the turnover between high and low positions.
Turning to May 31st, the first day of Autohome's listing, the price opened at HKD 42.16, up 65.88% when hit the highest price of HKD 16.92. However, the sell-off surged after 3pm resulting in a rapid decline to HKD 12.6. By the close of trading, the price increased by 26.86%, closing at HKD 12.94, and the chips were densely distributed above the closing price, indicating sufficient turnover in this range.
On the first day of Autohome's listing, the largest buyer was Futu Securities with a net purchase of 403,800 shares, followed by AAA Securities with a net purchase of 316,800 shares. The largest seller was Huitai Securities with a net sale of 430,000 shares, followed by Ribon Securities with a net sale of 244,600 shares.
In the following days, Autohome's stock price fluctuated and experienced another wave of increases on June 6th, along with a gradual increase in profit chips. More importantly, the high-density peak still existed. As the saying goes, 'The top peak cannot move, and the price cannot rise without breaking the peak.' Since the high-density peak did not move downward, the high level of trapped chips still exists, which makes it difficult for the stock price to develop upward.
Specifically, when the company's stock price rose to HKD 14.24, which was the densest peak in the chips, the chips in this peak were sold off to realize profits and formed a price callback, which blocked the upward trend of the stock price. Therefore, although the profit chips have formed a gathering trend, the high chips have not been digested, which places strong pressure on the stock price, and investors cannot easily participate in mid- or long-term band operations. As expected, on June 7th, Autohome's stock price fell again by 11.7%.
Subsequently, the trend of Autohome's stock price was tepid. However, it can be seen that while the overhanging chips in the upper range decreased, the profit chips in the lower range gradually disappeared, indicating that this stock has little main capital remaining in the market.
The upside of a stock with few main capital chips is very limited, and a wave of sell-offs can occur at any time, just like today's big drop. In fact, since June 24th, Autohome's capital has been in a net outflow state, with a total net outflow of 1.6858 million yuan in the last five days.
In short, any round of market trends needs to go through low to high turnover, high to low turnover, and the chip movement is the process of realizing profit. The high-density turnover of Autohome in this round was an obvious sign of shipment. With this big drop, the cost of the high-density chips once again gathered in the low position, which is the preparation process for the next stage. It is worth noting that as of the close of July 2nd, Autohome has formed a single-peak accumulation trend in the low-chip range of 8-10 Hong Kong dollars.
Who profited from this round? We may be able to see some clues from the buying and selling positions of the economic trading companies. In the past 20 days, the top three selling brokers were Huitai Securities, Ribon Securities, and KGI Securities Asia, with net sales of 1.5798 million shares, 1.47 million shares, and 275,800 shares, respectively. At the same time, the top three buyers were HSBC Shanghai and Hong Kong, Futu Securities International (Hong Kong), and Bank of China (Hong Kong), who bought 768,600 shares, 719,200 shares, and 382,400 shares, respectively.
What is the truth behind the leading online used car trading platform?
As the country's largest online used car trading platform, what is the truth behind Autohome?
According to the previous prospectus, Autohome was established in 2014 and was jointly initiated and funded by COX Automotive, a car trading platform and used car auction company, the National Core Dealers Group, and China Merchants Bank. According to data from Zhushixi Consulting, as of 2022, Autohome is the largest used car trading service provider in the country in terms of trading volume.
Although the trading volume of used cars is increasing day by day, the total transaction amount of the company's used cars traded on the platform is not stable. The total transaction volume for used cars traded on the company's trading platform from 2021 to 2023 are RMB 13.72 billion, RMB 6.747 billion and RMB 7.398 billion respectively.
Reflected in the financial aspect, Autos Street's revenue and profits are both declining, especially with profits decreasing year by year. During the period, the company's revenue was about 678 million yuan, 468 million yuan, and 492 million yuan, with a compound annual growth rate of -14.80%; gross margin was about RMB 426 million, RMB 285 million, and RMB 312 million, with a compound annual growth rate of -14.31%; annual net profits were approximately RMB 165 million, 68.98 million yuan, and 9.269 million yuan with a compound annual growth rate of -76.30%.
In terms of profit margins, over the past three years, Autos Street's gross margin has fluctuated around 60%, at 62.8%, 60.9% and 63.5% respectively, while net profit margin has steadily declined to the single digits, reaching only 1.9% in 2023. It can be seen that the profit-making ability has significantly declined. Behind the decline in profits lies the large-scale payment of salaries and personnel expenses. For example, in 2023, the total amount paid for salaries and benefits to sales and distribution personnel, and administrative personnel reached 130 million yuan, far exceeding the company's net profit for the period.
From the above core financial data, although bearing the aura of industry leader, Autos Street has not demonstrated its expected leader quality in terms of revenue fluctuations and declining profitability.
It is encouraging that the second-hand car market still has a more optimistic growth outlook. According to a report by Zhoushi Consulting, benefiting from policy and regulatory support, increased cross-regional transactions, the development of social media channels, and technological advancements, China's second-hand car trading market is developing rapidly, and the total trading volume is expected to reach 24.7 million in 2027 with a compound annual growth rate of 14.5% from 2022 to 2027. In short, the domestic second-hand car market still has a lot of room for imagination, and for Autos Street, there are still plenty of opportunities to flourish.
However, from a competitive perspective, Autos Street also faces significant competitive pressure.
According to the prospectus, in 2022, Autos Street's market share was 12.6%, with a transaction volume of approximately 160,000 vehicles; the second-largest in the industry had a market share of 12.2%, with an annual transaction volume of 154,000 vehicles, close to Autos Street; and the third-largest had a market share of 11.9%, with an annual transaction volume of 150,000 vehicles. It can be seen that Autos Street's first place position in the industry is not secure. Facing well-known used car trading platforms such as Guazi, Uxin, and Renrenche, how to maintain its advantages and win in the industry is still to be tested.
Judging from the above performances, factors such as revenue fluctuations, declining net profits, and unstable industry leadership have obviously reduced Autos Street's investment value and triggered a decline in the company's stock price.