We maintained our “buy” investment rating and raised our target price to HK$53.60, which is equivalent to 14.0 times our price-earnings ratio in 2024. Auto Home recorded total revenue of RMB 3.48 billion in the first half of 2024, an increase of 3.4% year over year. Online marketing and other businesses maintained double-digit growth in the first half of 2024, accounting for 33.7% of total revenue. Businesses related to data products and new energy are growing strongly. Adjusted net profit for the first half of 2024 was RMB 1.05 billion, with a net interest rate of 31.3%. We expect Autohome's earnings per share for 2024-2026 to be RMB 3.44, RMB 3.75, and RMB 3.92, respectively.

We have lowered our 2024-2026 revenue forecasts for Auto Home's media services business by 13.7%, 15.4%, and 15.5%, respectively. We raised our 2024-2026 lead services revenue forecast by 1%. In terms of online marketing and other revenue, we each raised our revenue forecast by about 2% for the same period. Overall, we lowered our 2024-2026 gross revenue forecast by 2.3%, 2.7%, and 2.6%, respectively.

The reason for the adjustment was that the price war between car manufacturers was unexpectedly intense, leading to a decline in both advertising revenue and the used car market.

We anticipate that price competition in the NEV industry may intensify further in the third quarter of 2024. However, early signals suggest that the situation will improve by the fourth quarter of 2024. Despite the positive elements, the decline in high-margin advertising revenue is likely to cause the NEV industry's profit margin to continue to decline in the second half of 2024. As a result, we lowered our 2024-2026 earnings per share forecast by 19.5%, 17.6%, and 18.4%, respectively.

By integrating online and offline services, using AI to enhance data analysis, and boost sales between dealers and car manufacturers, Auto Home has demonstrated its commitment to long-term development. After a year of testing the franchise model, Auto Home has established a direct and franchise sales network covering East China, South China, Southwest China and North China in the field of new energy vehicles, and added 8 new energy vehicle service stations in the first half of 2024. The company strategically uses these service stations as nodes to extend its reach to surrounding areas through “satellite stores”. The company's initiatives remain at the same pace as the country's direction of promoting new energy vehicle services. Service revenue related to NEVs has grown from less than 5% in 2021 to around 30% in the second quarter of 2024, reflecting the rapid market penetration of the NEV service chain and strong commercial partnerships with leading brands. This effectively allays the market's concerns about establishing new partnerships with the new energy industry chain.

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