Core views

In the second quarter, the company achieved revenue of 1.873 billion yuan, up 2.16% year on year, and achieved adjusted net profit of 0.572 billion yuan, up 0.52% year on year, corresponding net interest rate of 30.6%. According to QuestMobile, the average number of daily active mobile users of Auto Home reached 67.91 million in June, an increase of 8.3% over the same period in 2023. Demand for terminals in the automotive industry continued to be under pressure this quarter, and the price war continued. Weak economic outlook dragged down the company's overall revenue side performance, but online marketing and other revenue continued to grow rapidly, and new energy related businesses performed well. By the end of the second quarter, the company had sufficient cash reserves and continued shareholder return plans, which is expected to provide solid support for stock prices.

occurrences

In the second quarter of 2024, the company achieved revenue of 1.873 billion yuan, a year-on-year increase of 2.16%, and achieved adjusted net profit of 0.572 billion yuan, an increase of 0.52% year-on-year, corresponding to a net interest rate of 30.6%. According to QuestMobile, the average number of daily active mobile users of Auto Home reached 67.91 million in June, an increase of 8.3% over the same period in 2023.

Brief review

The outlook is under pressure, but the innovative business is showing positive performance. In the second quarter, the company achieved revenue of 1.873 billion yuan, an increase of 2.2% over the previous year. Among them, lead service revenue was 0.82 billion yuan, up 7.99% year on year, accounting for 44% of revenue. Media service revenue was 0.433 billion yuan, down 18.63% year on year, accounting for 23% of revenue. It was mainly affected by the decline in sales of mainstream joint venture brands. Corresponding to the decline in advertising revenue, considering the continuation of the automaker price war, the media service sector is expected to remain under pressure in the third quarter, and Q4 is expected to benefit from a recovery in sales. Online marketing and other revenue was 0.619 billion yuan, up 14.41% year on year, accounting for 33% of revenue, mainly driven by data products. Among them, the new energy brand business grew strongly, with a year-on-year increase of nearly 100%, continuing to outperform the industry's sales growth rate, accounting for nearly 30% of total revenue. In the second quarter, the company held more than 100 marketing events for new energy brands and used car businesses, including multi-brand comparison test drives, and more than 0.5 million consumers participated. In the second quarter, the company launched a satellite plan, using space station stores as the core hub to drive the collaborative service ecosystem of satellite stores. Currently, space station stores have been launched in 28 cities to achieve full coverage of core cities. The satellite station model has been piloted in 5 cities, which will promote the penetration of the company's new retail sales network from high-tier cities to low-tier cities.

The expense ratio declined during the period, and the overall net interest rate was stable. In the second quarter, the company achieved a gross profit margin of 81.52%, a year-on-year decrease of 0.47pct. In terms of the cost ratio for the period, the sales expense ratio decreased by 4.77 pct to 40.19% year on year in the second quarter, the management expense ratio increased slightly by 1.31 pct to 6.28% year on year, and the R&D expense ratio decreased by 0.24 pct to 16.83% year on year. In the second quarter, the company achieved non-GAAP net profit of 0.572 billion yuan, a year-on-year increase of 0.52%, corresponding to a net interest rate of 30.57%. It was 31.07% in the same period last year, and the overall profit margin level was stable.

Cash reserves are abundant, and shareholder returns provide solid support. As of the end of the second quarter of 2024, the company's cash, cash equivalents and short-term investments totaled RMB 23.47 billion, and net cash flow from operating activities in the second quarter was RMB 0.452 billion. The company will continue its shareholder return plan. It is expected that within the three years from 2024 to 2026, the total annual dividend will be no less than 1.5 billion yuan. Sufficient cash reserves and positive shareholder returns will provide solid support for the company's stock price.

Profit forecast and valuation: We expect the company's revenue for 2024-2025 to be 7.236 billion yuan and 7.456 billion yuan, respectively, up 0.72% and 3.04% year on year, and adjusted net profit of 2.019 billion yuan and 2.143 billion yuan, respectively, up -6.51% and 6.14% year over year, corresponding to net profit margins of 27.90% and 28.74%.

Maintaining the “Buy” rating, the target price is 30.97 USD/ADS, and the target price for Hong Kong stocks is HK$60.82, corresponding to 14 times PE in 2024.

Risk warning: Shareholder returns fall short of expectations; low expectations for domestic macroeconomic and consumer recovery; low demand for terminals in the automotive industry; intense competition in the automotive industry price war continues to drag down media service performance; online sales and marketing budget allocations for electric vehicles are more fragmented than fuel vehicles; competitive risks in the automotive information market, including platforms that understand Che Di and Easy Car squeeze the company's market share; the physical used car industry is squeezing market space, industry competition intensifies; new business development falls short of expectations; the Fed's interest rate cut process is low, dragging down the overall performance of the Chinese and US stocks; the RMB exchange rate exceeds expectations; Expected depreciation; other overseas risk factors affecting the overall performance of the Internet in Hong Kong stocks.