During the National Day holiday, Hong Kong stocks, which were advancing vigorously, experienced a significant pullback this Tuesday. However, the Hang Seng Connect's targets are still being sought after by capital. The Autostreets (02443) soared by 3.44 times in the early trading session. By the close, the stock closed at 9.76 Hong Kong dollars, up approximately 95.20%, with a turnover of around 0.359 billion Hong Kong dollars. Between the ups and downs, who will emerge as the biggest beneficiary?

Who has caught the skyrocketing 'carpool'?

Buffett taught us a long time ago: "If you've been at the poker table for a while and you still can't figure out who the fool is, then it's probably you."

In fact, it is not the first time Autostreets surged and then experienced a selloff. Previously, right after Autostreets was predicted to be included in the Connect, a massive selloff awaited Autostreets investors.

Similarly, this time Autostreets once again staged a "roller coaster" market. Buying chips at low prices, cashing out at high levels... These intertwined capital operation tactics have become the routine gameplay for market makers' stocks.

Since Autostreets officially joined the Connect on September 10th, the company experienced a significant 17.65% drop on September 11th of the same month. Subsequently, the stock traded sideways for about 10 trading days, with daily turnover less than a million Hong Kong dollars. Despite the general rise in Hong Kong stocks starting on September 30th, Autostreets did not follow the trend with consecutive significant increases.

Looking at the chip distribution of the stock, in the past month, the peak of chip concentration has been above 9 Hong Kong dollars, blocking the stock price from continuing to rise. Therefore, despite a continuous accumulation of profitable chips, the high-level chips have not been digested, exerting strong pressure on the company's stock price. As expected, after Autostreets rose by nearly 12% on September 30th, it fell by about 7% on October 2nd. Until today's significant surge, the densely concentrated high-level peak has significantly loosened, showing clear signs of positions being unwound.

According to the Wise Finance app, the top five sellers in Autostreets today are CM Bank Intl, Fosun Intl, Cisi Fin, Futu Securities, and Morgan Stanley, selling 1.0816 million shares, 0.7866 million shares, 0.608 million shares, 0.3138 million shares, and 0.2208 million shares respectively. As for buyers, China Investment (Shanghai-Hong Kong Stock Connect) is the largest buyer, buying 2.3762 million shares; China Chuangying (Shenzhen-Hong Kong Stock Connect) is the second largest buyer, buying 1.8594 million shares, indicating that most buyers are mainland retail investors from the Hong Kong Stock Connect.

Looking back over a 60-day period, Fosun Intl was the largest seller in Autostreets, selling a total of 4.45 million shares, while CMB Wing Lung Bank, Cisi Fin, and Citibank, as the top three buyers, bought 1.4308 million shares, 0.9818 million shares, and 0.5358 million shares respectively.

In short, any market cycle must go through phases of low turnover to high turnover, high turnover to low turnover, and the movement of positions is the process of realizing profits. Autostreets went straight up in this round, with an increase of 344%, followed by a rapid decline to a narrow increase of around 95%, clearly signaling the distribution phase. Unsurprisingly, as market makers cash out at high levels, all that is left for small speculators is a mess.

The leader in the used car trading platform struggles with performance decline.

According to the prospectus disclosed earlier, Autostreets was established in 2014, initiated and funded by the US company COX Automotive, a national core group of dealers, and CM Bank, among others. According to information from Zhuo Shi Advisory, in terms of trading volume in 2022, Autostreets is the largest national provider of used car trading services.

Of note, there has been a noticeable chill in the used car market in the first half of this year. In terms of transaction volume, data from the China Automobile Dealers Association shows that since March this year, national monthly used car transaction volume has continued to decline. It wasn't until July that transaction volume and value finally saw some recovery. Transaction prices have also been on a downward trend. According to the China Automobile Dealers Association, in June 2024, the average price of a used car transaction was 0.0644 million yuan, a decrease of 0.0002 million yuan from May. In fact, since March this year, the average price of used car transactions has been consistently declining, with the fastest decline in April, down by 0.0028 million yuan from March. The first half of the year was indeed the most difficult time for used car dealers.

In the midst of the harsh conditions in the used car market, the market leader is also unable to withstand the storm. In the first half of this year, Autostreets generated revenue of approximately 0.191 billion yuan, a 15.5% decrease year-on-year; gross profit was approximately 0.124 billion yuan, a 14.8% decrease year-on-year; and the company's attributable net loss was approximately 0.148 billion yuan, with losses continuing to widen.

More importantly, the company's performance decline has long been evident. Autostreets revenue and profits have been declining over the past three years, especially with profits decreasing year by year.

From 2021 to 2024, the company's revenue was approximately 0.678 billion yuan, 0.468 billion yuan, and 0.492 billion yuan respectively, with a compound annual growth rate of -14.80%; gross margin was about 0.426 billion yuan, 0.285 billion yuan, and 0.312 billion yuan respectively, with a compound annual growth rate of -14.31%; net income was about 0.165 billion yuan, 68.98 million yuan, and 9.269 million yuan respectively, with a compound annual growth rate of -76.30%.

In terms of profit margin, over the past three years, Autostreets' gross margin has fluctuated around 60%, at 62.8%, 60.9%, and 63.5% respectively, while the net profit margin has steadily declined to single digits, reaching only 1.9% by 2023, indicating a significant decrease in profitability.

Looking at the core financial data above, although Autostreets is touted as an industry leader, the revenue fluctuations and declining profitability do not reflect the leadership qualities expected of Autostreets.

Furthermore, Autostreets also faces challenges of over-reliance on major clients, weak new client development, and a business focus on the B-end, which brings significant risks due to the close relationship with dealers. According to the prospectus, the total revenue from Autostreets' top five clients during the reporting period amounted to 0.181 billion yuan, 0.12 billion yuan, and 0.125 billion yuan, accounting for 26.8%, 25.7%, and 25.3% of the total revenue for each respective period; while revenue from the largest client was 71 million yuan, 65.1 million yuan, and 78.9 million yuan, accounting for 10.5%, 13.9%, and 16.0% of the total revenue for each respective period.

Recognizing its inadequate profit-making ability, Autostreets has adjusted its commission rates for second-hand car auctions. Starting from February 1, 2023, Autostreets raised the commission rate, generally charging about 3.5% of the second-hand car auction price as commission, with a minimum commission per transaction of 500 yuan and a maximum of 3000 yuan. While this move may help improve the company's profitability, it could also impact Autostreets' market position. Despite being the largest second-hand dealer in the country, there is still no significant gap compared to other enterprises.

According to the prospectus, in 2022, Autostreets had a market share of 12.6% with a trading volume of about 0.16 million vehicles; the market share of the second-ranked entity reached 12.2%, with an annual trading volume of 0.154 million vehicles, closely following Autostreets; the market share of the third-ranked entity was 11.9%, with an annual trading volume of 0.15 million vehicles. Therefore, Autostreets' leading market share position in the industry is not secure. Facing competition from Guazi, Uxin, Renrenche, and other well-known second-hand car trading platforms, the future of Autostreets and its ability to maintain an advantage in the industry remain to be tested.

Encouragingly, in the long run, the second-hand car market still has optimistic growth prospects. According to the Zhoushi Consulting report, benefiting from policy support, increased cross-regional transactions, social media channel developments, and technological advancements, China's second-hand car trading market is rapidly expanding, with total transaction volume expected to reach 24.7 million vehicles by 2027. The compound annual growth rate from 2022 to 2027 is projected to reach 14.5%. In short, the domestic second-hand car market still has considerable room for growth, and for Autostreets, as long as it solidifies its business capabilities, there is still room to excel.