Net profit increased 94% year over year
On March 28, Bateley Holdings (Baxter) announced financial results for 2021: revenue increased 17% year on year to RMB 9.96 billion, net profit increased 94% year on year to RMB 456 million, higher than Huatai's forecast of RMB 416 million. We believe the strong financial results are mainly due to the recovery in demand for luxury cars in China. We expect 2022/2023/2024 EPS to be RMB 1.14/1.52/1.97.
Our target price is HK$8.93, based on 6.5 times the predicted PE for 2022. Our target multiplier is lower than the average PE value of 10.4 times that comparable company Wind unanimously anticipated in 2022, mainly because Baideli's business is smaller than that of competitors. Maintain the “buy”.
Strong sales and revenue growth
According to the announcement, Baideli's total revenue increased 17% year over year to RMB 9.96 billion. Among them, the automobile sales business increased 17% to RMB 8.7 billion, and after-sales service revenue increased 15% to RMB 1.2 billion. Bateley's sales volume in 2021 reached 14,000 units, up 5.0% year over year. We expect the further expansion of Bateley's dealership network, which will drive continued growth in sales revenue and net profit.
Operational efficiency has improved
According to the announcement, Baidelli had strong operating performance in 2021, with gross margin rising 1.7 percentage points to 11.8% year on year, and net profit margin rising 1.8 percentage points to 4.6%. Bateley's sales and distribution expenses rate remained at 4.2% in 2021 (2020:4.2%), and the management expenses ratio fell to 2.2% (2020:
6.2%). We believe that the increase in operating efficiency is due to the scale effect resulting from the expansion of sales scale.
Maintaining a “buy” rating
Taking into account Batel's strong performance in 2021, we raised the 2022/2023 gross margin forecast by 0.3/0.5 percentage points to 12.0%/12.2%, raised the net profit forecast by 6.7/ 7.6% to RMB 605/804 million, and introduced a net profit forecast of RMB 1,044 million for 2024. Our target price is HK$8.93 (previous value: HK$10.90), based on 6.5 times the predicted PE for 2022 (previous value: 10 times the predicted PE for 2022). Our target multiplier was 10.4 times lower than the average PE expected by comparable companies Wind in 2022 (previous value: 15.1 times PE in 2022), mainly because Bateley's business is smaller than that of competitors.
Risk warning: 1) loss of automobile dealership authorization; 2) decline in the quality of operating brands; and 3) increased market competition.