Demand for car maintenance is expected to increase due to the increase in passenger car ownership and vehicle age. The independent post-market service provider channel (IAM) is expected to gain more traffic bias compared to 4s stores due to its wide store distribution and reasonable prices. Tourover ranked first in terms of revenue size and number of stores for IAM automotive services. The increase in the penetration rate of new energy vehicles may bring new challenges to the industry. Their maintenance services are different from fuel vehicles. Daily maintenance costs are lower, but demand for cleaning and modification has increased. Tourover is actively developing new energy stations, training new energy maintenance technicians, and strengthening industrial chain cooperation.
Store standardization ensures network expandability and penetrates the sinking market. The company had 5,909 stores in 2023, an increase of 27% over the previous year. Among them, 152 Tourover Factory stores are self-operated and 5,757 Tourover Factory stores have joined. More than 70% of the new stores in 2023 come from second-tier cities and below. The number of self-operated stores is expected to remain stable in the future and expand through franchise stores. According to the prospectus, as of 2023Q1, the company's comprehensive gross profit margin, gross margins of self-operated Tourover factory stores, franchised Tourover factory stores, and partner stores were 25%, 5.5%, 26.0%, and 13.7%, respectively. The company has strong control over products, prices and store operation processes to ensure brand consistency.
SKUs are abundant, infrastructure guarantees flexible execution, and efficient inventory turnover. The company accumulates massive amounts of auto parts data and establishes a big data platform to achieve efficient product matching. As the largest replacement tire retailer and service provider in China, tires and chassis parts accounted for 40.8% of revenue in 2023, with a gross profit margin of 17.4%. The automobile maintenance category accounts for 36.3% of revenue, increasing year by year, with a gross profit margin of 32.4%. The optimization of the product structure led to an increase in gross margin. 150 million registered users and 19.3 million trading users in 2023. The company has built a three-level warehouse network of “regional warehouse-front warehouse-store warehouse” to ensure timeliness, coverage and cost efficiency.
The year 2023 was profitable for the whole year, and profitability increased. The company was listed on the main board of the Hong Kong Stock Exchange on September 26, 2023, with an issue price of HK$28 per share, and raised a net capital of HK$1,273 billion. It is mainly used to enhance supply chain capacity, invest in R&D, expand the store network, and provide capital, operating capital and general corporate purposes for investments related to new energy vehicle services.
The company achieved full-year profit for the first time in 2023. Adjusted net profit was 481 million yuan, and its profitability continued to increase. It is mainly due to the resumption of user travel, scale effects brought about by store expansion, optimization of revenue structures, and continuous promotion of cost reduction and efficiency.
Profit forecasts, valuations, and ratings
The company's net profit from 2024 to 2026 is estimated to be 706 million yuan, 987 million yuan, and 1,305 million yuan, respectively, corresponding to PE 29.10x, 20.82x, and 15.74x. The company was given a valuation of 33x PE in 2024, corresponding to a market value of HK$25.6 billion and a target price of HK$31.15. The first coverage gives a “buy” rating.
Risk warning
Industry competition intensifies, market demand and regulatory environment changes, store expansion falls short of expectations, risk of lifting the ban, etc.