20220531-招银国际-CMBI_Credit_Commentary_–_EHICAR_Weak_1Q22_results_partly_due_to_limited_used_car_disposal_3页_418kb

eHi Car (EHICAR) Credit Commentary Summary

Core Content

This credit commentary provides an analysis of eHi Car's (EHICAR) financial performance and outlook for the first quarter of 2022 (1Q22) and the remainder of the year. The report is authored by CMBI Fixed Income analysts and outlines the company's challenges and potential recovery path amid the ongoing impact of the COVID-19 pandemic.

Key Financial Performance in 1Q22

• Revenue: RMB919 million, a significant decline of -40.3% yoy and -23.7% qoq.
• EBIT: RMB0.13 million, compared to RMB110 million in 1Q21 and RMB24 million in 4Q21.
• Car Rental Revenue: Remained stable at RMB872 million, with a -1.5% yoy and -4.0% qoq change, attributed to the company's diversified operations across the country.

Factors Affecting Performance

• Used Car Market Decline: The used car segment experienced a severe drop of -88.8% yoy and -76.6% qoq, primarily due to lockdowns in Shanghai, which disrupted the market.
• Utilization Rate: Further declined to 57.2% in 1Q22, down from 71.1% in 1Q21 and 59.8% in 4Q21.
• RevPAC (Revenue per Available Car): Dropped to RMB123, compared to RMB150 in 1Q21 and RMB126 in 4Q21, influenced by the enlarged fleet size since 3Q21.

Cash Position and Debt Management

• Cash Balance: Reduced to RMB496 million as of March 2022 from RMB752 million in December 2021, due to debt repayment of RMB329 million in March 2022.
• Cash Collection: Slowed due to used car sales disruptions and higher account receivables.
• Capital Expenditure: Reduced to RMB51 million in 1Q22, a -94.6% yoy and -58.1% qoq decrease, indicating a more conservative approach to fleet expansion.

Outlook and Strategic Response

• Improvement Expected in 2H22: With loosening restrictions in cities like Shanghai, the company anticipates better performance in revenue and EBIT.
• Debt Management: As of May 2022, the company has renewed RMB846 million in bank loans and financial leases and repaid RMB329 million with cash. It expects to roll over most debts with extensions of up to 16 months.
• Policy Support: The commentary highlights policy support for SMEs financing, indicated by a recent cabinet meeting, as a positive factor for the company's financial stability.

Investment Recommendation

• Rating: The analysts maintain a "Buy" recommendation on EHICAR 7.75 2024.
• Valuation: The recent price decline is viewed as an opportunity for dip buying, given the current cash price of 71 and YTM of 24%.

Disclaimer and Risk Note

• The report is not investment advice and should be used with caution.
• Risks: Investors should be aware that the value and returns of investments are uncertain and may fluctuate.
• Conflicts of Interest: CMBIS may have investment banking relationships with the companies mentioned, which could affect the objectivity of the report.
• Distribution Restrictions: The report is intended for specific investors (e.g., major US institutional investors, Accredited Investors in Singapore) and not for general public.

Conclusion

Despite the challenges posed by the pandemic, eHi Car is expected to recover in the second half of 2022. The company's strategic debt management, policy support, and diversified operations provide a foundation for future growth. The current valuation is seen as favorable, supporting the "Buy" recommendation on EHICAR 7.75 2024.