Meidong Auto (1268 HK) Summary
Core Content and Key Highlights
Meidong Auto (1268 HK) is a company in the China auto sector, and the report provides an analysis of its recent financial performance and future outlook. The report maintains a BUY rating and raises the target price from HK$2.80 to HK$3.20, indicating a positive outlook despite some challenges.
2H24 Performance
- Revenue beat prior forecast by 3%, driven by after-sales revenue which was 11% higher than expected.
- New-car GPM missed the forecast by 2.2ppts, falling to -7.2%.
- Core profit was largely in line with expectations, despite impairment losses and forex losses.
- Profit before tax (excluding impairment and forex loss) was RMB119mn, RMB14mn lower than forecast.
Key Insight
- The high inventory turnover (13 days) played a crucial role in maintaining positive core net profit in FY24, which is often overlooked by investors.
- In a high discount environment, dealers with higher inventory turnover can achieve better cash flow and higher GPMs due to the continuous sale of cars as prices decline.
FY25E Outlook
- Net profit forecast is revised up by 21% to RMB494mn.
- The revisions are based on:
- After-sales revenue is expected to grow by 8%.
- New-car GPM is revised down to -5.6% from -4.2%.
- SG&A expenses are reduced by 6% due to better cost control and lower amortization from higher impairment in FY24.
- Gross profit is expected to increase by 2% compared to previous estimates, as after-sales service contributes more to revenue.
Valuation and Key Risks
- P/E ratio for FY25E is 6.5x, down from 9x previously.
- Target Price is raised to HK$3.20, with an upside of 24.5% from the current price of HK$2.57.
- Key risks include:
- Lower sales or new-car margins than expected.
- Sector de-rating due to broader market challenges.
- Lingering challenges from traditional luxury brands.
Financial Summary
Revenue and Growth
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
| FY22A |
28,655 |
21.5 |
| FY23A |
28,555 |
-0.3 |
| FY24A |
22,154 |
-22.4 |
| FY25E |
20,406 |
-7.9 |
| FY26E |
20,510 |
0.5 |
Net Profit and Growth
| Year |
Net Profit (RMB mn) |
YoY Growth (%) |
| FY22A |
521.0 |
-55.3 |
| FY23A |
140.2 |
-73.1 |
| FY24A |
-2,264.1 |
na |
| FY25E |
494.2 |
na |
| FY26E |
615.5 |
24.5 |
Profitability
| Metric |
FY24E |
FY25E |
FY26E |
| Gross margin (%) |
7.0 |
8.7 |
9.4 |
| Operating margin (%) |
-10.9 |
4.1 |
4.9 |
| Net margin (%) |
-10.2 |
2.4 |
3.0 |
| ROE (%) |
-56.5 |
16.2 |
18.2 |
Liquidity and Leverage
| Metric |
FY24E |
FY25E |
FY26E |
| Net debt to equity |
-1.0 |
-0.7 |
-0.8 |
| Current ratio |
1.2 |
1.4 |
1.6 |
| Inventory turnover days |
13.5 |
15.0 |
15.0 |
Shareholding and Stock Data
- Market Cap: HK$3,459.9 million
- Average 3-Month Turnover: HK$12.1 million
- 52-Week High/Low: HK$3.36 / HK$1.64
- Total Issued Shares: 1,346.2 million
- Shareholding Structure:
- Apex Sail Limited: 52.3%
- Others: 47.7%
Share Performance
| Period |
Absolute Return (%) |
Relative Return (%) |
| 1-Month |
25.4 |
27.0 |
| 3-Month |
16.3 |
-0.5 |
| 6-Month |
15.8 |
-1.8 |
Analysts and Ratings
- Analysts: Ji SHI, CFA; Wenjing DOU, CFA; Austin Liang
- Ratings:
- BUY: Potential return of over 15% over the next 12 months.
- HOLD: Potential return of +15% to -10%.
- SELL: Potential loss of over 10%.
- OUTPERFORM: Industry expected to outperform the market.
- MARKET-PERFORM: Industry expected to perform in-line with the market.
- UNDERPERFORM: Industry expected to underperform the market.
Important Disclosures
- The report is not tailored to individual investors and should not be used as investment advice.
- CMBIGM does not guarantee the accuracy or completeness of the information.
- The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.
- There may be conflicts of interest, and CMBIGM is not liable for any reliance on the report.
