20250331-招银国际-Zhongsheng_Weaker_FY24_results_but_signs_of_stabilizing_in_2H24_4页_770kb
报告摘要
Zhongsheng Summary
Core Content
Zhongsheng, a Chinese auto sales and services company, reported weaker financial results for FY24 primarily due to a negative gross margin in new car sales. However, the company has shown signs of stabilization in the second half of FY24, with improved new car sales margins and continued contributions from used car sales and accessories/after-sales services. These segments have accounted for an average of 90% of Zhongsheng's aggregate profit over the past five years, indicating a diversification of revenue streams.
Main Points
- FY24 Performance: Zhongsheng's FY24 results were weaker than FY23, mainly due to the negative gross margin from new car sales. However, the margin improved in 2H24, narrowing from 3.3% to 1.9%.
- Segment Contributions: Used car sales and accessories/after-sales services have been increasingly important, contributing significantly to overall profitability.
- Liquidity Improvement: The company has strengthened its liquidity position through recent funding exercises, including the tender offer for ZHOSHK 3 01/13/26 and the concurrent issue of ZHOSHK 5.98 01/30/28. Additionally, Zhongsheng secured USD350mn in new offshore syndicated loans, which will help with refinancing needs over the next 1-2 years.
- Debt Management: The company has been actively optimizing its store network, focusing on expanding collision centers and exiting underperforming stores, such as those for Nissan. This strategy has helped improve the absorption ratio and reduce net debt.
- Credit Profile: Despite weaker FY24 results, Zhongsheng's credit profile remains strong, with key coverage ratios (debt/EBITDA, net debt/EBITDA, EBIT/int) expected to improve over the next 2-3 years.
- Investment Recommendation: The report recommends buying Zhongsheng's bonds, particularly ZHOSHK 5.98 01/30/28, due to better trading liquidity and the company's improved financial position.
Key Information
Table 1: Outstanding Bonds Summary
| Ticker | ISIN | Ccy | Size (mn) | O/S (mn) | Coupon | Maturity | Offer px | Z-spread | YTM (%) |
|---|---|---|---|---|---|---|---|---|---|
| 05/21/25 CB | XS2171663227 | HKD | 4,560.0 | 3,124.0 | 0.0% | 5/21/2025 | 116.7 | 83.8 | 4.8 |
| ZHOSHK 5.98 01/30/28 | XS2867272630 | USD | 600.0 | 600.0 | 6.0% | 1/30/2028 | 99.7 | 244.4 | 6.1 |
Table 2: Operating Profiles
| Metric | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 1H23 | 2H23 | 1H24 | 2H24 |
|---|---|---|---|---|---|---|---|---|---|---|
| New cars (RMB bn) | 2,888.0 | 3,710.0 | 6,197.0 | 3,940.0 | 1,058.0 | (3,208.4) | 865.6 | 192.4 | (1,990.1) | (1,218.3) |
| Parts, packages, after-sales (RMB bn) | 8,600.0 | 9,575.0 | 11,783.0 | 11,586.0 | 11,766.3 | 12,650.5 | 5,771.2 | 5,995.1 | 6,298.3 | 6,352.2 |
| Used cars (RMB bn) | 0.0 | 197.0 | 489.0 | 506.0 | 940.0 | 1,229.8 | 333.0 | 607.0 | 618.0 | 611.8 |
| Gross profit (RMB mn) | 11,488.0 | 13,482.0 | 18,469.0 | 16,032.0 | 13,764.3 | 10,671.9 | 6,969.8 | 6,794.5 | 4,926.2 | 5,745.7 |
| Commission income (RMB mn) | 2,885.2 | 3,149.6 | 3,528.0 | 3,764.3 | 4,132.1 | 4,199.8 | 1,992.0 | 2,140.1 | 1,941.6 | 2,258.2 |
| Aggregate profit (RMB mn) | 14,373.2 | 16,631.6 | 21,997.0 | 19,796.3 | 17,896.4 | 14,871.7 | 8,961.8 | 8,934.6 | 6,867.8 | 8,003.9 |
| New car sales % aggregate profit | 20.1% | 22.3% | 28.2% | 19.9% | 5.9% | -21.6% | 9.7% | 2.2% | -29.0% | -15.2% |
| Absorption ratio | 104.0% | 103.8% | 108.5% | 100.7% | 100.9% | 111.4% | 108.5% | 94.5% | 118.2% | 105.4% |
Table 3: Financials
| Metric | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|---|
| Inventory days | 30.8 | 23.3 | 21.6 | 27.0 | 31.2 | 35.1 |
| Cash conversion cycle (days) | 20.4 | 14.6 | 17.1 | 19.3 | 20.1 | 23.7 |
| Cash (RMB mn) | 6,101.2 | 8,210.4 | 10,950.0 | 11,679.0 | 15,612.0 | 18,687.5 |
| Other ST deposits (RMB mn) | 1,605.0 | 1,606.2 | 1,031.0 | 1,958.9 | 3,989.5 | 4,316.6 |
| ST debts (RMB mn) | 17,326.3 | 17,257.8 | 15,615.4 | 15,162.7 | 16,483.0 | 17,654.4 |
| LT debts (RMB mn) | 11,783.3 | 11,025.6 | 13,114.8 | 15,475.4 | 20,273.5 | 19,804.8 |
| Total debts (RMB mn) | 29,109.6 | 28,283.3 | 28,730.2 | 30,638.2 | 36,756.5 | 37,459.1 |
| Net debts (RMB mn) | 21,403.4 | 18,466.8 | 16,749.2 | 17,000.2 | 17,155.0 | 14,455.0 |
| Debt/EBITDA | 3.1x | 2.6x | 1.9x | 2.4x | 3.5x | 4.4x |
| Net debt/EBITDA | 2.3x | 1.7x | 1.1x | 1.3x | 1.6x | 1.7x |
| EBITDA/int | 6.5x | 8.2x | 12.6x | 10.0x | 6.6x | 5.4x |
| Net debt/equity | 96.5% | 68.7% | 41.1% | 38.6% | 37.3% | 30.8% |
Conclusion
Zhongsheng's financial performance in FY24 was affected by the weak new car sales, but the company has shown resilience through its diversified business model and improved liquidity. The report recommends maintaining a "Buy" stance on Zhongsheng's bonds, with a preference for ZHOSHK 5.98 01/30/28 due to its better trading liquidity. The company's credit profile remains solid, and its financial ratios are expected to improve in the coming years, reflecting its disciplined approach to debt management and operational optimization.
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