20180911-广发证券_香港_-永达汽车-03669.HK-1H18_results_see_steady_growth_amid_improving_gross_profit_mix_maintain_Buy_5页_636kb

Yongda Auto (3669 HK) Equity Research Summary

Core Content

Yongda Auto is a luxury car dealer primarily focused on BMW, with a growing presence in after-sales services and other segments. The research maintains a Buy rating with a target price of HK$8.62, based on a 7.5x FY18E P/E multiple, indicating the stock is considered undervalued.

Key Financial Performance (1H18)

• Revenue: Increased by 12.5% YoY to Rmb22.56bn
• Gross Profit: Rose by 14.9% YoY to Rmb2.64bn, with GPM improving to 11.71%
• Net Profit: Grew by 10.3% YoY to Rmb700m
• GPM Drag: New car sales GPM fell by 11.4% YoY to Rmb715m, due to tariff cuts and economic uncertainty
• Porsche Performance: Strong GPM of 8% driven by 50% YoY sales increase
• After-sales Services: Revenue increased by 20.5% YoY to Rmb3.7bn, with GPM at 46.76%
• Proprietary Finance: Gross profit rose by 91.2% YoY to Rmb163m
• Auto Rental Services: Gross profit grew by 7.5% YoY to Rmb46m
• Pre-owned Vehicles: Actively developed to leverage customer relationships
• Professional Traveling Services: Planned to be established in response to market demand

Stock Valuation

Year	Turnover (Rmb m)	Net Profit (Rmb m)	EPS (Rmb)	EPS YoY (%)	P/E	Yield	BPS (Rmb)	P/B	ROE (%)
2016	43,033	851	0.58	64.3	9.1	2.5	3.35	1.6	37.0
2017	50,699	1,510	0.91	58.7	5.7	3.2	5.01	1.0	45.6
2018E	60,233	1,809	0.98	7.9	5.3	5.2	4.82	1.1	42.2
2019E	70,263	2,384	1.30	31.8	4.0	5.6	6.01	0.9	47.9
2020E	80,242	3,017	1.64	26.5	3.2	7.3	7.64	0.7	48.1

Key Assumptions

• Unit Sales Growth: Expected to be 17.2% in 2018E, declining gradually to 12.6% in 2020E
• ASP Growth: Minor increase or stable, ranging from 0.1% to 0.2%
• GPM: Expected to rise from 10.3% in 2018E to 11.4% in 2020E
• S&D Expenses/Revenue: Stable at 4.5%
• Admin Expenses/Revenue: Stable at 2.4%
• OPM: Projected to increase from 5.0% in 2018E to 6.0% in 2020E
• NPM: Expected to rise from 3.0% in 2018E to 3.8% in 2020E

Balance Sheet Highlights

• Total Current Assets: Increased from Rmb12,992m in 2016 to Rmb24,993m in 2020E
• Total Current Liabilities: Rose from Rmb12,430m in 2016 to Rmb21,731m in 2020E
• Total Non-current Liabilities: Increased from Rmb2,542m in 2016 to Rmb3,356m in 2020E
• Net Assets: Rose from Rmb5,403m in 2016 to Rmb14,885m in 2020E
• Shareholders Equity: Increased from Rmb5,403m in 2016 to Rmb14,885m in 2020E

Financial Ratios

Ratio	2016	2017	2018E	2019E	2020E
ROCE (%)	14.5	20.1	19.1	22.0	23.7
ROE (%)	37.0	45.6	42.2	47.9	48.1
ROA (%)	9.1	12.5	12.5	14.8	16.2
EBITDA Margin (%)	3.7	4.9	5.0	5.5	6.0
EBIT Margin (%)	4.9	5.9	6.0	6.5	7.1
Interest Cover (x)	3.3	5.0	5.1	5.7	6.2
Dividend Cover (x)	3.4	3.4	3.4	3.4	3.4
Current Ratio (x)	1.0	1.0	1.0	1.1	1.2
Inventory Turnover Days	38.5	41.1	40.9	38.3	38.7

Main Points and Views

• Steady Growth: Yongda Auto reported steady growth in 1H18, with improved revenue and gross profit.
• Segment Performance: New car sales grew 10.7% YoY, but GPM declined due to market conditions. After-sales services and proprietary finance showed strong growth.
• Market Position: Positioned as a luxury car dealer, with BMW as the main brand. Expected to outperform the overall PV market in 2H18.
• Valuation: Currently trading at 5.8x FY18E P/E, considered undervalued.
• Target Price: HK$8.62, based on 7.5x FY18E P/E to factor in market concerns.
• Growth Expectations: The company is targeting further growth in after-sales services and exploring new opportunities in pre-owned vehicles and professional traveling services.

Risks

• New Car Sales Growth: May miss expectations, especially for the BMW X3.
• After-sales Growth: Could slow down, affecting overall profitability.
• China Auto Market: Sluggish sales could impact performance.
• Trade Tensions: May lead to a decline in valuation due to Sino-US trade frictions.

Rating Definitions

• Buy: Stock expected to outperform the Hong Kong Hang Seng Index by more than 15% over a 12-month horizon.
• Accumulate: Outperform by 5% to 15%
• Hold: Relative performance between -5% to 5%
• Underperform: Underperform by more than 5%

Disclaimer

This report is for informational purposes only and does not constitute an offer to buy or sell any securities. It is intended solely for the use of GF Securities (Hong Kong) clients. The information and opinions are subject to change without notice, and GF Securities (Hong Kong) accepts no liability for any loss arising from its use. Investors are advised to seek professional advice before making any investment decisions.