In 2021, the global automotive market will follow suit in the face of supply chain instability caused by repeated epidemics, chip shortages and rising raw material prices. China's auto industry, which is gradually recovering from the epidemic, has shown great vitality, and china's passenger car market has bottomed out after three consecutive years of negative growth.
In recent years, the luxury car market, which has maintained an average growth rate of about 11%, has reached a new high. According to the data of the Association of Passenger Vehicles, the sales of luxury brand passenger cars in 2021 were 3.472 million units, an increase of 20.7% year-on-year, higher than the growth rate of passenger cars by 14.2 percentage points, accounting for 16.2% of the total passenger car sales, up 3.2 percentage points from 2020, a record high. All in all, the luxury car market has strong resilience, and the scissors difference with the growth rate of the large market has expanded, reflecting the trend of "rising against the trend", and will become one of the most important growth "engines" of the automobile market in the future.
In this context, Harmony Automobile (03836), as a pure luxury and ultra-luxury automobile dealer group, has seized the market opportunity for the continuous growth of luxury cars such as consumption upgrades, low inventory, damaged car replacement and maintenance, etc., continuously optimized the brand portfolio, unswervingly promoted the refined management strategy, steadily improved management efficiency, and set a new high in a number of indicators of main performance.
According to the annual results announcement released by Harmony Automobile on March 21, the company achieved revenue of 17.981 billion yuan (unit: RMB, the same below), an increase of 21.9% year-on-year; profit attributable to the company's owners was 673 million yuan, an increase of 63.9% year-on-year; profit during the period was 691 million yuan, an increase of 63.8% year-on-year.
Strong sales of luxury cars contributed to high growth
In the view of Zhitong Finance APP, the sales of luxury cars of Harmony Automobile are firm, the "three focuses" strategy has achieved initial results, the performance has grown as scheduled, and the brand portfolio structure has been continuously optimized, consolidating and expanding the market interest rate in a timely manner, coupled with persistent fine control, driving its business to improve for a long time.
Despite the heavy impact of the semiconductor shortage on automotive supply, Harmony Has captured fast-growing luxury and ultra-luxury brands such as BMW, Lexus, Volvo, Rolls-Royce and Bentley with a competitive product matrix, with sales showing resilience. According to the financial report, Harmony Automobile delivered a total of 40,791 units in 2021, an increase of 11.5% year-on-year. New car sales revenue was 15.610 billion yuan, an increase of 21.1% year-on-year.
Specifically, BMW is the main contributor to Harmony's sales and revenue, with a year-on-year increase of 11.4%. In addition to BMW, Ferrari, Rolls-Royce, Bentley and Maserati in the Harmony car brand portfolio also benefited from strong demand for ultra-luxury cars in China, with sales climbing rapidly. In 2021, the company's ferrari, Rolls-Royce, Bentley and Maserati sales increased by 94.3, 36.7%, 126.9% and 35.4% respectively year-on-year.
In addition to focusing on luxury car advantage brands, Harmony Automobile also attaches great importance to operational efficiency. In 2021, the company is committed to efficiency and quality, building the core competitiveness and "moat" of the enterprise, and improving profitability.
Reflected in the financial report, the gross profit margin of Harmony Automobile's sales in the first half of the year reached 9.7%, an increase of 0.9 percentage points year-on-year; the financial expense was 131 million yuan, down 2.4% year-on-year, thanks to the Group's improvement of capital operation management and optimization of loan terms. Inventory turnover days are 25 days. Inventory has always been maintained at a low level, not only due to the improvement of domestic consumption and policy support after the epidemic, but also thanks to the company's strengthening of order management and inventory real-time system, allocation and adjustment of resources between distribution outlets, and maintenance of reasonable inventory levels. Low inventory is partly beneficial to its cash management and gross margin.
Brand structure optimization Fundamental consolidation is becoming more and more valuable for investment
In addition to the sales of luxury cars, the new highlight of Harmony Automobile's performance lies in the further optimization of the brand structure. In 2021, the company added an ultra-luxury brand - Lamborghini, and obtained the authorization of Lamborghini Wenzhou and Tianjin stores.
Specifically, in 2021 the company added 5 new stores to its distribution network, 2 of which were Ferrari brands, 2 were Lexus brands and 1 was a Lamborghini brand. Among them, the Ferrari brand is the super luxury brand with the fastest network expansion of Harmony Automobile in 2021. Qingdao and Nanjing stores have opened one after another, and Zhengzhou and Xi'an stores are under construction. Harmony Automobile will get 4 new outlets in 2021, of which the Beijing Bentley store is under construction, which will be the largest Bentley dealership in Asia, and is expected to become the first sales volume in the country after opening. This is also the sixth Bentley brand dealership expanded by Harmony Automobile in the past two years.
Zhitong Finance APP believes that the expansion of ultra-luxury brands has added stability to the gross profit of Harmony Automobile. Zhongtai International Research Report shows that in the past three years, the gross profit margin of the company's luxury car sales range is only about 1.5%-3.0%, while the gross profit margin of ultra-luxury cars is 6.0%-16%, which is much higher than that of luxury cars. The combination of both luxury and ultra-luxury brands helps Harmony To smooth out the volatility of new car sales gross margins caused by fluctuations in luxury car gross margins. In addition, the customer loyalty and viscosity of ultra-luxury cars to the brand are also highly super luxury cars.
The brand matrix is optimized, and the investment value of Harmony Automobile is further highlighted. Because ultra-luxury cars escort gross profit steadily, luxury cars can grasp the growth opportunities of the sinking market, and the performance growth is certain.
On the one hand, China is currently the world's largest auto market, but also the largest luxury car sales market, according to Marklines statistics, in 2020 China's luxury car sales accounted for one-third of the world's total, sales share reached about 14%, slightly exceeding the global average (11%). However, compared with some overseas developed countries, such as the United Kingdom 23%, Germany 20%, the industry still has not reached saturation. In the future, with the domestic economic development and the improvement of residents' income level, there is still room for further improvement in the share of luxury cars in China, and demand will continue to grow. It is expected that by 2030, China's luxury car sales share is expected to exceed 20%.
On the other hand, grasping the growth space of Luxury Cars in China, the purchasing power of third- and fourth-tier cities should not be underestimated. In the past two years, under the background of the overall passenger car market raising the flag and sales volume, the sales share growth of the overall passenger car market is more focused on high-tier cities, while the share penetration growth of luxury cars in low-tier cities is more significant, and the growth dividend of low-tier cities is better captured.
Harmony Automobile has a wide layout in low-tier cities, and 14 of the 20 cities that open BMW stores on the official website are third-, fourth- and fifth-tier cities (Luoyang, Nanyang, Shangqiu, Zhoukou, Jiujiang, Hohhot, etc.), most of which have a population size of less than 7 million, a GDP of less than 500 billion, low penetration of luxury cars, small market competition, and great potential for consumption upgrading, which is conducive to grasping the opportunity of luxury car sales growth, and the performance determination configuration advantage is obvious.
Develop the two major markets of used cars + new energy vehicles to explore the business growth curve in multiple dimensions
In addition to grasping the main line of luxury car growth, Harmony Automobile also explores the business growth curve in multiple dimensions, increases the operation of second-hand cars, continues to cultivate new energy vehicle investment projects, and explores new business models for the electrification and digitization of traditional dealers.
In terms of used car business, due to Harmony Automobile's commitment to "old for new" services, the company's used car trading volume expanded to 7388 units, a significant increase of 28.9% year-on-year. In the view of Zhitong Finance APP, under more supporting policies of the automobile industry and automobile consumption stimulus policies, the second-hand car business has great potential.
Driven by the policy in 2021, the growth rate of second-hand car sales in The country still maintained a high growth trend compared with new car sales. According to the data of China Automobile Dealers Association, the national second-hand car trading volume in 2021 was 17.5851 million units, an increase of 22.62% year-on-year; the transaction volume of luxury brand second-hand cars was 1.68 million units, an increase of 26.6% year-on-year; the proportion of second-hand car transfers increased year by year, and the cross-regional circulation was significantly enhanced, and the proportion of second-hand car transfers in 2021 reached 27.32%. At the same time, in 2021, the mainland automobile old-to-new ratio is 0.74:1, while the relatively more mature foreign automobile market, such as the U.S. market, has a car-to-new ratio of 2.5:1, and the mainland second-hand automobile market still has great market potential.
In addition, with the gradual maturity of second-hand car transactions, the chained and branded dealer teams have benefited from its rapid development and become a trend in the development of the second-hand car industry. Harmony Automobile's forward-looking layout of the second-hand automobile market and the consolidation of its brand advantages are expected to win a double harvest of word of mouth and performance.
At the same time, with the steady development of the new energy vehicle market, luxury car brands have also entered the new energy battlefield, and the strategic investment effect of Harmony Automobile in the new energy vehicle track has emerged. In 2019, the company merged the "Harmony Car Repair" and "Harmony Zhilian" invested and established in 2017 and 2018 and renamed it "Bell New Energy Vehicle" (Bell Repair Car). At present, BellBell New Energy has obtained the sales and after-sales service authorization of major electric vehicle brands such as Ideal Automobile, Weilai, Xiaopeng Automobile, and GAC AION, and transformed into a comprehensive electric vehicle service provider covering electric vehicle sales and after-sales service.
At present, the development momentum of Bell New Energy Vehicles is good, and with the vigorous development of the new energy market, Harmony Automobile's new energy vehicle business is expected to contribute considerable performance in the future. According to the data of China Automobile Association, a total of 3.52 million new energy vehicles will be sold nationwide in 2021, an increase of 157.5% year-on-year, and the proportion of new energy vehicle sales will increase to 13.4% throughout the year, and it is predicted that the proportion of new energy vehicle sales will increase to 25% by 2025.
Zhitong Finance APP is optimistic about Harmony Automobile's strategy of selling luxury and ultra-luxury cars, while opening up growth space with multi-dimensional expansion layout and high-quality performance. With the company's continuous promotion of "adhering to the 'three focuses' strategy", the resilience of performance growth can be expected. Unlike strong fundamentals, the valuation level of Harmony Automobile in the capital market is further declining. As of the close of trading on March 21, the company's price-to-book ratio was only 0.60 times, and the price-to-earnings ratio (TTM) ratio was only 8.08 times. From this point of view, the valuation of Harmony Automobile is extremely attractive, and the investment value is worth continuing to track by the market.