In the past two years, under the background of macroeconomic pressure, industry cycle and carbon neutrality policy, automobile consumption differentiation is serious, but the direction is still relatively obvious, the general direction of new energy vehicles gradually replaced fuel vehicles to become the mainstream of consumption, and in the direction of segmentation, the consumer demand for high-end models showed an upward trend.
According to the data of China Automobile Association, the monthly sales of new energy vehicles have continued to double since 2021, and the penetration rate for the whole year of 2021 has increased from 13.4% to 13.4% in the first quarter of 2022. According to the data of the Association of Passenger Vehicles, the penetration rate of high-end and luxury vehicles is also increasing year by year, higher than the penetration rate of 300,000 models in 2021 of 10.5%, and in Q1 of 2022, it increased to 11.5%, an increase of 5.1 percentage points over 2018.
Automobile dealers are the circulation link of the automobile industry chain, and the differentiation of automobile consumption directly affects the business decisions and performance of dealers. Traditional car companies generally have a distribution department, responsible for automobile sales, independent third-party dealers in the traditional car companies market share is low, the main sales of joint ventures and imported luxury brands, in recent years, new energy vehicle sales are hot, dealers in the consolidation of luxury car market share at the same time, but also actively into the new energy vehicle agency distribution business.
At present, the distributors listed on the Hong Kong stock market are mainly Zhongsheng Holdings (00881), Yongda (03669), Meidong (01268), Harmony (03836), Guanghui Baoxin (01293) and Zhengtong Automobile (01728), mainly distributing BMW, Mercedes-Benz and Lexus and other luxury and ultra-luxury brands. In 2021, the luxury car brand as a whole achieved high-number growth in the number of units, and major dealers have achieved good results.
In Q1 2022, especially in March, in the case of the multi-point epidemic and the continuous increase in oil prices, the car sales environment was poor, the sales of luxury cars such as Mercedes-Benz and BMW declined, and the overall dealer inventory coefficient increased, but the inventory coefficient of luxury cars was 1.5, which was lower than that of independent and joint venture brands. It is expected that the performance of dealers Q1 is not very optimistic, and Q2 depends on the stability of the epidemic situation, and it is expected that there will still be some pressure.
In fact, since July last year, the auto dealer sector has begun to adjust, and the correction of individual stocks has exceeded 30%, basically digesting the pessimistic expectations of Q1 and Q2 this year. For the future, under the mainstream trend of high-end and new energy consumption, the performance growth of dealers continues to be highly certain, and the valuation is greatly adjusted, bringing left layout opportunities for value investors. So, which dealer is more worth the layout?
First echelon: Yongda is the first choice
Performance is the preferred indicator of value investment, because the data will not lie, the major dealers basically released the 2021 financial report, performance and business operations who are strong and who are weak may wish to take it out for comparison.
Zhitong Finance APP learned that since May 2021, under the interference of multiple factors such as lack of core and epidemic, the overall monthly sales of automobiles have continued to decline, but the performance of luxury car brands has been relatively low, with annual sales of 3.66 million vehicles, an increase of 6.6% year-on-year, driving the overall growth of dealer performance. The revenue of major dealers basically maintained double-digit growth, of which the industry's double leaders Zhongsheng Holdings and Yongda Automobile increased by 18% and 14.03% respectively year-on-year.
Benefiting from the growth of the industry scale, there are certain differences in the operating efficiency of the store. In 2021, Yongda opened 237 stores, a decrease of 1, single store revenue of 329 million yuan, an increase of 14.63% year-on-year, higher than the same level of single store revenue of Meidong Automobile and Guanghui Baoxin, Zhengtong outlets and Guanghui Baoxin are similar, but the single store revenue lags behind a lot. Zhongsheng Holdings was the industry leader, with 412 outlets opened during the period, an increase of 39 against the trend, and the revenue of a single store was 42,500 yuan, an increase of 7.54% year-on-year.
The difference between the dealer's business model is not large, and the 4S store mainly has two major sources of combined income, one is to sell brand cars to earn the difference, and the other is to sell after-sales service. The brand cars are BMW, Mercedes-Benz, Audi, Lexus and Porsche and other luxury and ultra-luxury car brands, in addition to Toyota and Honda and other joint venture brands, mainly for these brands are to adopt a distribution model, and in the high-end price, whether it is the price difference or after-sales profits are relatively rich compared to traditional brand cars.
From the perspective of revenue volume, Zhongsheng Holdings and Yongda Automobile are the first echelon of the industry, and the volume of Meidong, Harmony, Guanghui and Zhengtong is similar, which is the second echelon. In terms of business operation model, there is no essential difference between the first echelon and the second echelon, and the main difference lies in the brand management strategy.
Yongda Automobile VS Zhongsheng Holdings, Yongda Automobile's core business strategy is obviously different, Yongda mainly did two things: one is to reduce the high-end 4S stores, the past three years to reduce 12, while increasing luxury 4S stores, the past three years increased by 14; the second is the forward-looking layout of new energy brand stores, currently has 18. In contrast, Zhongsheng business strategy, high-end brands to seek stability, and expand luxury brand stores, in 2021 all the new for luxury brand stores, but in the new energy brand layout, currently only in Shenzhen has a Xiaopeng new car delivery center and supermarkets put into operation.
The dominant brands of Zhongsheng Holdings are Mercedes-Benz, BMW and Lexus, and in 2021, the sales volume of luxury brands will account for 56.7% of total sales, the gross profit margin of new cars will be 1.4%, the gross profit margin of after-sales service will be 48.04%, and the gross profit after-sales will contribute 63.8%. Yongda's dominant brands are BMW and Lexus, in 2021, luxury brand sales accounted for 66% of total sales, the overall gross profit margin of new cars was 3.49%, Porsche gross profit margin was as high as 8.7%, after-sales service gross profit margin was 45.1%, and after-sales gross profit contributed 67.1%.
The difference in core business strategy makes the two industry leaders have differences in business and gross profit margin performance, in general, Yongda streamlines the high-end brand + expands the luxury advantage brand + vigorously develops new energy brands to present better business results, the growth space is open, and the potential is huge. Of course, the two companies have used car and financial services business, although the performance contribution is low, but it is also a growth curve that cannot be ignored, especially the second-hand car market has a lot of room for improvement, in terms of penetration rate, there is still a large gap between domestic and overseas.
For the second echelon, the brand focus strategy is adopted, such as Meidong Automobile, the sales of bmw and Lexus brands in 2021 contributed 59.52%, of which BMW sales contributed 40.63%; harmony car sales mainly came from the BMW brand, and in 2021, bmw brand sales continued to win the domestic sales championship for the second consecutive year. Due to the focus on luxury brand cars, the gross profit margin of Meidong and Harmony new cars is higher than that of the first echelon, of which the usdong is 6.8%, while the gross profit margin of after-sales service is in the range of 45-50%.
Industry profitability "convergence"
The same business, different brand business models, profitability performance is different, Yongda, Zhongsheng, Meidong and Harmony four gross profit margins are relatively close, and relatively stable, of which the United States Due to the high gross profit margin of new cars, the overall gross profit margin is the highest, up to 11.8%, and zhongsheng gross profit margin is higher than Yongda, mainly for the high gross profit after sale of Zhongsheng. It is worth noting that the profitability of Guanghui Baoxin and Zhengtong has fallen behind, and the gross profit margin has shown a downward trend in recent years.
The period expense rate of major dealers is in the range of 6-8%, and the characteristics of each expense rate are obvious, so that the net profit margin of the four companies with relatively close gross profit margins is not large, but from the perspective of scale, Zhongsheng and Yongda obviously want to earn more. In addition, due to the mistakes in the business strategy, the three major expenses are high, and in the past few years, the focus of the business has shifted to auto finance, and its Dongzheng Financial will be forcibly liquidated, which seriously drags down the distribution business, and loses more than 10 billion yuan for two consecutive years.
In terms of operational capabilities, the inventory turnover days in the United States are lower than those of its peers, and Zhongsheng and Yongda are evenly matched, both of which are about 22 days. In terms of return on investment, the United States is still the highest, with an ROE of 28.32%, and maintaining an upward trend, with an equity leverage of 2.38 times, which is undoubtedly "small and beautiful" in the reference target. Zhongsheng and Yongda were 20.46% and 2.1 times and 17.4% and 2.2 times respectively on these two indicators.
Although Yongda lags slightly behind the United States and Zhongsheng in the main indicators, it can be seen in an upward trend in recent years and has a good development condition, which is mainly due to the release of the results of the company's business strategy. From the perspective of network layout, Yongda's growth space is larger than that of Zhongsheng, the forward-looking new energy layout will become a new growth point, and multi-brand is stronger than single-brand anti-risk ability, and the performance stability is also higher than that of the United States.
Pay attention to yongda valuation regression signals
Through layer by layer analysis at the operational level, Yongda is undoubtedly the preferred target for the left layout of value investment, with business strategy + policy and industry drive, optimistic performance prospects, and high certainty of high growth.
The sustainability of Yongda's performance growth is: First, driven by the business strategy, continuous high-end driving the continuous improvement of the gross profit margin of new cars, and the new energy strategy will also usher in the release of performance, and large-scale growth will also bring considerable profits; second, driven by the industry and policies, luxury car consumption is firm, BMW brand sales increased by 8.9% in 2021, leading BBA, Jaguar Land Rover and other ultra-luxury brands double-digit growth, in addition to new energy sales monthly sales to maintain a doubling trend, The marketing of the new forces of car manufacturing with higher prices has gradually changed into an agency and distribution model, bringing cooperation opportunities to dealers.
At the same time, the market has not given Yongda a reasonable valuation level, and in this wave of corrections, its correction is more than 50%, much higher than Zhongsheng and the United States East. At present, the market capitalization of Zhongsheng, Yongda and Meidong is HK$127.4 billion, HK$33.2 billion and HK$14.64 billion respectively, and the PB and PE (TTM) values are 2.6, 6.9 and 0.9 times and 12.5, 23.3 and 4.8 times respectively, and the valuation of Yongda is significantly undervalued. From the perspective of performance-driven valuation, compared with the valuation of peers, Yongda's market value has a huge room for improvement.
However, at present, the hong Kong stock market has a weak effect of making money, and the adjustment of various industry sectors is more obvious under the bearish trend of the broader market, and Yongda may not get a valuation correction in the short term, but in the long run, it is still optimistic about its valuation return space.