研究报告全文：21Mar2023CMBInternationalGlobalMarketsEquityResearchCompanyInitiationYongdaAutomobiles3669HKBUYInitiationAfter-salesasearningsdriveramidlowvaluationTargetPriceHK850UpDownside680CurrentPriceHK506InitiatewithBUYWeinitiatecoverageofYongdawithaBUYratingandatargetpriceofHK850basedon7xFY23EPEDespitedirect-salesattemptsbysomenew-energy-vehicleNEVmakerswebelievedealershipbusinessmodelChinaAutoSectorisstilljustifiedWebelievethemajorityofshort-termnegativeshasbeenpricedingivenitslowvaluationnowSomeinvestorsmayunderestimatetheDOUWenjingCFAcontributionofafter-salesservicerecoverytoYongdasnetprofitgrowththisyear85269394751douwenjingcmbicomhkIndustrymargindenthasbeenlargelypricedinAutodealersnew-carSHIJiCFAsalesbusinessmayfacechallengesamidpricewarin1Q23followingphase-85237618728outofbothNEVsubsidyandpurchase-taxbenefitfromthisyearWeexpectshijicmbicomhksalesvolumeandmarginstorecoverfrom2H23afterpossibleinventoryreductionin2Q23YongdascorebrandsBMWandPorschecouldbebetterpositionedthanothertraditionalbrandsintheNEVworldStockDataMktCapHKmn9896NEVbrandsandpre-ownedvehiclesmaygrowfastYongdaisapioneerAvg3mthstoHKmn21inpartneringwithNEVmakersWeexpectYongdasnew-carsalesvolumeof52wHighLowHK910340TotalIssuedSharesmn1956NEVbrandstosurgeover90YoYto15000unitsdealershipmodelandSourceBloombergagencymodelcombinedinFY23EamidnetworkexpansionWeprojectYongdaspre-ownedvehiclesalesvolumetorise10YoYto88000unitsinShareholdingStructureFY23Eamountingtomorethan50ofitsnew-carsalesvolumeMrCheungTakOn298FILLimited81After-salesservicesasakeyearningsdriverthisyearWeprojectOthers622SourceHKExYongdasafter-salesservicerevenuetorise15YoYinFY23Eandtoaccountfor165ofitstotalrevenueamidpent-updemandandcommuteSharePerformanceresumptionThatcouldliftYongdasoverallgrossmarginto100inFY23EAbsoluteRelativefrom89inFY22EbasedonourestimatesAccordinglyweforecastitsnet1-mth-237-1543-mth-40-35profittorise39YoYtoRMB20bninFY23EWebelievesuchprofitand6-mth12-18margincontributionfromafter-salesservicescouldbeunderestimatedbySourceBloombergsomeinvestors12-mthPricePerformanceValuationKeyrisksOurtargetpriceofHK850isbasedon7xourFY23EHK3669HKHSIrebasedPEthesameasitsaverageforward12-monthPEinthepastnineyearsWe10thinkthevaluationgapbetweenYongdaanditspeerscouldnarrowbecausetherisingimportanceofafter-salesservicesandYongdasNEVexposureWe8alsoprojectYongdasdividendyieldtoexceed8thisyearKeyriskstoour6ratingandtargetpriceincludelowersalesandormarginsslowerafter-sales4servicerecoverythanourexpectationaswellasasectorde-rating2EarningsSummary02022-032022-062022-092022-12YE31DecFY20AFY21AFY22EFY23EFY24ESourceBloombergRevenueRMBmn6820177917729507059869260YoYgrowth88142643219AuditorDeloitteNetincomeRMBmn16252480144320052327EPSRMB085126074103119YoYgrowth103526418389161PEx5033614337PBx0706060505Yield1311166693108ROE150194103134141Netgearing57188824NetcashSourceCompanydataBloombergCMBIGMestimatesNoteMarketdataasof20Mar2023PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1MOREREPORTSFROMBLOOMBERGRESPCMBRGOORhttpwwwcmbicomhk21Mar2023ContentsFocusCharts3InvestmentThesis4DealershipwilllikelyexistdespitetheadoptionofdirectsalesbyNEVstart-ups4After-salesserviceasanearningsdriverthisyearforYongda4Earningsforecastandvaluation4IndustryOverview5OverallluxurycarTraditionalluxurydownpremiumNEVup5Willdealershipbusinessmodeldisappearamidslowerexpansion8CompanyOverview12Luxury-brandautodealercomplexownershipofsubsidiaries12New-carsalesLuxuryisthefoundationNEVcouldbeadriver14Pre-ownedvehiclesNextprofitdriverfordealers16After-salesservicesEarningsdriverinFY23E18EarningsForecast20Weexpectnetprofittorisealmost40YoYinFY23E20Valuation21InitiatewithBUYTPofHK850over65upside21FinancialSummary22PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE221Mar2023FocusChartsFigure1RetailsalesYoYgrowthfortraditionalFigure2NoofauthorizedstoresandavgsalesluxurybrandsoverallluxurybrandsandoverallPVvolumeperstoreforPorscheandBMWinChinaSourceCATARCCMBIGMestimatesSourceCompanydataCMBIGMFigure3YongdasauthorizedstorenumbergrowthFigure4Yongdasnew-carsalesvolumeforecastbybybrandbrandSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesFigure5Yongdasnew-carsalesgrossmarginFigure6OurforecastforYongdasgrossprofitfromforecastbybrandafter-salesservicesSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE321Mar2023InvestmentThesisDealershipwilllikelyexistdespitetheadoptionofdirectsalesbyNEVstart-upsThemainpurposeforautomakerstoattemptdirectsalesistoknowcustomersneedsfasterandbetterwhichdoesnotmeana100direct-salesmodelinourviewespeciallyinregionswithlowerinvestmentreturnInadditionhigherhardwareratioforcarsthansmartphonesandvolatilecustomerdemandprobablymeanhigherstock-keepingunitsSKUswhichmayleadtocomplexsupplychainandhigherinventoryburdenforautomakersThereforedealersarethecushionsforautomakersduringunexpectedeventsMoreandmoreNEVmakershavebeenrelyingondealerstoadoptso-calledagencymodelYongdaisoneofthepioneerstoworkwithNEVstart-upsandattemptagencymodelAgencymodelrequireslowerinitialinvestmentsfordealerswhichcouldmeanshorterpaybackperiodMoreimportantlyoperationalrisksarelowerfordealersastheydonotneedtotakeinventoriescomparedwiththedealershipmodelandautomakersarelikelytooffergenerousincentivestodealersatthebeginningundertheagencymodelOntheotherhandweestimatetheoverallafter-salesservicerevenueintheNEVworldtodeclinebyabout20withaslightlylowergrossmarginAfter-salesserviceasanearningsdriverthisyearforYongdaAlthoughvehicleconsumptionupgradehasneverhaltedinChinainouropinionretailsalesvolumeoftraditionalluxurybrandsmaycontinuetounderperformtheoverallpassenger-vehiclePVmarketthisyeargivenalackofcompetitiveNEVmodelsYongdaasaleadingluxury-brandautodealercouldpostnew-carsalesvolumeYoYdeclinefortraditionalbrandsinFY23EOntheotherhandweprojectYongdasnew-carsalesvolumeofNEVbrandstosurgeover90YoYtoabout15000unitsinFY23EdrivenbyitsnetworkexpansionlastyearDespitelowbasefornew-cargrossmargininFY22EwestillexpectasimilarlevelforFY23EamidpricewarWealsoforecastYongdaspre-ownedvehiclesalesvolumetorise10YoYtoabout88000unitsinFY23EWebelieveYongdasafter-salesservicescouldbeitsearningsdriverinFY23EafterthesignificantdentbylockdownslastyearWeforecastYongdasafter-salesservicerevenuetorise15YoYinFY23Edrivenby11increaseinnumberofafter-salesservicesandslightlyhigheraveragesellingpriceASPfrombetterproductmixWeprojectYongdasafter-salesservicestoaccountfor165ofitstotalrevenueinFY23EthehighestinhistoryThereforeweprojectYongdasoverallgrossmargintowidenfrom89inFY22Eto100inFY23Eaidedbyhigh-marginafter-salesservicesEarningsforecastandvaluationWeprojectYongdastotalrevenuetodrop3YoYtoRMB706bninFY23Eand2YoYRMB693bninFY24ElargelyduetosalesslowdownintraditionalluxurybrandsinChinaWeexpectYongdanetprofittorise39YoYand16YoYtoRMB20bnandRMB23bnrespectivelyduringFY23-24EWebelievesomeinvestorsmayunderestimateYongdasearningsimprovementdrivenbyafter-salesservicereboundthisyearWeinitiateourcoveragewithaBUYratingandourtargetpriceofHK850isbasedon7xFY23EPEthesameasitsaverageforward12-monthPEinthepastnineyearsThecompanyislikelytofurtherimprovethedividendpayoutratiotoabout40thisyearinourviewimplyingadividendyieldofabove8inFY23EwhichshouldbeagoodsupporttothecompanyssharepriceinourviewPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE421Mar2023IndustryOverviewOverallluxurycarTraditionalluxurydownpremiumNEVupWedivideluxury-autosegmentintotwocategoriestobetterreflecttheindustrylandscapechangestraditionalluxuryandNEVluxuryaspremiumNEVmodelshavealreadycontributedasignificantportiontohigh-endvehiclesalesOurdefinedNEVluxurybrandsincludeTeslaNIOLixiangXpengZeekrAitoDenzaHiPhiGreatWallsSLJIDUBYDsYangwangAvatarVoyahIMandPolestarAfterfour-yearoutperformanceduring2017-20retailsalesvolumeoftraditionalluxurybrandsunderperformedtheoverallPVmarketin2021-22HoweverthefiguresbelowclearlyshowthatvehicleconsumptionupgradehasneverhaltedinChinaastheoverallluxurysegmentincludingpremiumNEVbrandshasbeenconsistentlyoutperformingtheoverallPVmarketFigure7RetailsalesYoYgrowthfortraditionalFigure8MarketsharesforoverallluxurybrandsluxurybrandsoverallluxurybrandsandoverallPVandtraditionalluxurybrandsinChinaSourceCATARCCMBIGMestimatesSourceCATARCCMBIGMestimatesWeexpectsuchtrendtocontinuein2023Weprojecttraditionalluxurybrandstodrop4YoYin2023slightlyweakerthantheoverallPVmarkets2YoYdeclineWeexpecttheoverallluxuryautoretailsalesvolumetorise17YoYin2023ThatmeansweexpecttheoverallluxurybrandsincludingNEVluxurytoaccountfor235ofChinastotalretailsalesvolumein2023whereastraditionalluxurybrandsmarketsharemaydroptoabout146InotherwordsretailsalesvolumeofNEVluxurybrandscouldaccountforalmost40oftotalluxurybrandsin2023basedonourestimatesTraditionalluxurybrandshavebeenlaggingintherolloutsofcompetitiveNEVmodelsinthepastfewyearswhichshouldbeoneofthekeyreasonsfortheirunderperformanceinChinainourviewWebelievesometraditionalluxurybrandsstillhaveopportunitiestocatchupastheirbetterbrandimagegivesthemalongertransitiontimetowardelectrificationthanmass-marketbrandsAsHongKong-listedautodealersmainlyselltraditionalluxury-brandvehiclessalesunderperformanceoftraditionalluxurybrandshastrimmeddealersvaluationinthepasttwoyearsAsweprojectsuchsalesunderperformancetocontinuein2023new-cargrossmarginsandafter-salesservicewouldbemorecriticaltodealersearningsoutlookMostdealersachievedall-timehighnetmarginsin2021amidnew-carsalesdeclinesduetochipshortagePLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE521Mar2023BMWNoneedtoreadtoomuchintoitsaggressivesalestargetYongdaisoneofBMWslargestdealersinChinawithover40ofitstotalnew-carsalesvolumecomingfromBMWin2022onourestimatesYongdaopeneditsfirstBMW4Sstorein2005inShanghaiandnowoperatesabout56BMW4SstoresandshowroomsnationwideYongdaaccountedforabout10ofBMWstotalretailsalesvolumeinChinain2022Figure9YongdascontributiontoBMWsChinaFigure10BMWaccountsforabout43ofYongdasretailsalesvolumenew-carsalesvolumeSourceCompanydataCATARCCMBIGMestimatesSourceCompanydataCMBIGMestimatesBMWtargetsasales-volumegrowthofover15YoYtoabout900000unitsinChinain2023whichisquiteaggressiveinourviewBMWmayaimtotakeovertheluxury-carsalesvolumecrownfromMercedes-BenzinChinathisyearasitonlyfellshortbylessthan4000unitsin2022OntheotherhandBMWannouncedMSRPmanufacturerssuggestedretailpriceincreaseofaboutRMB2000-20000formostmodelsinChinafromFeb2023duetoraw-materialpricehikeamidhighinflationintheEurozoneWeareoftheviewthatinvestorsdonotneedtoreadtoomuchintosuchaggressivesalestargetBMWhasbeenmoreresponsivetomarketchangesthanbeforeafteritsoversupplyduring2014-15and2H18whichresultedinquitesignificantsubsidiestodealersafterwardsBMWinitiallytargeted10YoYsales-volumegrowthinChinain2022butendedupwith7YoYdeclineBMWdealersinventorylevelswereoneofthelowestamongallthebrandslastyearWethinksimilartrendcouldhappentoBMWthisyearPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE621Mar2023Figure11BMWsretailsalesvolumeinChinaFigure12NEVmarketshareatBMWinChinaSourceCATARCCMBIGMestimatesSourceCATARCCMBIGMestimatesWeprojectBMWsretailsalesvolumetodecline4YoYtoabout740000unitsin2023amidtheaging3-Seriesand5-SeriesWeexpectBMWtoretaintheNEVsalescrownamongtheGermanBigThreein2023aidedbythei3andiX3BEVsasweprojectNEVstoaccountforalmost10ofBMWstotalsalesvolumein2023WealsoexpectBMWdealersnew-cargrossmargintoimprovefrom2Q23whichcouldbeapositivecatalystforYongdassharepricePorscheNew-cargrossmargintoreboundamidconservativesalestargetYongdaisalsooneofPorscheslargestdealersinChinaaccountingforabout12ofPorschestotalnew-salesvolumeinChinain2022YongdaopeneditsfirstPorsche4SstoreinHainanProvincein2011andnowhas19Porsche4SstoresandshowroomsnationwidePorscheprobablyaccountedforabout6ofYongdastotalnew-carsalesvolumebut45ofYongdastotalnew-cargrossprofitin2022basedonourestimatesFigure13YongdascontributiontoPorschesChinaFigure14Porscheaccountsforabout45ofretailsalesvolumeYongdasnew-cargrossprofitSourceCompanydataCATARCCMBIGMestimatesSourceCompanydataCMBIGMestimatesPorschetargetsretailsalesvolumeof90000unitsin2023implyingaYoYdeclineof5whichisconservativeandprobablyreflectsPorschesdeterminationtomaintainitsmoreluxuriousbrandimageafterexperiencingunusuallyhighdiscountsin2H22WeareoftheviewthatPorschemaybebestpositionedamongtraditionalluxurybrandswhenfacingPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE721Mar2023competitionfromNEVsthankstoitsmoreluxuriousbrandimageandbetterreceivedTaycanBEVthanthoseBEVsatMercedes-BenzandBMWWeprojectPorschesretailsalesvolumetogrow6YoYtoabout100000unitsin2023partlyaidedbyupcomingnewMacanBEVandnewstoresopenedin2022UnlikeBMWandMercedes-BenzPorschesBEVmodelsareprofitablefordealersFigure15PorschesretailsalesvolumeinChinaFigure16NEVmarketshareatPorscheinChinaSourceCATARCCMBIGMestimatesSourceCATARCCMBIGMestimatesWilldealershipbusinessmodeldisappearamidslowerexpansionDealernetworkexpansionsfortraditionalluxurybrandshavebeenstableduringthepastfewyearsexceptforAudiasitsetupanewjointventureSAICAudiThestorenumbergrowthrateislessthan5formajorluxurybrandsinChinaperannumThemajorityofnewstoresarelocatedinlower-tiercitiesBMWhasabout7304SstoresshowroomsandservicecentersinChinanoworabout1000-1200unitsofannualsalesvolumeperstoreonaveragenationwidePorschenowhasabout1504SstoresshowroomsandservicecentersinChinawithanaveragestoresalesvolumeof650-720unitsperyearFigure17NumberofauthorizedstoresinclshowroomsandservicecentersandaveragesalesvolumeperstoreforPorscheandBMWinChinaSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE821Mar2023WeexpectChinasoverallauthorizeddealernetworktoexpandataslowerpacethanbeforeincludingbrandslikeBMWandPorschefortworeasons1AutosalesgrowthinChinahasbeenslowingdownespeciallyforinternal-combustionengineICEvehicles2Automakersmayattemptdirect-salesmodeltosellatleastpartoftheircarstocustomersespeciallyforNEVsAutodealerbusinesswillexistinthemediumtolongtermWehavenotseensignalsfordirect-salesattemptsfrombrandslikeBMWandAudiPorschehasafewself-operating4SstoresforalongtimeinChinaalthoughwecannotruleoutsuchpossibilitiesDespitethatwearestilloftheviewthattheautodealerbusinesswillexistinthemediumtolongtermforthefollowingreasons1Reactingtocustomersneedsfasterdoesnotneed100direct-salesmodelInourviewthemainpurposeforautomakerstoadoptadirect-salesmodelistoknowcustomersneedsfasterandbetterassoftware-definedvehiclesmakeupgradesmoreflexibleHoweveritdoesnotmeanthatautomakershavetoimplementa100direct-salesmodelespeciallyinregionswithlowerinvestmentreturnInsteadautomakerscouldopenself-operatingflagshipstoresinbigcitiesthatcouldserveasleadingindicatorsforotherlower-tiercitiesandmeanwhilerealignauthorizeddealersKPItoenhancetimelyfeedbackandcustomerservicesMoreandmoreNEVmakersincludingXpengSAICsIMSmartandDongfengsVoyahhavebeenrelyingondealerstoadoptso-calledagencymodelInthismodelcustomersarerequiredtoplaceordersonlinethroughmobileAPPwhiledealersdonottakeinventorybuthelpdelivervehiclesandservicecustomersInthiscaseautomakerscanstillcloselymonitordemanddynamicsandreactquicklytocustomersneedsbyleveragingdealerscapitalandresourcesFigure18FaststoreexpansionofXpengandAitoinChinaSourceCompanydataCMBIGM2HighSKUsandcomplexsupplychainmaychallengedirect-salesmodelInvestorsseethesimilaritybetweensmartphonesandNEVsintermsofsoftwareimportanceandthereforeinferthatNEVmakerscouldalsoadoptdirect-salesbusinessmodelWeacknowledgesuchanalogybutweareoftheviewthatitcouldstillbeabitdifferentAsnotedinourpreviousreportsifwehadtoquantifytheimportanceofsoftwareforfuturecarswewouldprobablyput5050forthesoftwarehardwareratiointermsofconsumersperceivedvalueHigherhardwareratioforcarsthansmartphonesprobablyPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE921Mar2023meanshigherstock-keepingunitsSKUsandhigherinventoryburdenforautomakersDespitehigherlevelofcomponentsintegrationforNEVsthesupplychainforcarsiswaymorecomplexthansmartphonesVolatilecustomerdemandforcarsbynaturewouldcreatehugedifficultyforautomakerstomanagetheirsupplychainandthereforedealersarethecushionsforautomakersduringunexpectedeventsAgencymodelShorterpaybackperiodandloweroperationalriskfordealersAgencymodelappearstogainpopularitynowadaysamongincumbentautomakersNEVbrandssuchasSmartSAICsIMandDongfengsVoyahasitsatisfiestraditionalautomakersattemptstoknowcustomersneedswithmuchlowerinvestmentsthandirect-salesmodelMuchlowerinvestmentsthandirect-salesmodelalsomeansafastersalesnetworkexpansionwhenautomakerssetupanewsalesnetworkforanewbrandDealersarewillingtotakethisoptionaslongasautomakersofferareasonableincentiveschemeforsellingnewcarsAgencymodelrequireslowerinitialinvestmentsfordealerswhichcouldmeanshorterpaybackperiodMoreimportantlyoperationalrisksarelowerfordealersastheydonotneedtotakeinventoriescomparedwiththedealershipmodelYongdaisoneofthepioneerstoworkwithNEVstart-upsandattemptagencymodelwithsomeautomakersItappearstousthatautomakersarelikelytooffergenerousincentivestodealersatthebeginningundertheagencymodelespeciallywhennew-carsalesandafter-salesservicesareusuallyseparatedintheNEVsalesbusinessmodelPossibleabnormalprofitsfromagencymodelwouldbegonewhentheNEVbrandsgetmatureInfactweareoftheviewthatagencymodelcouldeitherconvertintopuredirect-salesmodelorgobacktodealershipmodelinthelongtermThereforepaybackperiodcouldbecrucialfordealersWillthelikesofTeslaleveragedealersinlower-tiercitiesThisyearcouldbeinterestingfordealersasNEVstart-upsmayexperienceproductionovercapacityforthefirsttimeinhistoryThepossibleinventoryburdencouldmakeNEVmakersrethinkaboutdealersAsnotedinourpreviousreportTeslaneedstoexpanditssalesnetworkinlower-tiercitiesinChinainabidtomaintainitshighcapacityutilizationrateAlthoughTeslahasneverutilizeddealersforitssalesnetworkwecannotruleoutsuchpossibilitiesItcouldbeahugepositivecatalystforChinesedealerssharepriceifanyleadingNEVmakersadoptagencyordealershipmodelFigure19TeslasshowroomexpansionindifferentcitytiersSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1021Mar2023WillNEVsafter-salesservicebelessprofitablethanICEvehiclesfordealersInvestorshavebeenquestioningtheprofitdentonNEVsafter-salesservicesfordealersWeareoftheviewthatitisnotacrucialissueaslongasdealersstillexistintheNEVworldbecausethenatureofopportunitycostrequiresareasonableinvestmentreturnfordealerswhetheritisfromnew-carsalesorafter-salesservicesProfitsoftraditionaldealershipmodelmainlycomefromafter-salesservicesInotherwordsdealersarewillingtosellanewcaratalossiftheycangenerateenoughprofitslaterfromafter-salesservicesIfprofitsfromafter-salesservicesarelowerintheNEVworldautomakersmayhavetoliftprofitsofnew-carsalesfordealersinordertoofferdealersareasonableprofitlevelNeverthelesswetryourbesttoestimatethepotentialprofitdentforafter-salesservicesintheNEVworldbasedonthelimiteddatawehavecompiledWeestimatethatpowertrainwarrantyandpaintandbodyaccountfor4015and45ofanICEvehiclesafter-salesservicerevenueWeexpectthefrequencyforthepaintandbodyshoptobelargelyunchangedintheNEVworldandthedollaramountforsuchservicestoriseslightlygivenmoreintegratedmanufacturingtechnologiesandmoreelectroniccomponentsWeexpectpowertrainrelatedservicerevenuetofallabout70intheNEVworldThereforeweestimatetheoverallafter-salesservicerevenueintheNEVworldtodeclineabout20Wealsoprojectgrossprofitfromafter-salesservicestofallabout22intheNEVworldassumingaslightlylowergrossmarginFigure20OurestimatesontheprofitabilityofNEVsafter-salesserviceICEvehiclesNEVsEstrevenueEstEstgrossEstrevenueEstEstgrossEstGPMEstGPMmixrevenueprofitmixrevenueprofitPowertrainrelated404060241512557Warranty15152032016305Paintandbody4545401865524523Total1001004545100804435SourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1121Mar2023CompanyOverviewLuxury-brandautodealercomplexownershipofsubsidiariesYongdaisoneofthelargestautodealersinChinamainlyfocusingonluxurybrandsespeciallyBMWandPorscheThecompanywaslistedontheHongKongstockmarketinJul2012Yongdashistorycanbetracedbackto1991whenitsfounderMrCheungTakOnstartedhishardwareelectromechanicalbusinessinShanghaiMrCheungTakOnnowholds296ofYongdasstakeWeestimatethecompanynowhasabout276authorizedoutletscovering24provincesmainlyineasternandsouthernChinaAbout66ofstoresarelocatedinShanghaiJiangsuandZhejiangprovinceThenetworkcovers13luxurybrands10mid-to-high-endbrandsandmorethan10NEVbrandsAbout70ofstoressellsluxury-brandcarsFigure21YongdasnetworkmapasofJun2022SourceCompanydataMergersandacquisitionsMAshavecontributedalottoYongdasdevelopmentasabout60storeswereacquiredsince2013basedontheinformationwehavecompiledWehavelistedsomemajorMAprojectsofYongdainthetablebelowYongdaeithertargetedthebrandsitisfamiliarwithsuchasBMWandPorschetofurtherstrengthenitspositionsinthesebrandsorleveragedMAstoaccessnewbrandssuchasMercedes-BenzTeslaandLexusPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1221Mar2023Figure22YongdasmajorMAsinhistoryNumberofConsiderationEstvaluationYearProjectBrandLocationstoresRMBmnPEBMW5JiangsuCadillac2JiangsuJSBaozunBuick5Jiangsu20167646418storesChevrolet4JiangsuRoewe1JiangsuFAW-Toyota1JiangsuBaitaiPorsche3ShaanxiFujianSichuan2017103454storesBMW1ShandongPorsche1JiangxiInchcapeMercedes-Benz1Jiangxi20198191264storesLexus1ZhejiangTeslaafter-sales1JiangxiZhongzhiyuan2020BMW6YunnanSichuan682396storesOrientalLexus2Jiangsu2021833494storesBMW2JiangsuSourceCompanydataCMBIGMestimatesOntheotherhandMAscouldcreatechallengesformanagingdifferentmindsetandcompanycultureespeciallyforthoseacquiredstoresthatarenotwholly-ownedbyYongdaWeestimateover25ofYongdasstoreshaveminorityinterestsWealsocalculatethattheprofitabilityofthosestoresshouldbelowerthanYongdaswholly-ownedstoresWenotethatYongdasSGAratioishigherthanmajorpeerswhichmaybepartlyexplainedbythecomplexequitystructureofitssubsidiariesWeexpectYongdasMAstoslowdowninthenextfewyearsgiventhecompanyslowvaluationnowanditsfocusonNEVbrandsinabidtohedgethepossiblerisksintraditionalautomakerselectrificationprogressFigure23Noofstoreacquiredorself-builtbyFigure24SGAratiocomparisonofYongdaYongdaMeidongandZhongshengSourceCompanydataCMBIGMSourceCompanydataCMBIGMPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1321Mar2023New-carsalesLuxuryisthefoundationNEVcouldbeadriverNetworkMoreNEV-brandstoresShanghaiJiangsuandZhejiangaskeyregionsWeestimateYongdahasabout276authorizedstoresasofFY22endincluding56BMWstoresexclservicestores19PorschestoresfiveLexusstoresthreeMercedes-Benzstores75otherluxury-brandstoresinclAudiJaguarLandRoverCadillacVolvoLincolnetc49mid-to-high-endstoresand59NEVstoresexclservicestoresYongdaisoneofthepioneerstoworkwithNEVstart-upsandattemptagencymodelwithsomeautomakersincludingXpengSAICsIMSmartLotusMustangandDongfengsVoyahThecompanyaddedabout48newNEVstoresin2022andstillhasplentyinitspipelineWebelieveNEVstorescouldbeamaindriverforYongdasnetworkexpansionforthenext2-3yearsMeanwhileweexpectYongdatoclosesomestoresoftier-2luxurybrandsandmid-to-high-endbrandsinthefollowingyearsshouldtheirprofitabilityplungeamidintensifyingcompetitionFigure25YongdasauthorizedstorenumbergrowthbybrandSourceCompanydataCMBIGMestimatesYongdasstoresaremainlylocatedintheeasterncoastalregionofChinaasshowninthefigurebelowShanghaiJiangsuandZhejiangaccountedfor3127and8ofYongdastotalstoresasofFY21-endrespectivelyThatcouldexplainwhyYongdasoperationwasheavilydisruptedduringShanghaislockdownfromlateMartoMay2022OntheotherhandthatmayimplypotentialsalesandearningsYoYimprovementatYongdathisyearPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1421Mar2023Figure26YongdasstorenumbergrowthbyprovinceFY16FY17FY18FY19FY20FY21Total147173194206213224-Shanghai485052525969-Jiangsu454756605860-Zhejiang192122241819-Guangdong6711121313-Fujian589999-Shandong167889-Shanxi556666-Sichuan-33356-Anhui333455-Jiangxi221444-Yunnan----44-Heilongjiang255533-Hebei333333-Hunan112233-Tianjin222222-Hainan222222-Beijing111221-Henan111111-Shaanxi-22111-Guizhou111111-Chongqing-33331-Hubei--1221-Guangxi----11-Jilin--1---SourceCompanydataCMBIGMNew-carsalesSalesvolumemaydropgrossmarginlargelystableWeprojectYongdasnew-carsalesvolumetodrop12YoYtoabout188000unitsinFY22EexcludingsalesbasedonagencymodelNotethatrevenuefromtheagencymodelisrecognizedascommissionincomeunderotherincomeWeestimateNEVsalesvolumeundertheagencymodeltobeabout4400unitsinFY22EWeforecastYongdasnew-carsalesvolumetodrop8YoYtoabout172000unitsinFY23EamidtraditionalluxurybrandslagginginNEVrolloutsWeprojectnew-carsalesvolumefortraditionalluxurybrandsatYongdatofall6YoYtoabout127000unitsinFY23Eaccountingfor74ofitstotalnew-carsalesvolumeWeexpectYongdastotalNEV-brandsalesvolumetoriseover90YoYtoabout15000unitsover60undertheagencymodelinFY23EdrivenbynewstoresopenedinFY22Accordinglyweprojectnew-carsalesrevenuetodrop78and5YoYduringFY22-24ErespectivelyPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1521Mar2023Figure27Yongdasnew-carsalesvolumeforecastFigure28Yongdasnew-carsalesrevenueforecastbybrandbybrandSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesWeestimateYongdasnew-cargrossmargintobe26inFY22Edownfrom35inFY21whichwasbenefitedfromsupplyconstraintsWeprojectBMWsnew-cargrossmargintofallfrom22inFY22Eto20inFY23EassumingthatBMWincreasesrebatestodealersthisyearversuslastyearWealsoexpectPorschesnew-cargrossmargintobearound74inbothFY22EandFY23EWeforecastNEVbrandsnew-cargrossmargintodropfrom5inFY22Eto4inFY23EamidintensifyingNEVcompetitionAccordinglyweexpectYongdasnew-cargrossmargintobe25inFY23EFigure29Yongdasnew-carsalesASPforecastbyFigure30Yongdasnew-carsalesgrossmarginbrandforecastbybrandSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesPre-ownedvehiclesNextprofitdriverfordealersStronggrowthpotentialbutstillneedstimetofindanoptimalmodelPre-ownedvehiclesalesvolumehasgrownfasterthannewcarsinChinasince2015exceptfor2022partiallyduetowideneddiscountsfornewcarsPre-ownedvehiclemarketcouldstillbechallengingin2023amidnew-carpricewarInourviewthebiggestchallengefordealersisthatpre-ownedvehicleisnotaproperlyregulatedmarketyetwithnon-standardizedproductsItrequiresamuchhigherlevelofPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1621Mar2023managementandskillsetfordealerswhensourcingandsellingpre-ownedcarsItmayalsoneedfurtherregulationfromthegovernmentinourviewNeverthelesspre-ownedvehiclescouldbeanothersourceofincomefordealersalthoughitisnotagoodhedgefornew-carprofitsWeexpectdealerstoplayamoreimportantroleinpre-ownedvehicletradingwhenthemarketmaturesgivenitsadvantageinsourcingandafter-salesservicesFigure31Pre-ownedvehicletradevolumeandYoYFigure32NumberofpassengervehiclesontheroadgrowthvsnewPVsalesinChinaandYoYgrowthinChinaSourceCADACATARCCMBIGMSourceNBSCMBIGMestimatesYongdaisapioneerinthepre-ownedvehiclemarketYongdahasbeendevelopingitspre-ownedvehiclebusinessforalmost10yearswhichcouldgiveYongdaafirst-moveradvantageinthismarketPriortoFY21pre-ownedvehiclebusinesswasbookedunderafter-salesservicesasthemajorityofusedcarsweresoldbasedonthewholesalemodeltogeneratecommissionincomeIn2021theChinesegovernmentannouncedavalue-addedtaxcutforsellingusedcarsto05from2inabidtofacilitateusedcarsalesDealersstartedtotakemoreinventoriesofusedcarsandsellthembasedontheretailmodelSuchincomesarebookedasthetoplinerevenueInFY22about20ofpre-ownedcarssoldwerethroughretailmodelThecompanytargetspre-ownedvehiclesalesvolumeof100000unitsinFY23EwhichinourviewcouldbeaggressiveamidthecurrentpricewarWeprojectYongdastotalpre-ownedvehiclesalesvolumetorise10YoYtoabout88000unitswithretailsalestakingup22inFY23EThatmeanssalesvolumeofpre-ownedvehiclescouldbeamountedtohalfofYongdasnew-carsalesthisyearbasedonourestimatesWealsoforecastYongdastotalpre-ownedvehiclesalesvolumetorise8YoYtoabout95000unitsinFY24EAccordinglyweprojectYongdasrevenuefrompre-ownedvehiclesretailmodelonlytorise402420YoYtoaboutRMB31bn39bn47bnduringFY22-24ErespectivelyPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1721Mar2023Figure33Yongdaspre-ownedvehiclesalesvolumeFigure34Yongdaspre-ownedvehiclerevenueforecastforecastSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesWeprojectgrossmarginforYongdaspre-ownedcarssoldviaretailchanneltobe85inFY22EwithanASPofaroundRMB200000Weexpectsuchmargintonarrowto75-80duringFY23-24EamidintensifyingcompetitionWeprojectthecommissionincomepervehicleforpre-ownedcarssoldviawholesalemodeltobestableduringFY22-24EaroundRMB1600-1700Thatimpliesanominalgrossmarginof3givenanASPofRMB55000-65000Figure35Yongdaspre-ownedvehicleASPforecastFigure36Yongdaspre-ownedvehicleGPMforecastSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesAfter-salesservicesEarningsdriverinFY23EWebelieveYongdasafter-salesservicescouldbeitsearningsdriverinFY23EafterthesignificantdentbylockdownslastyearWeprojectYongdasnumberofafter-salesservicestofall9YoYtoabout19mninFY22Ealthoughweestimateitsretainedcustomernumbertorise6YoYtoabout11mnattheendof2022WeforecastYongdasafter-salesservicerevenuetorise15YoYinFY23Edrivenby11increaseinnumberofafter-salesservicesandslightlyhigherASPfrombetterproductmixWeprojectYongdasafter-salesservicestoaccountfor165ofitstotalrevenueinFY23EthehighestinhistoryWeestimateYongdasoverallgrossmargintoriseabout05PLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1821Mar2023pptifitsafter-salesservicescontribute1morepptintotalrevenueassumingeverythingelsebeingequalThereforeweprojectYongdasoverallgrossmargintowidenfrom89inFY22Eto100inFY23Eaidedbyhigh-marginafter-salesservicesFigure37Yongdasnumberofafter-salesservicesFigure38Yongdasafter-salesservicerevenueforecastforecastexpre-ownedvehiclesSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesWeexpectYongdasafter-salesservicestoaccountfor175ofitstotalrevenueinFY24Ewhichcouldfurtherliftitsoverallgrossmarginto107WealsoestimateYongdasabsorptionratiotoexceed100inFY24EforthefirsttimeinitshistoryInotherwordsitsgrossprofitfromafter-salesserviceswouldfullycoveritsSGAexpensesinFY24EonourestimatesWeassumegrossmarginforYongdasafter-salesservicestobelargelystableat445-448duringFY22-24EFigure39OurforecastsforYongdasgrossprofitFigure40Yongdasoverallgrossprofitcontributedandgrossmarginfromafter-salesservicesfromafter-salesservicesSourceCompanydataCMBIGMestimatesSourceCompanydataCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE1921Mar2023EarningsForecastWeexpectnetprofittorisealmost40YoYinFY23EAccordingtoYongdasprofitwarningon17Jan2023itsFY22Enetprofitmaydropnomorethan43YoYtonolessthanRMB14bnasitsoperationwasseverelydisruptedbyseveralroundsoflockdownsespeciallyinShanghaiin2Q22andthenationwidepandemicinDec2022WeprojectYongdastotalrevenuetodrop3YoYand2YoYtoRMB706bninFY23EandRMB693bninFY24Erespectivelymainlyduetooverallnew-carsalesslowdownfromtraditionalluxurybrandsDespitethatweexpectYongdasgrossprofittorise9YoYinFY23Eand5YoYinFY24Edrivenbyfastergrowthinafter-salesservicesWebelieveYongdasotherincomecouldbelargelystableYoYduringFY23-24EastheimprovementfromNEVagencybusinessmaybeoffsetbythedeclinefromfinanceandinsurancecommissionsamidfallingnew-carsalesvolumeWeexpectYongdasSGAratioduringFY23-24EtobeatsimilarlevelsasinFY22EasitscostreductioneffortsmaybeoffsetbylowertoplinerevenueandrisingcompetitionAccordinglyweexpectYongdanetprofittorise39YoYand16YoYtoRMB20bnandRMB23bnrespectivelyduringFY23-24EWebelievesomeinvestorsmayunderestimateYongdasearningsimprovementdrivenbyafter-salesservicereboundthisyearFigure41CMBIestimatesvsconsensusCMBIConsensusDiffRMBmnFY22EFY23EFY24EFY22EFY23EFY24EFY22EFY23EFY24ERevenue72950705986926072934823178898400-142-222GrossProfit647470297416696479888737-70-120-151OperatingProfit236930523532273032643671-132-65-38Netprofit144320052327167421082417-138-49-37GrossMargin89100107959798-07ppt03ppt09pptOperatingMargin324351374041-05ppt04ppt10pptNetMargin202834232627-03ppt03ppt06pptSourceBloombergCMBIGMestimatesPLEASEREADTHEANALYSTCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGE20