It fell from a high of HK$47 to 36 Hong Kong dollars, it took two years, and last Friday a long white candle tried to reverse the trend, the bear road long luxury car dealer brand Meidong Automobile (01268) stabilized?
In fact, in the past two years, the competition of new energy brands has been fierce, and traditional car companies have actively launched high-end brands to maintain their competitiveness, while high-end brands such as NIO, Li and Zeekr have continued to eat up the market share of traditional luxury cars, while luxury car dealers have made significant discounts at the expense of profits in order to digest inventory. Since 2022, the industry's operating environment has deteriorated, revenue growth has slowed down, and profits have declined sharply, which has also led to changes in investment logic.
It is worth noting that due to the shaking of the domestic status of traditional luxury brands, some brands have begun to reduce domestic **, such as Porsche, which has been reducing in the Chinese market since June, which has a greater impact on dealers who own the brand. The main core brands of Meidong Auto include BMW, Lexus and Porsche, and its revenue is relatively resilient, but its earnings fluctuate much more than its peers, falling by nearly 90% from a high level, much higher than its peers.
In the face of fierce competition, how should Meidong Auto break the game?
Affected by high-end new energy vehicles, traditional luxury car brands are differentiated.
Zhitong Financial APP has learned that traditional luxury brands are facing severe challenges, and the rise of high-end new energy brands has made most luxury brand cars feel "threatened", and there will be obvious differentiation in 2023. In the first three quarters, BBA (Mercedes-Benz, BMW, and Audi) was relatively resilient, but sales growth was only in the single digits, while luxury brands such as Lexus, Porsche, Lincoln and Infiniti all saw double-digit declines.
Mercedes-Benz, BMW and Audi sold 59 percent in the first three quarters80,000 units, 5890,000 units and 510,000 units, up from the previous year. 24% and 506%, with a total sales volume of 16970,000 units, contributing more than 70% of the luxury car brand, other brands have a low share, and sales are generally declining, but there are exceptions, such as Land Rover, which has achieved double growth against the trend. Luxury and imported brands as a whole are still severe, according to the Passenger Association, the inventory warning is 566%, above the warning line.
High-end new energy brands continue to penetrate in the first band of luxury brands, forcing the tide of price reduction, and the mainstream models under the ** policy have dropped to the range of 20-300,000 yuan, driving the growth of some luxury brands. On the other hand, domestic high-end brands, mainstream models** with the upward movement, 40-450,000 domestic new power brand sales increased by more than 60% year-on-year, of which the ideal as the representative, snatched the potential customers of BBA, and achieved a continuous doubling of sales.
In fact, luxury brands are also actively wrestling with domestic brands through new energy, especially BBA, the sales of new energy models maintain a double-digit growth rate, but due to the lack of product power, they are far inferior to domestic high-end brands in terms of three-electric system, vehicle machine and intelligence, so they are called "miscellaneous" cars by the market. Although criticized by the market, luxury cars have actively changed their strategies, such as through partnerships, such as the partnership between Audi and Zhiji.
As the industry competition enters the deep water area, the differentiation trend of luxury car brands will be more obvious, and the consumer groups with higher prices are already niche and face the risk of customer loss, which is expected to continue to decline, while the brands that are actively transforming, such as BBA, have a high probability of reversing the trend and driving the penetration rate of luxury brands to increase due to flexible price adjustment. And this pricing pressure is lost to luxury car dealers, and the industry is hardly optimistic.
Guaranteed income does not guarantee profits, and the profit of the eastern United States continues to decline.
Meidong Auto is a small luxury car dealer in Hong Kong (compared to Zhongsheng and Yongda), but there are not many brands it distributes, including luxury brands such as BMW, Lexus, Porsche, and Audi, in addition to mid-range brands such as Toyota and Hyundai, of which BMW, Porsche and Lexus are the three core brands, with a total revenue of more than 80% in passenger car revenue in previous years, accounting for 89 in the first half of 20233%。
As of June this year, the company had a total of 77 4S stores, of which BMW, Porsche and Lexus had 27, 16 and 20 respectively, accounting for 818%。In terms of store strategy, the company adheres to the single-city, single-store model, maintains the stability of the three core brand stores through mergers and acquisitions and new construction, successively closes mid-range brand stores, and actively integrates into the current new energy trend to open a new Tesla after-sales service store.
Judging from past performance, before 2021, Meidong Automobile's single-city single-store model has always been the reference paradigm of the industry, mainly reflected in the double increase in revenue and profit, the growth rate is much higher than the industry level, the operational efficiency is also higher than that of peers, and the inventory turnover rate is far ahead of its peers, and the gross profit margin of its luxury cars has increased by 2 in four years7 percentage points. However, after 2022, in order to maintain sales, the profit margin of luxury cars has declined significantly, and the overall gross profit margin will drop to 7 in the first half of 20231%, net profit margin is only 027%, the profit margin under the preferential ** policy in the second half of the year is not expected to be higher than the first half of the year, and the annual profit margin indicators will be the lowest since 2013.
In addition, the company has impairment risks, mainly for spending 3.7 billion yuan in April last year to buy 7 Porsche stores, this year the Porsche brand as a whole is not easy to sell in China, if the downward trend in demand continues to next year, its store operations may be affected, resulting in a certain impairment provision. The company's Lexus industry performance is also not satisfactory, with two brand stores accounting for 36, accounting for nearly half.
As of June this year, cash plus fixed deposits exceeded 3 billion yuan, and the debt ratio was within a reasonable range, which was enough for the company to implement the "rest and recuperation" policy. **Competition accelerates the reshuffle of the industry, the company is facing not only peer competition, but also high-end new energy brand product substitution, next year's earnings are not expected to be very optimistic, but abundant cash on the books can ensure a stable level of dividends.
The risk point still exists, and the short-term bearish trend is difficult to reverse.
This year, the sales of luxury car brands are sluggish, the market share has declined to a certain extent, and destocking is still the main job of dealers, while some brands have reduced domestic imports**, which means that luxury car brands are facing more severe challenges in the future, and the substitution effect of high-end new energy vehicles will reshape the definition of luxury cars. The domestic "luxury" new energy brand represented by Ideal is stirring the market cake of BBA and other traditional luxury cars.
For dealers, because the products are through the brand, the dealers with a high dependence on a single brand are very passive, and the performance is greatly affected by the brand prosperity. The dependence of the United States East Auto on the brand is relatively high, BMW, Porsche and Lexus three core brands have two boom downturns, and the sustainable growth of performance may be worried, and the first will inevitably lead to a continued decline in profits, and the fundamentals are no longer "small and beautiful".
In fact, Meidong Automobile is also actively transforming, adjusting the brand matrix, cutting into the new energy vehicle market from the after-sales service side, first opening Tesla's after-sales service store, and then it is expected to open independent 4S stores with more new forces. From the perspective of peers, including Zhongsheng and Yongda, they are also vigorously deploying high-end new energy brands, and the new energy business will become a new growth point in performance. As mentioned above, Meidong Automobile has abundant funds in its account, which may be the key to its entry into the new energy track.
Meidong Auto's dividend payout is stable, with an average annual dividend payout ratio of more than 30%, but in the face of a continuous bearish market value, the company has not repurchased, resulting in a lack of investor confidence in holding shares. It is worth noting that on December 15, shareholders Fidelity Funds increased their holdings by 33340,000 shares, accounting for 20% of the total turnover, resulting in a sharp rise in stock prices, which shows that the degree of external large capital participants is low, and most investors are still in a wait-and-see state. The market is worried about the impact of the company's core brand performance and the continued weakening of earnings, and the bearish trend may be difficult to reverse in the short to medium term.