On February 25, after Tuhu released its 2023 performance forecast, Goldman Sachs once again released a research report and upgraded Tuhu from "neutral" to "**". The target price is HK$31, compared to the ** price of 19 on February 26HK$98, implied 55% of the ** space.
Previously, Tuhu's performance forecast showed that for the year ended December 31, 2023, Tuhu's adjusted net profit is expected to be no less than 4500 million yuan, compared with an adjusted net loss of 5 for the same period in 2022500 million yuan, successfully turning losses into profits. This is a testament to the improvement of Tuhu's cost control and profitability, and the successful validation of the business model.
The Goldman Sachs report pointed out that from the perspective of the industry pattern and development status, as a leader in the independent aftermarket, Tuhu has the potential for upward growth in industry penetration and profit margin, and the competitive pressure is limited, and the current value of Tuhu is undervalued by the market and is a good investment target in China's Internet field.
In 2023, China's vehicle mileage increased by 23% year-on-year, and even compared with the whole of 2019, it achieved an increase of 106%. During the Spring Festival in 2024, the number of self-driving vehicles will also increase by 130% compared with 2019. Based on this, Goldman Sachs expects that with the strong recovery of China's automotive industry, the automotive aftermarket will usher in a favorable development environment. According to the data of relevant institutions, from the sampling results, the growth rate of GMV of car service stores is accelerating, from a year-on-year growth rate of 13% in 2023** to 30% in January 2024, and the two-year compound annual growth rate has also reached a 12-month high.
In addition, Goldman Sachs raised its previous sales forecast for plug-in hybrid vehicles in the next five years, which will lead to higher penetration of plug-in hybrid vehicles. Considering that the repair and maintenance costs of plug-in hybrid vehicles are higher than those of gasoline vehicles and pure electric vehicles, this will bring 1-3% growth to the total automotive aftermarket when other factors are equal.
In terms of industry competition, regarding the market's previous doubts about JD.com's "shock tiger price" will affect Tuhu's profits, according to Goldman Sachs' survey, Tuhu's ** competitive pressure is smaller than expected since the beginning of 2024. Moreover, Goldman Sachs further pointed out that the impact of Tuhu's gross profit on the "** war" is limited, because the "** war" is partly for marketing purposes and is only applicable to a limited number of SKUs and regions. Tuhu's earnings growth in 2023 will ease market concerns about its profitability. Under the current consumption downgrade trend, consumers will prefer lower-priced Tuhu owned and exclusive products, which have higher profit margins. Goldman Sachs expects that Tuhu's gross profit margin will grow more as its obvious advantages in scale help it win more favorable commercial terms, as well as the increase in revenue contribution from self-supplied products and exclusive products with higher gross margins. It is worth noting that as the exclusive sales channel in the market, the self-supplied products and exclusive products are less affected by the competition.
At the same time, Goldman Sachs believes that in the highly fragmented automotive aftermarket, the number of stores and the best traffic of Tuhu are expected to achieve continuous growth. Goldman Sachs is optimistic about the expansion of Tuhu's stores, and expects Tuhu stores to maintain growth at a compound annual growth rate of 21% from 2023 to 2026.
Taking into account the increase in gross margin and the decline in operating expenses, Goldman Sachs expects Tuhu's adjusted net profit in 2023 to be 4.5.2 billion yuan, an increase of 6% from the previous forecast.
Based on the above analysis, Goldman Sachs gave Tuhu a "**" rating.