Macquarie Maintained Outperform Rating for Yongda Auto (3669) with Target Price of HK$9.80

Apr 24, 2013 20:20 JST

Source: China Yongda Automobiles Services Holdings Limited

HONG KONG, Apr 24, 2013 - (ACN Newswire) - According to Macquarie's recently issued research report on Yongda Auto (3669.HK), driven by the rising demand in China's luxury automobile market, Yongda Auto's sales revenue will keep growing in 2013, and the bank maintained Outperform rating for Yongda Auto with target price of HK$9.80.

The Company just reported their FY2012 results on 28th March 2013, and as Macquarie stated in the report, Yongda Auto (3669.HK) possess an extensive distribution network with ultra-high dealership density at Yangtze Delta Region. To avoid escalating price competition, Yongda Auto (3669.HK) slowed the expansion rate of its luxury automobile dealership network, and thus reported a relative slowdown in growth rate of new car sales profit for second half year of 2012. In 1Q 2013, Yongda Auto (3669.HK) has opened Porsche, BMW, Audi and JLR outlets one after another, aiming to satisfy the market demand for luxury and ultra-luxury automobiles and help boost Yongda Auto's (3669.HK) profit growth. Looking forward, Yongda Auto (3669.HK) will keep focusing on the strategic expansion of luxury automobile brands, and accelerate the speed of opening new 4S outlets. Yongda Auto expects to open 34 more 4S outlets with 27 on luxury and ultra-luxury automobile brands, which will continuously inject impetus to Yongda Auto's (3669.HK) result growth in 2013 and the years after.

Aftersales service business with higher gross profit grew at an accelerating speed. According to the report, aftersales revenue of Yongda Auto (3669.HK) was up 35% YoY in 2012 mainly because of the rapid increase in the customer base, maintaining a strong upward trend. Meanwhile, commission income from sales on auto F&I (Financing and Insurance) products grew rapidly, up 77% YoY. Driven by the excellent cost control and sustainable business development, aftersales service business will provide strong cash flow to cover operating expenses, stimulating the net profit of Yongda Auto (3669.HK) to increase continuously.

In the future, benefitting from the continuous growth of new car sales and aftersales service business with higher gross profit, there will be enormous upside potential for the profitability of Yongda Auto (3669.HK). Based on this, Macquarie maintains its Outperform rating with target price of HK$9.80.

Source: China Yongda Automobiles Services Holdings Limited
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