Core Viewpoint - Zhongsheng Holdings (00881) reported a total revenue of 168.12 billion yuan for the year ending December 31, 2024, representing a year-on-year decrease of 6.2% [1] - The company faced challenges in new car sales, leading to a decline in profitability, while used car sales and after-sales services showed growth [1][2] Financial Performance - Total revenue decreased to 168.12 billion yuan, down 6.2% year-on-year [1] - Profit attributable to equity holders was 3.21 billion yuan, a decrease of 36% year-on-year [1] - Basic earnings per share were 1.35 yuan, with a proposed final dividend of 0.678 Hong Kong dollars per share [1] Sales Breakdown - New car sales revenue was 125.33 billion yuan, a decline of 14.89 billion yuan or 10.6% year-on-year, attributed to a drop in new car sales volume and average selling prices [1] - Used car sales revenue reached 15.42 billion yuan, an increase of 1.43 billion yuan or 10.2% year-on-year, driven by higher sales volume despite a decrease in average selling prices [1] - After-sales service revenue was 22.00 billion yuan, an increase of 1.93 billion yuan or 9.6% year-on-year, mainly due to an increase in service visits [1] Market Dynamics - In 2024, new car sales volume was 485,000 units, slightly down from 502,000 units the previous year, reflecting market volatility [2] - The industry faced challenges with negative gross margins in new car sales due to pricing pressures and delayed manufacturer subsidies [2] - Zhongsheng is focusing on maintaining local business concentration and market share to navigate cash flow issues and optimize brand and regional structures for future growth opportunities [2]

Financial Performance - For the fiscal year ending December 31, 2024, the total revenue decreased by 6.2% to RMB 168,124.2 million compared to RMB 179,290.1 million in 2023[2]. - The overall net profit for the year was RMB 3,070.9 million, a decline of 38.5% from RMB 4,990.9 million in 2023[3]. - Gross profit for the year was RMB 10,671.9 million, a decline of RMB 3,092.4 million or 22.5% compared to the previous year[27]. - The operating profit was RMB 5,674.5 million, a decrease of RMB 2,665.2 million or 32.0% compared to the previous year[34]. - The company recorded a net profit of RMB 3,070.9 million for the year, a decrease of RMB 1,920.0 million or 38.5% compared to the previous year[23]. - Basic earnings per share for the year was RMB 1.35, down from RMB 2.09 in 2023, reflecting a decline of 35.4%[67]. - The total tax expense for 2024 was RMB 1.03 billion, down from RMB 1.84 billion in 2023, indicating a reduction of about 44%[91]. Sales and Market Performance - New car sales volume fell by 3.2% to 485,307 units, while luxury brand sales decreased by 3.7% to 293,370 units[3]. - The number of used car sales surged by 37.9% to 226,231 units, indicating a strong performance in the used car market[3]. - New car sales revenue was RMB 125,325.6 million, down RMB 14,889.3 million or 10.6%, primarily due to a decline in new car sales volume and average selling prices[24]. - Used car sales revenue increased to RMB 15,417.3 million, up RMB 1,432.5 million or 10.2%, driven by higher sales volume despite a decrease in average selling prices[24]. - The sales volume of new cars priced above RMB 400,000 decreased by nearly 300,000 units to 1 million units, accounting for 4.5% of total sales[19]. - The retail sales of automobiles in 2024 showed a slight increase of approximately 1.0%, indicating downward pressure on car prices[19]. Customer Engagement and Services - Active customer count increased by 10.7% to 4.19 million, with a three-year compound annual growth rate (CAGR) of 9.2% from 2022 to 2024[6]. - In key strategic cities, the active customer base grew by 10.2%, with significant increases in service visits: maintenance up 6.7%, warranty services up 16.1%, and accident repairs up 18.1%[7]. - The company processed 8.05 million core after-sales service entries, marking a 7.8% increase from the previous year, with a three-year CAGR of 7.5%[12]. - The company provided nearly 8 million car wash services in 2024, enhancing customer engagement and service value[13]. Strategic Initiatives and Future Outlook - The company emphasizes a strategic transformation to become a well-known quality automotive service provider in China, focusing on customer-centric services[4]. - The company is strategically positioned to capitalize on the growing demand for high-quality automotive services in the post-market sector[22]. - Forward-looking statements regarding business outlook and financial performance are based on existing data and assumptions, subject to risks and uncertainties[116]. Dividends and Shareholder Information - The company plans to distribute a final dividend of HKD 0.678 per share, pending shareholder approval at the annual general meeting[3]. - The proposed final dividend for 2024 is HKD 0.678 per share, equivalent to approximately RMB 0.634, compared to HKD 0.797 in 2023[102]. - The total proposed final dividend for 2024 amounts to HKD 1,604 million, approximately RMB 1,500 million[112]. Operational Efficiency and Cost Management - Selling and distribution expenses were RMB 7,552.6 million, a decrease of RMB 184.3 million or 2.4% compared to the previous year[31]. - Administrative expenses were RMB 2,229.2 million, down RMB 189.4 million or 7.8% year-over-year due to cost control measures[32]. - The company has no significant acquisitions or future investment plans as of December 31, 2024[60][61]. Inventory and Capital Management - Inventory increased from RMB 16,366.1 million to RMB 18,476.9 million due to a slight increase in new car turnover days[56]. - Average inventory turnover days increased from 31.2 days in 2023 to 35.1 days in 2024, indicating adjustments to inventory levels[57]. - Total capital expenditure for the year ending December 31, 2024, is RMB 1,356.7 million, a decrease from RMB 1,426.5 million in the previous year[55]. Debt and Financing - The company issued zero-coupon convertible bonds with a principal amount of HKD 4,560 million, maturing in 2025, with a conversion price adjusted to HKD 43.88 per share effective from July 4, 2024[49]. - The company issued a total of $450 million 3.00% bonds due in 2026, with a purchase offer made at $966 per $1,000 principal[51]. - The bank loans and other borrowings as of December 31, 2024, amounted to RMB 32,039.2 million, an increase from RMB 28,372.8 million the previous year[46]. Employee and Governance - The number of employees decreased from 31,180 in 2023 to 26,357 in 2024, a reduction of about 15.5%[109]. - The company expressed gratitude to employees and stakeholders for their unwavering support and dedication[115]. - The company has adopted corporate governance codes and has complied with them throughout the reporting period[104].

Investment Rating - The report assigns a "Buy" rating for Zhongsheng Holdings (00881.HK) for the first time [4]. Core Views - Zhongsheng Holdings is a leading automotive dealer in China, focusing on luxury and mid-to-high-end brands, with a strategic shift towards new energy vehicles (NEVs) [4][22]. - The company is expected to see revenue growth from 2024 to 2026, with projected revenues of 1794.76 billion, 1841.02 billion, and 1807.36 billion CNY respectively, and net profits of 25.45 billion, 31.64 billion, and 49.40 billion CNY [4]. - The current price-to-earnings (P/E) ratios for 2024, 2025, and 2026 are 11.0, 8.9, and 5.7 respectively, indicating attractive valuation compared to peers [4]. Summary by Sections Company Overview - Zhongsheng Holdings ranks first in the 2024 list of China's top automotive dealers, with a focus on luxury brands such as Mercedes-Benz and Lexus [4][22]. - The company operates 419 4S dealerships across 32 major cities in China, providing comprehensive automotive services [23]. Financial Performance - In the first half of 2024, Zhongsheng achieved a revenue of 824.21 billion CNY, with a year-on-year growth of 0.6%. However, new car sales revenue decreased by 5.8% due to price competition [31]. - The net profit for the same period was 15.8 billion CNY, reflecting a significant decline of 47.5% year-on-year, primarily due to reduced gross margins from new car sales [33]. Business Segments - New car sales faced challenges, with a gross margin of -3.3% in the first half of 2024, marking the first loss in this segment [5][37]. - The after-sales and used car segments showed resilience, with after-sales revenue growing by 9.3% and used car revenue increasing by 61.6% year-on-year [31][37]. Market Position and Strategy - Zhongsheng is transitioning towards new energy vehicle sales, having partnered with Seres to enhance its offerings in this growing market [4][22]. - The company aims to improve operational efficiency through centralized management, which has already led to significant growth in after-sales and used car businesses [6][31].

Investment Rating - The report assigns a "Buy" rating for Zhongsheng Holdings (00881.HK) [4] Core Views - Zhongsheng Holdings is a leading automotive dealer in China, focusing on luxury and mid-to-high-end brands, with a strategic shift towards new energy vehicles [4][22] - The company is expected to see revenue growth from 2024 to 2026, with projected revenues of 1794.76 billion, 1841.02 billion, and 1807.36 billion CNY respectively, and net profits of 25.45 billion, 31.64 billion, and 49.40 billion CNY [4] - The current price-to-earnings (P/E) ratio is projected to be 11.0, 8.9, and 5.7 for the years 2024, 2025, and 2026, indicating a low valuation compared to peers [4] Summary by Sections Company Overview - Zhongsheng Holdings ranks first in the 2024 list of China's top automotive dealers, with a focus on brands like Mercedes-Benz and Lexus [4][22] - The company operates 419 4S outlets across 32 major cities, providing comprehensive automotive services [23] Financial Performance - In the first half of 2024, the company reported revenues of 824.21 billion CNY, with a year-on-year growth of 0.6% [31] - New car sales revenue was 608.12 billion CNY, down 5.8% year-on-year, primarily due to price competition [31] - The net profit for the first half of 2024 was 15.8 billion CNY, a decline of 47.5% compared to the previous year [33] Business Segments - The new car segment faced challenges with a gross margin of -3.3% in the first half of 2024, marking the first loss in this area [5][37] - The after-sales and used car segments showed resilience, with after-sales revenue growing by 9.3% and used car revenue increasing by 61.6% year-on-year [31][37] Market Position and Strategy - The company is transitioning towards new energy vehicle sales, having partnered with Seres to enhance its offerings [4][22] - Zhongsheng's centralized operations have improved efficiency, particularly in after-sales and used car businesses [6][31] Valuation Metrics - The projected P/E ratios for 2024, 2025, and 2026 are 11.0, 8.9, and 5.7 respectively, indicating a favorable valuation compared to industry averages [4][7]

Customer Base and Services - Active customer base increased by 9% year-on-year, totaling 900,000 in key cities such as Chengdu, Dalian, Nanjing, and Shenzhen[6] - Regular maintenance services grew by 6%, manufacturer warranty services increased by 10%, accident vehicle repairs rose by 14%, and vehicle insurance renewals surged by 22%[6] - The number of active customers in the company's WeChat platform reached approximately 7.4 million, with the average daily visits to the platform at 840,000[11] - The company operates 26 maintenance service centers in 20 cities, with an additional 19 centers under construction or planning[10] - The company has established over 1,000 renewal policy positions across the group to enhance service offerings[10] - The active customer base in four leading cities (Nanjing, Shenzhen, Chengdu, and Dalian) has increased without expanding the number of brand dealerships[11] - The company aims to leverage its ecosystem to integrate customers into its automotive service network across various markets[6] Financial Performance - The company's revenue for the six months ended June 30, 2024, was RMB 82,421.4 million, an increase of RMB 519.7 million or 0.6% compared to the same period in 2023[19] - New car sales revenue decreased by RMB 3,757.0 million or 5.8% to RMB 60,812.0 million, primarily due to a decline in average selling prices[19] - The revenue from the after-sales service business increased by RMB 1,327.5 million or 13.8% to RMB 10,964.1 million, driven by growth in service visits and average revenue per visit[19] - The gross profit for the six months ended June 30, 2024, was RMB 4,926.2 million, a decrease of RMB 2,043.6 million or 29.3% compared to the same period in 2023[21] - The operating profit for the six months ended June 30, 2024, was RMB 2,755.8 million, a decrease of RMB 2,011.9 million or 42.2% compared to the same period in 2023[22] - The net profit for the six months ended June 30, 2024, was RMB 1,500.0 million, a decrease of RMB 1,515.3 million or 50.3% compared to the same period in 2023[22] - The gross margin for the six months ended June 30, 2024, was 6.0%, down from 8.5% in the same period in 2023[22] Market Trends and Vehicle Sales - In the first half of 2024, the used car retail volume increased by 45.2% year-on-year, reaching 102,000 units, while the renewal policy number grew by 22.9%[11] - The average profit contribution per used car in the first half of 2024 was RMB 6,600, leading to a 25.1% year-on-year increase in overall used car business profit to RMB 670 million[11] - The penetration rate of new energy vehicles reached 40.7% in the first half of 2024, up seven percentage points from 2023, with significant contributions from PHEV and EREV models[15] - The total retail sales of social consumer goods in China grew by 3.7% year-on-year in the first half of 2024, with the automotive sector remaining flat[15] - The second-hand car transaction volume reached 7,528,000 units in the first half of 2024, a year-on-year increase of 6.9%[16] - As of June 30, 2024, the total number of vehicles in China reached 345 million, maintaining the highest vehicle ownership globally[15] Debt and Financing - The company issued $600 million in unsecured senior bonds with a maturity of 3.5 years and redeemed $292 million of existing bonds due in 2026[7] - A total of RMB 5 billion Panda bonds were registered, with the first issuance of RMB 1 billion completed in August 2024[7] - The company secured a $350 million syndicated loan, pending approval from the National Development and Reform Commission of China[7] - The company successfully reduced bond issuance spreads by 70 basis points compared to the previous bond issuance in 2021[7] - The company issued zero-coupon convertible bonds with a face value of HKD 4,560,000,000 due in 2025, with no conversions during the period[65] - The company issued a total of $450 million 3.00% bonds due in 2026, with an outstanding principal amount of $157.83 million as of August 1, 2024[107] Inventory and Assets - The inventory increased from RMB 16,366.1 million as of December 31, 2023, to RMB 18,353.5 million as of June 30, 2024, primarily due to increased turnover days for new cars[25] - The average inventory turnover days increased to 36.2 days for the six months ended June 30, 2024, compared to 33.6 days for the same period in 2023[26] - The net current assets as of June 30, 2024, were RMB 20,902.3 million, a decrease of RMB 3,166.7 million compared to December 31, 2023[24] - The total liabilities increased to RMB 61,310,326 thousand from RMB 57,221,885 thousand, representing an increase of approximately 7.06%[37] - The total inventory as of June 30, 2024, is RMB 18,353,521, an increase of 11.9% from RMB 16,366,096 as of December 31, 2023[59] Corporate Governance and Compliance - The financial statements were prepared in accordance with Hong Kong Financial Reporting Standards, ensuring compliance and transparency in financial reporting[43] - The audit committee reviewed the interim financial results for the six months ended June 30, 2024, and confirmed compliance with relevant accounting standards and regulations[122] - The company has adopted the corporate governance code and has complied with its provisions during the reporting period[115] - The board of directors is responsible for overseeing the company's business strategies and performance, ensuring effective internal controls and risk management systems[113] Corporate Social Responsibility - The company is committed to corporate social responsibility by providing employment opportunities for local residents and disabled individuals through its national dealer network[124] - The company has donated funds to assist underprivileged families and students in mountainous areas[124] - The company organizes activities for the elderly and disabled in nursing homes[124] - The company has implemented multiple measures to reduce emissions and enhance energy efficiency during daily operations[123] - The company encourages employees to use public transportation and replace business travel with phone or video conferencing when feasible[123]

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Automotive Sales Performance - Revenue from automotive sales decreased by 0.9% to RMB 69,052.3 million[2] - New car sales increased by 3.9% to 232,543 units[3] - New car sales reached 233,000 units in the first half of 2024, a year-on-year increase of 3.9%[11] - New car sales revenue decreased by RMB 3,757.0 million or 5.8% to RMB 60,812.0 million, primarily due to a decline in average selling prices[76] - Mercedes-Benz accounted for approximately 40.5% of the company's new car sales revenue, down from 43.1% in the same period last year[76] - New car sales costs decreased by RMB 901.3 million or 1.4% to RMB 62,802.1 million for the six months ended June 30, 2024[77] After-Sales Services - Revenue from after-sales services increased by 13.8% to RMB 10,964.1 million[2] - Gross profit from after-sales services rose by 12.7% to RMB 5,035.0 million[3] - After-sales service revenue rose by RMB 1,327.5 million or 13.8% to RMB 10,964.1 million, due to increased service visits and higher average revenue per visit[76] - ZhongSheng's after-service business saw a 45.2% year-on-year increase in used car retail sales and a 22.9% increase in insurance renewal policies in the first half of 2024[8] - ZhongSheng's maintenance, manufacturer warranty, and accident repair service visits increased by 3.4%, 17.2%, and 9.1% respectively in the first half of 2024[8] Used Car Business - Used car transaction volume surged by 53.9% to 101,525 units[3] - ZhongSheng's used car business achieved a comprehensive profit of RMB 670 million in the first half of 2024, a year-on-year increase of 25.1%[9] - ZhongSheng's used car retail sales increased from 18,000 units in the first half of 2023 to 26,000 units in the first half of 2024[9] - ZhongSheng's used car flagship stores reached 49 by the end of June 2024, with many stores achieving monthly sales of over 100 units[9] - Used car sales revenue increased by RMB 3,139.6 million or 61.6% to RMB 8,240.3 million, driven by higher sales volume[76] - Used car sales costs increased by RMB 2,854.6 million or 59.9% to RMB 7,622.3 million for the six months ended June 30, 2024[78] Financial Performance - Net profit for the period dropped by 50.3% to RMB 1,500.0 million[3] - The company's revenue for the first half of 2024 was RMB 82,421,409 thousand, compared to RMB 81,901,699 thousand in the same period last year[14] - The company's net profit for the first half of 2024 was RMB 1,500,027 thousand, compared to RMB 3,015,283 thousand in the same period last year[14] - The company's comprehensive income for the first half of 2024 was RMB 1,394,832 thousand, compared to RMB 2,612,033 thousand in the same period last year[15] - Gross profit decreased by RMB 2,043.6 million or 29.3% to RMB 4,926.2 million for the six months ended June 30, 2024[79] - Gross margin decreased to 6.0% for the six months ended June 30, 2024, compared to 8.5% for the same period in 2023[79] - Operating profit decreased by RMB 2,011.9 million or 42.2% to RMB 2,755.8 million for the six months ended June 30, 2024[81] - Net profit decreased by RMB 1,515.3 million or 50.3% to RMB 1,500.0 million for the six months ended June 30, 2024[82] Market Share and Brand Performance - The company holds a 32% market share in Lexus new car sales, 18% in Mercedes-Benz, and 10% in Toyota, Volvo, and Jaguar Land Rover in China[11] - Domestic passenger car sales in China were 9.939 million units in the first half of 2024, a year-on-year increase of 3.9%[12] - New energy vehicle (NEV) sales in China reached 4.048 million units in the first half of 2024, a year-on-year increase of 37.5%, with a penetration rate of 40.7%[12] - Used passenger car transactions in China reached 7.528 million units in the first half of 2024, a year-on-year increase of 6.9%[13] Financial Position and Assets - Total non-current assets decreased to RMB 45,145,794 thousand from RMB 45,669,804 thousand[16] - Total current assets increased to RMB 61,818,198 thousand from RMB 57,598,657 thousand[16] - Total current liabilities rose to RMB 40,915,857 thousand from RMB 33,529,583 thousand[17] - Net current assets decreased to RMB 20,902,341 thousand from RMB 24,069,074 thousand[17] - Total assets minus current liabilities stood at RMB 66,048,135 thousand compared to RMB 69,738,878 thousand[17] - Total non-current liabilities decreased to RMB 20,394,469 thousand from RMB 23,692,302 thousand[17] - Net assets slightly decreased to RMB 45,653,666 thousand from RMB 46,046,576 thousand[17] - Inventory increased to RMB 18,353,521 thousand from RMB 16,366,096 thousand[16] - Cash and cash equivalents rose to RMB 17,146,435 thousand from RMB 15,611,984 thousand[16] - Equity attributable to owners of the parent company decreased to RMB 45,487,875 thousand from RMB 45,797,296 thousand[18] - The company's total equity as of June 30, 2024, was RMB 46,046,576 thousand, with a net profit of RMB 1,579,552 thousand for the period[19] Cash Flow and Financing - The company's operating cash flow for the six months ended June 30, 2024, was RMB 3,673,291 thousand, a decrease from RMB 4,496,260 thousand in the same period last year[21] - The company's net cash from operating activities for the six months ended June 30, 2024, was RMB 2,925,583 thousand, compared to RMB 3,466,967 thousand in the same period last year[21] - The company's depreciation and impairment of property, plant, and equipment for the six months ended June 30, 2024, was RMB 1,022,091 thousand, an increase from RMB 441,543 thousand in the same period last year[20] - The company's finance costs for the six months ended June 30, 2024, were RMB 792,249 thousand, up from RMB 717,969 thousand in the same period last year[20] - The company's inventory increased by RMB 2,009,353 thousand for the six months ended June 30, 2024, compared to an increase of RMB 190,385 thousand in the same period last year[21] - The company's trade payables and bills increased by RMB 2,203,538 thousand for the six months ended June 30, 2024, compared to an increase of RMB 1,048,410 thousand in the same period last year[21] - The company's exchange rate fluctuations reserve decreased by RMB 105,195 thousand for the six months ended June 30, 2024[19] - The company's total comprehensive income for the six months ended June 30, 2024, was RMB 1,394,832 thousand, compared to RMB 2,612,033 thousand in the same period last year[19] - The company's declared final dividend for 2023 was RMB 1,734,665 thousand[19] - Investment activities resulted in a net cash outflow of RMB 433,293 thousand, compared to RMB 513,336 thousand in the same period last year[22] - Financing activities resulted in a net cash outflow of RMB 942,448 thousand, compared to a net cash inflow of RMB 1,689,296 thousand in the same period last year[23] - Net increase in cash and cash equivalents was RMB 1,549,842 thousand, compared to RMB 4,642,927 thousand in the same period last year[23] - Cash and cash equivalents at the end of the period were RMB 17,146,435 thousand, compared to RMB 16,352,611 thousand in the same period last year[23] - Purchase of property, plant, and equipment amounted to RMB 1,238,252 thousand, a decrease from RMB 1,620,616 thousand in the same period last year[22] - Proceeds from the sale of property, plant, and equipment were RMB 662,164 thousand, compared to RMB 825,795 thousand in the same period last year[22] - Bank loans and other borrowings obtained amounted to RMB 51,861,550 thousand, slightly lower than RMB 52,770,810 thousand in the same period last year[23] - Repayment of bank loans and other borrowings was RMB 51,694,222 thousand, compared to RMB 48,107,631 thousand in the same period last year[23] - Interest received from investments was RMB 224,321 thousand, slightly lower than RMB 230,930 thousand in the same period last year[22] Debt and Bonds - The company issued USD 600 million in unsecured senior bonds in July 2024[5] - The company issued $600 million in bonds with a 5.98% interest rate, maturing on January 30, 2028[74] - The first batch of Panda Bonds was issued on August 1, 2024, with a total issuance size of RMB 1 billion, a coupon rate of 3.5%, and a maturity of three years[75] - The company repurchased and canceled $292,166,000 of its 2026 bonds, leaving $157,834,000 outstanding as of August 1, 2024[73] - The company's 2025 convertible bonds have an outstanding principal amount of HKD 3,124 million after partial redemption[97] - The company's 2026 bonds have an outstanding principal amount of USD 157.834 million after partial repurchase[99] - The company issued $600 million in bonds with a 5.98% interest rate, maturing on January 30, 2028[100] - The first batch of Panda Bonds was issued with a total size of RMB 1 billion, a coupon rate of 3.5%, and a maturity period of three years[101] Operational Metrics - Active customer base in four key cities grew by 9% to 900,000[4] - ZhongSheng's enterprise WeChat has nearly 7.4 million customers, and its ZhongShengGo membership platform has about 3.1 million subscribers with an average daily visit count of 840,000[8] - ZhongSheng's social media accounts have a total of 16.6 million followers, and new media leads exceeded 1 million in the first half of 2024[8] - ZhongSheng operates 26 maintenance service centers in 20 cities, with an additional 19 centers under construction or planning[7] - ZhongSheng has deployed nearly 10,000 courtesy cars in central cities and established over 1,000 insurance renewal specialist positions across the group[7] - The company operates 419 dealerships nationwide, including 269 luxury brands and 150 mid-to-high-end brands, with no significant changes since 2022[11] - Inventory turnover days increased to 36.2 days for the six months ended June 30, 2024, compared to 33.6 days for the same period in 2023[90] - The company's employee count decreased to 30,944 as of June 30, 2024, down from 31,180 at the end of 2023[93] Strategic Initiatives - BMW became the first company in China to publicly exit the irrational price war in July 2024, adjusting sales targets to rebalance retail prices and demand[6] - The company plans to expand its core regions and brands through new store openings and acquisitions, focusing on used car and after-sales services[95] Forward-Looking Statements - The company's forward-looking statements are based on existing data and current outlook, subject to risks and uncertainties[113] - The forward-looking statements include business outlook, financial performance estimates, business plan forecasts, and development strategies[113] - The statements are based on subjective expectations, assumptions, and premises beyond the company's control[113] - The forward-looking statements may prove to be incorrect and may not be realized in the future[113] - The company's management accounts are used for the statements, which have not been audited by the company's auditors[113] - Shareholders and potential investors should not overly rely on the forward-looking statements[113]

Economic Growth and Market Trends - In 2023, China's economic growth reached 5.2%, exceeding the initial target of 5%[7] - New car sales in the second half of 2023 increased by over 20% compared to the first half[7] - The Chinese government announced a plan to stimulate equipment replacement and trade-in, expecting a 100% increase in car scrappage and a 45% increase in used car transactions by 2027 compared to 2023[7] - The automotive market in China has fully transformed into an ownership market, emphasizing local customer relationship management and market share[9] - The company anticipates strong growth momentum in the automotive and automotive services industry in 2024, supported by government initiatives and economic targets[7] - In 2023, total passenger car sales in China reached 21.7 million units, a year-on-year increase of 5.8%[29] - The retail sales of new energy passenger vehicles surged by 38.9% to 7.32 million units, with a penetration rate of 33.7%[30] Company Strategy and Objectives - The company set a strategic vision to become the most trusted automotive service brand for quality consumers in China, with specific goals including establishing 100 service centers and doubling the revenue from accident vehicle repairs[9] - The company aims to achieve a 1.0 ratio of used car sales to new car sales as part of its strategic objectives[9] - The company’s strategy focuses on local market centralization and cross-brand operations, aiming to enhance customer loyalty and market share by providing a comprehensive automotive service ecosystem[10] - The company aims to create a well-recognized local automotive service brand through integrated operations and customer-centric strategies, regardless of the vehicle brand owned by customers[10] - The company plans to establish more benchmark used car stores to strengthen local market share and enhance customer connections[22] Financial Performance - The company's revenue for the year ended December 31, 2023, was RMB 179,290.1 million, a decrease of RMB 566.8 million or 0.3% compared to the previous year[38] - Revenue from new car sales was RMB 140,214.9 million, down RMB 5,205.1 million or 3.6% due to a decline in new car sales volume[38] - The revenue from after-sales services increased by RMB 2,698.9 million or 15.5%, reaching RMB 20,076.0 million, driven by an increase in service visits[38] - The used car sales revenue grew by RMB 4,156.8 million or 42.3%, totaling RMB 13,984.8 million, attributed to an increase in used car sales volume[38] - The group's gross profit for the year ended December 31, 2023, was RMB 13,764.3 million, a decrease of RMB 2,267.3 million or 14.1% compared to the previous year[43] - The net profit for the year was RMB 4,990.9 million, down RMB 1,644.3 million or 24.8%, resulting in a profit margin of 2.8%[47] Customer Relationship Management - The company has implemented a centralized customer relationship management (CRM) system that integrates various business segments, allowing cross-brand operations and enhancing customer engagement[14] - The centralized CRM system allows customers to access services across various platforms, including new cars, used cars, after-sales services, and insurance renewals, enhancing the overall customer experience[14] - Over 60% of the 3.8 million active customers became subscribers of the 中升GO platform, while the corporate WeChat account has over 6.8 million customers[17] - The company’s digital membership platform records customer data and service history, facilitating service bookings and reward point accumulation for customers[10] Operational Efficiency and Service Quality - The company operates over 400 stores across China, witnessing local governments implementing various policies to stimulate automotive consumption[7] - The monthly transaction volume of the used car business increased from 7,000 units in January to 20,000 units in December 2023, demonstrating strong operational execution amid market fluctuations[18] - The maintenance service centers are expected to improve customer experience through higher repair quality and shorter repair times, fostering brand loyalty[27] - The centralized maintenance service strategy aims to enhance operational efficiency and cost structure, leveraging network effects to boost used car and rental vehicle business[27] Employee and Workforce Management - The total number of employees was 31,180, a decrease from 32,943 employees as of December 31, 2022[61] - The employee turnover rate for the year is 24.19%, with a total of 9,947 employees leaving, which is a decrease of 5,561 from the previous year[109] - The group has received recognition as one of the "Top 100 Best Employers in China for 2023" and "2023 Employment Contribution Model Employer," highlighting its performance in talent recruitment and development[104] - The group emphasizes employee training and development, aiming to cultivate capable management personnel to support business expansion plans[103] - Employee satisfaction surveys indicate that over 90% of employees are satisfied with the company's management practices[112] Environmental, Social, and Governance (ESG) Initiatives - The group aims to enhance its ESG governance by establishing an ESG committee under the board of directors to oversee sustainability strategies and initiatives[76] - The group is committed to sustainable development and actively supports low-carbon initiatives in response to government policies[74] - The company has established a "Climate Change Policy" to mitigate the impacts of climate change on its operations and aims to reduce carbon emissions and associated risks[136] - The group has implemented various measures to improve energy efficiency, including transitioning spray booths from diesel to electric power[126] - The group has set a target for new energy vehicle sales to account for approximately 10% by 2026, which is expected to reduce carbon emissions by about 67,711 tons per year[124] Corporate Governance - The board of directors emphasizes the importance of high-quality governance to protect shareholder interests and enhance corporate value[169] - The company has adhered to the principles outlined in the Corporate Governance Code throughout the reporting period[171] - The board consists of executive directors, including the chairman and CEO, and independent non-executive directors, ensuring a balance of skills and experience[175][179] - The company has established an independence assessment mechanism for the board, which is reviewed annually to enhance efficiency and identify areas for improvement[183] - The company encourages continuous professional development for directors to enhance their knowledge and skills[184]

Core Viewpoint - UBS has issued a "Buy" rating for Zhongsheng Holdings (00881), adjusting its earnings forecast for 2025 to 2027 down by 3% based on last year's performance, with a slight decrease in target price from HKD 20 to HKD 19 [1] Group 1: Financial Performance - The company's performance last year met market expectations, with overall new car sales remaining roughly flat year-on-year in the second half of the year [1] - The sales revenue from new cars decreased by 1.3% year-on-year, while after-sales service revenue increased by 9.1% [1] - The revenue from used car sales reached RMB 8.9 billion, marking a record high [1] Group 2: Margin Analysis - The gross margins for both new car and after-sales service businesses declined year-on-year, indicating increased profitability pressure in the second half of the year [1]

Group 1 - The core viewpoint of the report is that Bank of America Securities maintains a "Buy" rating on Zhongsheng Holdings (00881), highlighting the potential of the used car trading and after-sales service business as new growth drivers for the company [1] - The report indicates a slight adjustment in the earnings forecast for 2024 and 2025, with a decrease of 5% and 2% respectively, and a minor reduction in the target price to HKD 17 [1] - The company's performance in the second half of last year exceeded expectations, with a year-on-year revenue growth of 4%, reaching RMB 97 billion, despite a 1% decline in new car business revenue and flat sales volume [1] Group 2 - The report notes that the gross profit margin for the business segment fell by 2 percentage points to 0.3%, primarily due to pricing pressure from the price war in the Chinese electric vehicle industry and weak demand recovery [1] - Significant growth was recorded in the used car trading and after-sales service segments, surpassing market expectations, with after-sales service revenue increasing by 9% and used vehicle transaction volume growing by 32% year-on-year [1]