Investment Rating - The investment rating for the company is maintained at "Buy" [8] Core Views - The company reported a significant increase in losses due to one-time impairments related to goodwill and automotive dealership rights, with a net loss of 2.26 billion RMB in 2024 compared to a net profit of 140 million RMB in 2023 [1][3] - The company is expected to see a significant reduction in impairment risks in 2025, leading to potential performance recovery [1][3] - The after-sales service business has shown resilience, with revenue growth of 7.1% year-on-year, indicating a strong profit foundation despite challenges in new car sales [2][3] Summary by Sections Financial Performance - The company's revenue for 2024 was 22.15 billion RMB, a decrease of 22.4% year-on-year, while the new car sales volume dropped by 14.2% to 57,000 units [2][7] - The average discount rate in the luxury car market was approximately 20.7% in 2024, impacting sales [2] - After-sales service gross margin improved by 6.4 percentage points to 60.1% in 2024, highlighting the profitability of this segment [3] Operational Strategy - The company continues to implement a low inventory turnover strategy, maintaining an inventory turnover period of 13 days, which helps mitigate larger losses during industry restructuring [4] - Early indicators for 2025 show improvements in orders and customer traffic, suggesting a positive operational outlook [4] Profit Forecast and Valuation - The projected net profits for 2025 and 2026 are 339.54 million RMB and 481.94 million RMB, respectively, with an estimated EPS of 0.26 RMB and 0.38 RMB [5][18] - The target price for the company is set at 2.09 HKD, based on a PE ratio of 7.5 for 2025 [5][9]

Financial Performance - The total revenue for the year ended December 31, 2024, was RMB 22,154.0 million, a decrease from RMB 28,554.6 million in 2023, representing a decline of approximately 22.6%[6] - The gross profit for the year was RMB 1,561.0 million, with a gross margin of 7.0%, down from RMB 2,077.9 million in 2023[5] - The company reported a loss of RMB 2,258.8 million for the year, compared to a profit of RMB 155.8 million in the previous year[6] - Total revenue for 2024 was RMB 22,153,952 thousand, a decrease of 22.6% from RMB 28,554,553 thousand in 2023[26] - Revenue from passenger car sales was RMB 17,726,326 thousand, down 27.4% from RMB 24,421,186 thousand in the previous year[26] - The company reported a pre-tax loss of RMB 2,634,517 thousand in 2024 compared to a profit of RMB 384,474 thousand in 2023[39] - The net loss for the year was approximately RMB 2,258.8 million, compared to a profit of approximately RMB 155.8 million in the previous year, resulting in a loss margin of about -10.2%[111] Impairment and Costs - Non-cash impairment of goodwill and intangible assets related to automotive dealership rights totaled RMB 2,911.0 million for the year[5] - The company recognized a goodwill impairment loss of RMB 943,466 thousand in 2024, compared to RMB 43,519 thousand in 2023[37] - The group recognized a significant impairment loss of RMB 1,967,486,000 for intangible assets related to automotive dealership rights as of December 31, 2024, compared to RMB 43,519,000 in the previous year[63] - Employee costs decreased from RMB 869,941 thousand in 2023 to RMB 711,084 thousand in 2024, a decline of around 18.2%[33] - The total financing costs decreased from RMB 291,162 thousand in 2023 to RMB 239,325 thousand in 2024, a reduction of approximately 17.8%[33] Cash Flow and Dividends - Cash generated from operating activities was RMB 1,097.1 million, an increase from RMB 1,034.8 million in 2023[14] - The net cash from operating activities after tax payments was RMB 864.7 million, compared to RMB 816.8 million in the previous year[14] - The company proposed a final dividend of RMB 0.0445 per ordinary share[5] - The company paid dividends to equity shareholders amounting to RMB 169,223 thousand, significantly higher than RMB 44,426 thousand in the previous year[26] - The proposed final dividend per ordinary share is RMB 0.0445, an increase from RMB 0.0330 in 2023, with a total proposed dividend of RMB 59,908,000 compared to RMB 44,426,000 in the previous year[86] Assets and Liabilities - Total non-current assets decreased to RMB 4,368.2 million from RMB 7,847.7 million in 2023, primarily due to a significant reduction in intangible assets[10] - Current liabilities increased to RMB 6,788.4 million from RMB 4,447.4 million in 2023, driven by higher trade and other payables[10] - The company's total equity decreased to RMB 2,956.8 million from RMB 5,286.1 million in the previous year, reflecting the losses incurred[12] - The total net book value of property, plant, and equipment as of December 31, 2024, is RMB 1,431,364,000, down from RMB 1,708,135,000 as of December 31, 2023[50] - The net book value of land use rights as of December 31, 2024, is RMB 465,382,000, down from RMB 481,262,000 as of December 31, 2023[53] Inventory and Receivables - Inventory costs decreased significantly from RMB 26,255,858 thousand in 2023 to RMB 20,330,016 thousand in 2024, a reduction of approximately 22.6%[37] - The company’s automotive inventory was valued at RMB 610,835,000 in 2024, a decrease from RMB 768,366,000 in 2023[72] - Trade receivables increased to RMB 319,838,000 in 2024 from RMB 276,385,000 in 2023, suggesting improved collection efforts[72] - The accounts receivable balance includes a rebate receivable of RMB 830,176,000, compared to RMB 605,409,000 in 2023[73] Market and Sales Performance - The retail sales of passenger vehicles in China reached 22.89 million units, a year-on-year increase of 5.5%, with new energy vehicles accounting for 10.9 million units sold, up 40.7%[97] - The average discount rate in the luxury car market reached 20.7%, significantly impacting dealer profitability and leading to an expected closure of 4,000 dealerships[98] - New passenger vehicle sales revenue decreased by approximately 27.4% to about RMB 17,726.3 million, accounting for approximately 80.0% of total revenue[103] - The group’s after-sales and warranty service revenue increased by approximately 7.1% to about RMB 4,427.6 million, representing approximately 20.0% of total revenue[103] Corporate Governance and Future Outlook - The company has complied with the corporate governance code as per the applicable rules during the year[143] - The company will continue to explore opportunities in the new energy vehicle market through sales of existing luxury brand models and related services[128] - The company emphasizes a data-driven corporate culture to attract talent and improve employee satisfaction[129] - The company will maintain a prudent approach to manage cash reserves and reduce debt burden for sustainable business development[128]

Investment Rating - The report maintains a BUY rating for Meidong Auto, with a target price of HK$2.80, indicating an upside potential of 28.4% from the current price of HK$2.18 [3][9]. Core Insights - Meidong's core earnings for 2H24E are projected to remain stable quarter-on-quarter, with profit improvements expected from BMW and Lexus, potentially offset by Porsche's declining profits [1][9]. - The report highlights rising impairment risks in 2H24E due to Porsche's worsening profit, with an estimated impairment loss of RMB1.3 billion for FY24E [1][9]. - The FY25E net profit estimate has been revised upward by 7% to RMB408 million, reflecting a more positive outlook for Porsche dealers and reduced interest expenses following the redemption of convertible bonds [1][9]. Financial Summary - Revenue for FY24E is projected at RMB21,859 million, a decline of 23.4% year-on-year, while FY25E revenue is expected to be RMB20,968 million, a further decline of 4.1% [2][11]. - Net profit for FY24E is expected to be a loss of RMB1,105 million, with a recovery to RMB408 million in FY25E, representing a significant turnaround [2][11]. - The report anticipates a gross margin of 7.3% for FY24E, with an improvement to 8.3% in FY25E [11][12]. Earnings Projections - New-car sales volume is expected to rise by 12% quarter-on-quarter in 2H24E, contributing to a 6% increase in new-car revenue [1][9]. - The overall gross margin is projected to narrow by 0.5 percentage points to 7.1% in 2H24E, resulting in a gross profit of RMB792 million [1][10]. - The report estimates a net loss of RMB1.1 billion for 2H24E, but a net profit excluding impairment of RMB70 million is anticipated [1][10]. Share Performance - The stock has shown a 1.4% increase over the past month, but a decline of 13.1% over the past three months [5]. - The market capitalization of Meidong Auto is approximately HK$2,934.8 million [3]. Shareholding Structure - Apex Sail Limited holds a significant 52.3% stake in Meidong Auto, indicating concentrated ownership [4].

Revenue Performance - For the first half of 2024, the company recorded revenue of approximately RMB 10,655.9 million, a decrease of about 24.4% compared to RMB 14,088.7 million in the same period of 2023[11]. - New passenger vehicle sales revenue fell by approximately 29.3% to about RMB 8,569.4 million, accounting for approximately 80.4% of total revenue[11]. - After-sales and mortgage application service revenue increased by approximately 6.3% to about RMB 2,086.5 million, representing about 19.6% of total revenue[11]. - Revenue for the six months ended June 30, 2024, was RMB 10,655,863 thousand, a decrease of 24.3% compared to RMB 14,088,673 thousand for the same period in 2023[75]. - For the six months ended June 30, 2024, the revenue from new passenger car sales was RMB 8,569,387 thousand, a decrease of 29.4% compared to RMB 12,126,498 thousand in the same period of 2023[92]. - The revenue from after-sales and mortgage application services increased to RMB 2,086,476 thousand, up 6.3% from RMB 1,962,175 thousand in the previous year[92]. Profitability and Loss - The group recorded a loss of approximately RMB 22.9 million for the period, compared to a profit of approximately RMB 44.7 million in H1 2023, resulting in a profit margin of -0.2%, a decrease of 0.5 percentage points year-on-year[18]. - Gross profit decreased approximately 19.4% from about RMB 1,001.1 million in H1 2023 to approximately RMB 806.4 million, while overall gross margin increased by 0.5 percentage points to about 7.6%[13]. - Operating profit decreased to RMB 141,081 thousand from RMB 304,653 thousand, indicating a significant reduction in operational efficiency[75]. - The company reported a net loss of RMB 22,931 thousand for the six months ended June 30, 2024, compared to a profit of RMB 44,727 thousand in the prior year[75]. - Total comprehensive income for the period was a loss of RMB 27,214 thousand, compared to a gain of RMB 41,563 thousand in the previous year[77]. - Basic and diluted loss per share was RMB (2.01) for the current period, compared to earnings of RMB 2.91 in the same period last year[77]. Cost Management - The company's sales cost decreased by approximately 24.7% to about RMB 9,849.4 million, primarily due to the decline in new passenger vehicle sales revenue[12]. - Operating expenses, including distribution costs, administrative expenses, and financing costs, were maintained under strict cost control, with distribution costs decreasing approximately 22.7% to about RMB 295.4 million[15]. - Employee costs for the group amounted to RMB 334.2 million, a decrease from RMB 426.9 million in the same period last year[66]. - Employee costs decreased to RMB 315,776,000 in the first half of 2024 from RMB 400,777,000 in 2023, reflecting a reduction of approximately 21.2%[99]. - Financing costs totaled RMB 334,208,000 for the six months ended June 30, 2024, down from RMB 426,868,000 in the same period of 2023, representing a decrease of approximately 21.7%[98]. Inventory and Efficiency - Inventory turnover days remained at a healthy level of approximately 19 days, with an increase of 7 days compared to the same period last year, highlighting the company's focus on efficiency[10]. - The total inventory as of June 30, 2024, was RMB 1,396,588,000, an increase from RMB 960,042,000 as of December 31, 2023[113]. - Inventory costs were RMB 9,739,231,000 for the six months ended June 30, 2024, down from RMB 12,976,713,000 in 2023, a decrease of about 25.5%[100]. Market Conditions and Strategy - The competitive landscape in the new energy vehicle market is intensifying, with a retail sales volume of 4.11 million units, a year-on-year increase of 33.2%, leading to a market share of 41.8%[9]. - The overall domestic passenger vehicle sales reached 9.84 million units, a year-on-year increase of 3.2%, while luxury vehicle sales decreased by 5.6% to 1.33 million units[8]. - The company is focusing on cost control, cash turnover, and operational efficiency as key strategies in response to the challenging market environment[8]. - The group plans to maintain efficient operations and enhance profitability from new passenger car sales and after-sales services in response to market uncertainties[33]. - The group aims to explore opportunities in the new energy vehicle market by focusing on sales of existing luxury brand electric models[34]. Financial Position - As of June 30, 2024, the total equity of the group was approximately RMB 5,184.7 million, a decrease from RMB 5,286.1 million as of December 31, 2023[27]. - Current assets increased to approximately RMB 6,832.3 million from RMB 6,372.7 million, primarily due to a rise in inventory by approximately RMB 436.5 million[27]. - Current liabilities rose to approximately RMB 6,657.6 million from RMB 4,447.4 million, mainly due to the reclassification of convertible bonds from non-current to current liabilities[27]. - The group's asset-liability ratio was approximately 88.3% as of June 30, 2024, down from 97.7% as of December 31, 2023[28]. - Cash and cash equivalents totaled approximately RMB 3,943.4 million as of June 30, 2024[28]. Shareholder Information - As of June 30, 2024, the total number of issued shares is 1,346,247,201[41]. - Mr. Ye Fan holds 703,916,000 shares, representing 52.29% of the total shares[41]. - FIL Limited and its affiliates collectively hold 121,772,260 shares, accounting for 9.05% of the total shares[46]. - Fidelity Funds owns 95,108,000 shares, which is 7.06% of the total shares[46]. - The company has not established any arrangements for directors to benefit from the purchase of shares or bonds during the period[44]. Convertible Bonds and Financing - The company issued convertible bonds with a total principal amount of HKD 2,750 million in January 2022, guaranteed by the company[59]. - The conversion price for the convertible bonds was adjusted to HKD 44.1764 per share, effective from August 9, 2024[60]. - The outstanding principal amount of convertible bonds as of the report date is HKD 1,873,000,000, representing approximately 68.11% of the initial total principal amount of the convertible bonds[63]. - The company plans to redeem the convertible bonds at 106.9428% of the principal amount on January 13, 2025, at the bondholder's option[59]. - The company has not exercised any conversion rights or redeemed, purchased, or canceled any convertible bonds during the period[65]. Impairment and Taxation - The group recognized impairment losses of approximately RMB 104.8 million and RMB 46.5 million for goodwill and intangible assets, respectively, due to adverse macroeconomic conditions[15]. - The income tax expense for the period was approximately RMB 41.3 million, a decrease of about 66.0% compared to RMB 121.4 million in the same period last year[17]. - The income tax expense for the period was RMB 113,583,000, up from RMB 99,175,000 in the previous year, reflecting an increase of approximately 14.5%[103]. Dividends - The group did not declare an interim dividend for the period, compared to RMB 0.0087 per share in H1 2023[19]. - The approved final dividend for the previous fiscal year is RMB 0.0330 per share, down from RMB 0.1170 per share for the same period in 2023[135]. - The group paid dividends totaling RMB 16.63 million to non-controlling shareholders during the six months ended June 30, 2024, compared to RMB 35.51 million for the same period in 2023[136].

Revenue Performance - For the first half of 2024, the company recorded revenue of approximately RMB 10,655.9 million, a decrease of about 24.4% compared to RMB 14,088.7 million in the same period of 2023[11]. - New passenger vehicle sales revenue fell by approximately 29.3% to about RMB 8,569.4 million, accounting for approximately 80.4% of total revenue[11]. - After-sales and mortgage application service revenue increased by approximately 6.3% to about RMB 2,086.5 million, representing approximately 19.6% of total revenue[11]. - Revenue for the six months ended June 30, 2024, was RMB 10,655,863 thousand, a decrease of 24.3% compared to RMB 14,088,673 thousand for the same period in 2023[75]. - Revenue from new passenger car sales was RMB 8,569,387 thousand, down 29.5% from RMB 12,126,498 thousand in the previous year[92]. - Revenue from after-sales and mortgage application services increased to RMB 2,086,476 thousand, up 6.3% from RMB 1,962,175 thousand in the previous year[92]. Cost and Profitability - The company's sales cost decreased by approximately 24.7% to about RMB 9,849.4 million, primarily due to the decline in new passenger vehicle sales revenue[12]. - Gross profit decreased approximately 19.4% from about RMB 1,001.1 million in the first half of 2023 to about RMB 806.4 million, while overall gross margin increased by 0.5 percentage points to approximately 7.6%[13]. - The gross profit margin for new vehicle sales continued to decline, while after-sales and mortgage services maintained stable gross profit margins[10]. - The operating profit decreased to RMB 141,081 thousand from RMB 304,653 thousand, representing a decline of 53.8%[75]. - The company reported a total financing cost of RMB 123,871,000 for the six months ended June 30, 2024, down 13% from RMB 142,845,000 in the same period of 2023[98]. - Employee costs were reduced to RMB 315,776,000 in the first half of 2024, a decrease of 21% from RMB 400,777,000 in the same period of 2023[99]. Financial Position - As of June 30, 2024, the total equity of the group was approximately RMB 5,184.7 million, a decrease from RMB 5,286.1 million as of December 31, 2023[27]. - Current assets increased to approximately RMB 6,832.3 million from 6,372.7 million, primarily due to concentrated procurement of new vehicles, resulting in an inventory increase of about RMB 436.5 million[27]. - Current liabilities rose to approximately RMB 6,657.6 million from RMB 4,447.4 million, mainly due to the reclassification of convertible bonds from non-current to current liabilities[27]. - The group's asset-liability ratio was approximately 88.3% as of June 30, 2024, down from 97.7% as of December 31, 2023[28]. - Cash and cash equivalents totaled approximately RMB 3,943.4 million, with a significant portion held in RMB, USD, and HKD[28]. - The company reported cash and cash equivalents of RMB 2,557,619 thousand as of June 30, 2024, compared to RMB 2,361,671 thousand at the end of 2023[78]. Market and Competitive Landscape - The competitive landscape in the new energy vehicle market is intensifying, with a retail sales volume of 4.11 million units, a year-on-year increase of 33.2%, leading to a market share of 41.8%[9]. - The overall domestic passenger vehicle sales reached 9.84 million units, a year-on-year increase of 3.2%, while luxury vehicle sales decreased by 5.6% to 1.33 million units[8]. - The company is focusing on cost control, cash turnover, and operational efficiency as key strategies in response to the challenging market environment[8]. Shareholder Information - As of June 30, 2024, the total number of issued shares is 1,346,247,201[41]. - Mr. Ye Fan holds 703,916,000 shares, representing 52.29% of the total shares[41]. - FIL Limited and its affiliates collectively hold 121,772,260 shares, accounting for 9.05% of the total shares[46]. - Fidelity Funds owns 95,108,000 shares, which is 7.06% of the total shares[46]. - The company did not declare an interim dividend for the period, compared to RMB 0.0087 per share in the first half of 2023[19]. Debt and Financing - The company issued convertible bonds with a total principal amount of HKD 2,750 million in January 2022, guaranteed by the company[59]. - The outstanding principal amount of convertible bonds as of the report date is HKD 1,873,000,000, representing approximately 68.11% of the initial total principal amount of the convertible bonds[63]. - The company repurchased convertible bonds totaling approximately HKD 642.03 million during the period, with a total principal amount of HKD 636 million[61]. - The company plans to reduce debt burden by gradually repaying loans and convertible bonds to lower the debt ratio and financing costs[34]. Employee and Management Information - The total remuneration for key management personnel was RMB 6,552 thousand for the six months ended June 30, 2024, down from RMB 7,433 thousand in the same period of 2023, a decrease of 11.8%[154]. - As of June 30, 2024, the group had 3,674 employees, down from 3,805 employees as of December 31, 2023[66]. - Employee costs for the group totaled RMB 334.2 million, a decrease from RMB 426.9 million in the same period last year[66]. Other Financial Metrics - The company recorded a loss of approximately RMB 22.9 million for the period, compared to a profit of approximately RMB 44.7 million in the same period last year, resulting in a profit margin of -0.2%, a decrease of 0.5 percentage points year-on-year[18]. - The company recognized a goodwill impairment loss of RMB 104,762,000 for the first half of 2024, compared to RMB 32,924,000 in the same period of 2023, indicating increased challenges in asset valuation[100]. - The company reported a total tax expense of RMB 113,583,000 for the first half of 2024, an increase of 15% from RMB 99,175,000 in the same period of 2023[103].

Revenue and Profit Performance - Revenue for the period was RMB 10,655.9 million, a decrease of 24.4% compared to the same period in 2023[2] - Gross profit for the period was RMB 806.4 million, a decrease of 19.4% year-over-year, with a gross margin of 7.6%[2] - The company recorded a loss of RMB 22.9 million for the period[2] - Revenue from passenger car sales in 2024 reached RMB 8,569,387 thousand, a decrease from RMB 12,126,498 thousand in 2023[14] - Revenue from after-sales and mortgage application services in 2024 was RMB 2,086,476 thousand, slightly up from RMB 1,962,175 thousand in 2023[14] - Total revenue from customer contracts under HKFRS 15 was RMB 10,655,863 thousand in 2024, down from RMB 14,088,673 thousand in 2023[14] - Revenue decreased by 24.4% YoY to RMB 10,655.9 million, with new passenger car sales revenue dropping 29.3% to RMB 8,569.4 million, accounting for 80.4% of total revenue[65] - After-sales and mortgage application service revenue increased by 6.3% YoY to RMB 2,086.5 million, representing 19.6% of total revenue[65] - Gross profit declined by 19.4% YoY to RMB 806.4 million, with overall gross margin improving by 0.5 percentage points to 7.6%[67] - New passenger car sales gross margin dropped by 5.3 percentage points to -5.1%, while after-sales and mortgage services gross margin rose by 9.7 percentage points to 59.8%[67] - The company recorded a loss of RMB 22.9 million, compared to a profit of RMB 44.7 million in the same period last year, with a profit margin of -0.2%[70] - Shareholders' attributable loss was RMB 27.0 million, compared to a profit of RMB 39.0 million in the previous year[70] Asset and Liability Changes - Inventory increased to RMB 1,396.6 million as of June 30, 2024, compared to RMB 960.0 million at the end of 2023[6] - Cash and cash equivalents stood at RMB 2,557.6 million as of June 30, 2024, up from RMB 2,361.7 million at the end of 2023[6] - Total assets decreased to RMB 7,604.8 million as of June 30, 2024, from RMB 9,773.0 million at the end of 2023[6] - Total liabilities decreased to RMB 6,657.6 million as of June 30, 2024, from RMB 9,773.0 million at the end of 2023[6] - The company's equity attributable to shareholders decreased to RMB 5,063.4 million as of June 30, 2024, from RMB 5,152.3 million at the end of 2023[7] - The company's inventory increased to RMB 1,396,588,000 as of June 30, 2024, up from RMB 960,042,000 as of December 31, 2023[35] - The company's trade receivables decreased to RMB 249,148,000 as of June 30, 2024, down from RMB 276,385,000 as of December 31, 2023[38] - The company's restricted bank deposits increased to RMB 1,146,182,000 as of June 30, 2024, up from RMB 971,543,000 as of December 31, 2023[41] - The company's cash and cash equivalents decreased to RMB 2,557,619,000 as of June 30, 2024, down from RMB 2,361,671,000 as of December 31, 2023[42] - The company's total loans and borrowings decreased to RMB 1,391,591,000 as of June 30, 2024, down from RMB 1,444,439,000 as of December 31, 2023[43] - The company's trade payables and notes payable increased to RMB 2,621,917,000 as of June 30, 2024, up from RMB 1,705,880,000 as of December 31, 2023[46] - Total equity as of June 30, 2024, was approximately RMB 5,184.7 million, with current assets of RMB 6,832.3 million and current liabilities of RMB 6,657.6 million[76] - Net current assets decreased significantly to RMB 174.7 million from RMB 1,925.3 million at the end of 2023[76] - The company's debt-to-equity ratio improved to 88.3% from 97.7% at the end of 2023[76] - Cash and cash equivalents, time deposits, and pledged bank deposits totaled approximately RMB 3,943.4 million as of June 30, 2024[77] Impairment and Losses - The company recognized a non-cash impairment of goodwill and intangible assets related to automotive dealership rights totaling RMB 151.3 million[2] - Goodwill impairment losses increased significantly to RMB 104,762 thousand in H1 2024 from RMB 32,924 thousand in H1 2023, a 218% increase[23] - Intangible assets impairment losses rose sharply to RMB 46,542 thousand in H1 2024 from RMB 4,274 thousand in H1 2023, a 989% increase[23] - The company recognized impairment losses of RMB 104,762,000 for goodwill and RMB 46,542,000 for intangible assets - car dealership rights in the first half of 2024[34] - Impairment losses on goodwill and intangible assets (car dealership rights) amounted to RMB 104.8 million and RMB 46.5 million, respectively[68] Costs and Expenses - Inventory costs decreased to RMB 9,739,231 thousand in H1 2024 from RMB 12,976,713 thousand in H1 2023, a reduction of 25%[23] - Employee stock option expenses decreased to RMB 4,434 thousand in H1 2024 from RMB 9,954 thousand in H1 2023, a 55% reduction[23] - Current tax provisions in China increased to RMB 113,583 thousand in H1 2024 from RMB 99,175 thousand in H1 2023, a 15% rise[25] - Total financing costs in 2024 were RMB 131,035 thousand, down from RMB 149,293 thousand in 2023[22] - Employee costs, including salaries, wages, and benefits, decreased to RMB 315,776 thousand in 2024 from RMB 400,777 thousand in 2023[22] - Equity-settled share-based payment expenses in 2024 were RMB 4,434 thousand, down from RMB 9,954 thousand in 2023[22] - Distribution costs decreased by 22.7% YoY to RMB 295.4 million, while administrative expenses fell by 19.0% to RMB 324.4 million[68] - As of June 30, 2024, the company had 3,674 employees, with employee costs totaling RMB 334.2 million, down from RMB 426.9 million in the first half of 2023[83] Dividends and Shareholder Equity - The company declared dividends of RMB 619.3 million from its Chinese subsidiaries, resulting in a deferred tax liability of RMB 31.0 million[26] - The company declared no interim dividend for the six months ended June 30, 2024, compared to an interim dividend of RMB 0.0087 per share for the same period in 2023[54] - The company approved a final dividend of RMB 0.0330 per share for the previous fiscal year, compared to RMB 0.1170 per share for the same period in 2023[55] - The company's subsidiaries declared and paid dividends of RMB 16,631,000 to non-controlling shareholders during the six months ended June 30, 2024, compared to RMB 35,510,000 for the same period in 2023[56] Convertible Bonds and Financing - The company's subsidiary, Sail Vantage Limited, issued zero-coupon convertible bonds with a total principal amount of HKD 2,750,000,000 (approximately RMB 2,248,263,000), receiving HKD 2,689,517,000 (approximately RMB 2,198,814,000) after deducting transaction costs[48] - The convertible bonds can be converted into the company's shares at an initial conversion price of HKD 46.75 per share, with adjustments to HKD 45.4881 per share as of August 5, 2022, and further to HKD 44.7582 per share as of August 4, 2023[48] - The company repurchased convertible bonds with a total principal amount of HKD 636,000,000 during the six months ended June 30, 2024, paying a total consideration of HKD 642,030,000 (approximately RMB 585,968,000)[51] - As of June 30, 2024, the outstanding principal amount of the convertible bonds was HKD 1,873 million[51] - The convertible bonds were reclassified from non-current liabilities to current liabilities as of June 30, 2024, due to the company's obligation to redeem them at 106.9428% of the principal amount on January 13, 2025[52] - The company repurchased HKD 636 million of convertible bonds during the period, which were subsequently canceled, with no significant adverse impact on the financial position[90] - The outstanding principal amount of convertible bonds as of the announcement date was HKD 1,873 million, convertible into 42,398,203 shares at HKD 44.1764 per share[90] Market and Industry Trends - Domestic passenger car sales in China reached 9.84 million units in the first half of 2024, a year-on-year increase of 3.2%, while luxury car sales declined by 5.6% to 1.33 million units[62] - New energy vehicle (NEV) retail sales in China reached 4.11 million units in the first half of 2024, a year-on-year increase of 33.2%, with a market penetration rate of 41.8%[63] - Over 8,000 4S stores in China have closed since 2020, with an estimated 2,000 more closures expected in 2024[62] - The NEV market is experiencing intense competition, with some brands adjusting prices to maintain competitiveness and market share, further squeezing profit margins for both brands and dealers[63] Operational and Strategic Updates - The company expects domestic consumption to take time to recover in the second half of 2024, with the automotive industry facing intense competition[81] - The company plans to focus on selling new energy vehicle models under existing luxury brands and providing related after-sales and financing services to explore the new energy market with a light-asset, low-risk model[81] - The company aims to reduce debt burden by gradually repaying certain loans and convertible bonds to lower the debt ratio and financing costs[81] - In January 2023, the company raised approximately HKD 1,012 million from the placement of 68 million new shares at HKD 15.05 per share, with 50% allocated for business expansion and 50% for working capital[86][87] - The company has no updates on property title defects during the period and will disclose progress in accordance with relevant regulations[84] - The company's external auditor, KPMG, reviewed the interim financial report in accordance with Hong Kong Standard on Review Engagements 2410[91] - The company's interim report will be available on the HKEX website (www.hkexnews.hk) and the company's website (www.meidongauto.com) in due course[92] - The CEO expressed gratitude to all employees, management team, shareholders, and investors for their contributions and support during the period[93] - The announcement contains forward-looking statements based on assumptions, current estimates, and forecasts, subject to risks and uncertainties[93] - The company does not guarantee the accuracy of forward-looking statements and is not responsible for updating or correcting them[93] Share Options and Employee Compensation - The company granted a total of 4,150,000 share options to directors on January 20, 2014, with vesting periods of 25% on January 1, 2015, 2016, and 2017, and a term of 9.82 years[58] - The company granted 7,830,000 share options to employees on January 4, 2018, with vesting periods of 25% on January 4, 2018, 2019, 2020, and 2021, and a term of 10.00 years[58] - As of June 30, 2024, the weighted average exercise price of outstanding share options was HKD 15.65, with 15,582,250 options outstanding[59] - The weighted average remaining contractual life of outstanding share options as of June 30, 2024, was 6.20 years[59] Capital Commitments and Property, Plant, and Equipment - The company's capital commitments as of June 30, 2024, amounted to RMB 15,000, a significant decrease from RMB 441,000 as of December 31, 2023[60] - Property, plant, and equipment acquisitions decreased to RMB 81,396 thousand in H1 2024 from RMB 216,849 thousand in H1 2023, a 62% reduction[31] - Loss on disposal of property, plant, and equipment was RMB 5,863 thousand in H1 2024 compared to a gain of RMB 19,761 thousand in H1 2023[31] - The company's right-of-use assets increased by RMB 62,423,000 in the first half of 2024, compared to RMB 24,502,000 in the same period of 2023[32] Earnings Per Share and Financial Ratios - Basic loss per share was RMB 0.0201 for the period, compared to a profit of RMB 0.0291 in the same period last year[5] - Basic loss per share was RMB 0.02 in H1 2024 compared to a basic earnings per share of RMB 0.03 in H1 2023[27] - The company's debt-to-equity ratio improved to 88.3% from 97.7% at the end of 2023[76] Contingent Liabilities and Treasury Shares - The company had no significant contingent liabilities as of June 30, 2024[78] - As of June 30, 2024, the company had no treasury shares[85]

Investment Rating - The report maintains a "Buy" rating for the company, despite facing strong headwinds from dealers [2][3]. Core Views - The company is expected to remain profitable in the first half of 2024, with a projected net profit of RMB 43 million, despite a forecasted 8% decline in new car sales year-on-year [2][3]. - The report anticipates a slight recovery in margins in FY25 due to the elimination of convertible bond burdens and the introduction of new electric vehicle models by BMW [2][3]. - The target price has been adjusted from HKD 4.00 to HKD 3.00, based on a revised earnings multiple of 10 times the estimated FY25 earnings per share [2][3]. Financial Summary - For 1H24, new car sales are expected to decline to 29,200 units, with a significant drop in average selling prices by 13% [2][3]. - The company’s revenue is projected to decrease by 15% year-on-year, while gross profit is expected to decline by 11% [2][3]. - The net profit for FY25 is estimated at RMB 360 million, reflecting a 52.9% decrease from previous estimates [7][8]. Sales and Profitability - The report indicates that the gross margin for new cars is expected to drop to -3.7% in 1H24, marking a historical low [2][3]. - Despite a decrease in service volume, after-sales service revenue is projected to grow by 12% year-on-year, with Porsche contributing a larger share [2][3]. Market Position - The market share of the company in Porsche sales in China is expected to increase from 16% in 2H23 to 17% in 1H24, despite a 39% decline in Porsche's overall sales [2][3]. - The company is expected to benefit from a potential reduction in sales targets by foreign automakers, which may lead to improved margins in FY25 [2][3].

Investment Rating - The report maintains a BUY rating for Meidong Auto, with a revised target price of HK$3.00, down from HK$4.00, based on a 10x FY25E EPS valuation [2][5]. Core Views - Despite facing strong industry headwinds, Meidong is expected to remain profitable in 1H24, with a projected net profit of RMB43 million, supported by subsidies from Porsche and Lexus [2]. - The outlook for FY25 is anticipated to improve due to the removal of the convertible bond burden and a new NEV model cycle for BMW, leading to a projected net profit of RMB360 million [2]. - The report highlights a decline in new car sales volume by 8% YoY to 29,200 units in 1H24, with a significant drop in average selling price by 13% YoY [2]. Financial Summary - Revenue for FY24 is projected at RMB24,141 million, a decrease of 15% YoY, with gross profit expected to drop by 11% YoY to RMB1,877 million [11]. - The new car gross margin is expected to fall to -3.7% in 1H24, marking the lowest in history, while after-sales service revenue is projected to rise by 12% YoY [2][11]. - The report indicates a significant decline in net profit from RMB521 million in FY22 to RMB140 million in FY23, with a forecasted recovery to RMB360 million in FY25 [11][12].

Investment Rating - The investment rating for the company is "Buy" [2] Core Views - The company is facing challenges in new car sales due to macroeconomic pressures and industry price competition, but it has shown strong operational resilience with a service absorption rate of 116.7% [2][3] - The report maintains a "Buy" rating, indicating potential for growth despite ongoing price competition and performance pressures in 2023 [2][3] - The company is expected to benefit from its efficient operations and quick inventory turnover, which may help it navigate through the current crisis and achieve better growth [2][3] Summary by Relevant Sections Financial Performance - In 2023, the company reported revenue of 28,555 million RMB, a slight decrease from 28,655 million RMB in 2022, with a projected revenue of 28,284 million RMB for 2024 [2][3] - The net profit for 2023 was 156 million RMB, down 72% from the previous year, with a forecasted net profit of 295 million RMB for 2024 [2][3] - The diluted earnings per share (EPS) for 2023 is projected at 0.01 RMB, significantly lower than 0.41 RMB in 2022, with an expected recovery to 0.23 RMB in 2024 [2][3] Operational Insights - The company has maintained a strong after-sales service margin of 53.7%, which has improved by 4.7 percentage points year-on-year, helping to offset declines in new car sales margins [2][3] - The report highlights that the company is the fastest in inventory turnover within the automotive dealership industry, which supports stable cash flow and operational resilience [2][3] Market Context - The automotive dealership industry is experiencing significant price competition, leading to a decline in new car sales margins, which fell to -0.6% in 2023, down 4 percentage points from the previous year [2][3] - The report notes that the demand for new car sales has decreased due to reduced customer traffic and extended purchase cycles, exacerbated by frequent price cuts in the electric vehicle segment [2][3]

Investment Rating - The report maintains an "Overweight" rating for Meidong Automotive (1268.HK) [2] Core Views - In 2023, Meidong Automotive faced challenges in new car sales due to macroeconomic pressures and industry price competition, but demonstrated strong operational resilience with a service absorption rate of 116.7% [2] - The company is expected to navigate through the crisis and potentially achieve better growth due to its leading advantages in the industry [2] - The report adjusts profit forecasts while maintaining the "Overweight" rating, indicating a belief in the company's ability to recover and grow despite current pressures [2] Financial Summary - Revenue (in million HKD): - 2022: 28,655 - 2023: 28,555 - 2024E: 28,284 - 2025E: 29,301 - 2026E: 30,448 [2][3] - Net Profit (in million HKD): - 2022: 556 - 2023: 156 - 2024E: 295 - 2025E: 983 - 2026E: 1,672 [2][3] - Earnings Per Share (in HKD): - 2022: 0.41 - 2023: 0.01 - 2024E: 0.23 - 2025E: 0.76 - 2026E: 1.30 [2][3] - The company is noted for having the fastest inventory turnover in the automotive dealership industry, which is expected to help maintain stable cash flow [2]