Zhi Tong Cai Jing·2025-09-08 13:20Core Viewpoint - The article highlights the positive outlook for Zhongsheng Holdings (00881) amidst a challenging automotive market, indicating a potential turnaround in performance and valuation for the company as it navigates industry restructuring and focuses on growth opportunities in both traditional and new energy vehicles [1][2][4]. Company Summary - Zhongsheng Holdings' stock price has shown resilience, rising over 3% on September 8, with a closing price of HKD 16.45, reflecting renewed market interest [1]. - The company is at a critical point for performance recovery after two years of industry adjustment, with expectations of improved profitability driven by market share consolidation and effective pricing strategies [1][2]. - The company’s management anticipates a recovery in the new car market, supported by ongoing dealer channel integration and favorable policies that stabilize car sales prices [1][2]. - The company has expanded its luxury car customer base, with active customers reaching 4.54 million, a 15.2% year-on-year increase, and has optimized its channel network by adding 57 dealerships and 20 service centers in the first half of the year [3]. Industry Summary - The automotive dealership industry is undergoing significant restructuring, with a reduction in the number of 4S stores since the second half of 2024, driven by high leverage, declining new car sales profitability, and network optimization by major manufacturers [3]. - The industry is expected to benefit from reduced promotional pressure as less efficient dealers exit the market, which will help improve gross margins for remaining players [3]. - The shift towards new energy vehicles is being capitalized on by Zhongsheng Holdings, which has become the largest distribution channel for the AITO brand, contributing to a marginal improvement in new car gross margins [4]. - Analysts predict a recovery in gross margins for the industry as irrational competition is curtailed and new luxury models are introduced, enhancing the business environment for dealerships [3][4].