Seeking Alpha·2024-05-13 04:41Core Viewpoint - Autohome Inc. (NYSE:ATHM) is upgraded from a Hold to a Buy rating due to positive quarterly financial performance, favorable policy developments in China's automotive market, and a significant increase in dividend guidance for 2024 [2] Financial Performance - Autohome's revenue grew by +4.9% YoY from RMB1,533.6 million in Q1 2023 to RMB1,609.1 million in Q1 2024, exceeding consensus forecasts by +1.7% [3] - The new energy vehicle segment saw a substantial revenue increase of +49.6% YoY, contributing to the overall positive performance [4] - Normalized net profit attributable to shareholders rose by +2.2% YoY to RMB493.9 million, with a net margin of 30.7%, despite a slight decline of -0.8 percentage points YoY [4] Policy Developments - China is introducing a one-time subsidy of up to 10,000 yuan ($1,380) for consumers trading in old vehicles for new models, which is expected to boost new car sales [5] - Autohome is leveraging big data to identify potential customers and enhance automobile consumption, positioning itself favorably in light of the new subsidies [5] - Analysts project a +3.4% growth in revenue and +6.9% growth in operating income for Autohome in FY 2024, contrasting with declines in the previous year [5] Dividend Outlook - Autohome plans to distribute at least RMB1.5 billion in dividends annually from FY 2024 to FY 2026, translating to a forward dividend yield of 6% [6] - This marks a significant increase from previous dividend distributions of RMB1.0 billion in FY 2023 and RMB500 million in FY 2022, and a shift from annual to semi-annual payments [6] Valuation Perspective - Autohome is currently valued at 13.2 times the consensus next twelve months' normalized P/E, significantly lower than its historical 10-year mean P/E of 20.4 times [8] - The favorable policy environment and positive dividend outlook are expected to drive a re-rating of the stock towards its historical average P/E [8]