Investment Rating - The report gives a "Buy" rating for the company, Tuhu (途虎) [5][8]. Core Views - The Chinese automotive market is entering a stage of stock economy, with the number of passenger cars expected to reach 374 million by 2027, making it the largest in the world. The demand for after-sales maintenance services will grow significantly due to the increasing average age of vehicles [5][34]. - Tuhu has established itself as a leading integrated online and offline automotive service platform in China, with a revenue of 11.55 billion RMB in 2022 and a CAGR of approximately 17.94% from 2019 to 2022 [5][74]. - The company is expected to continue expanding its store network, with plans to add nearly 1,000 stores annually, which will support steady revenue growth [5][9]. Summary by Sections Market Overview - The Chinese automotive service market is projected to reach nearly 2 trillion RMB by 2027, with maintenance and repair services accounting for the largest share [5][47]. - The market is characterized by a fragmented structure, with around 680,000 automotive service providers, and Tuhu holds the largest number of service stores in China [5][60]. Business Development - Tuhu has over 24,394 service stores as of March 31, 2023, including 4,770 Tuhu workshop stores and 19,624 partner stores, covering most prefecture-level cities in China [5][9]. - The company has seen a significant increase in transaction users, growing from 8.6 million in 2019 to 17.1 million in Q1 2023, achieving a CAGR of 17.6% [5][9]. Financial Performance - Tuhu's revenue is expected to reach 13.54 billion RMB in 2023, with projected net profits of 324 million RMB, and is forecasted to grow to 21.77 billion RMB by 2026 [6][8]. - The company’s operating efficiency is expected to improve, with the expense ratio projected to decrease from 22.2% in 2022 to 17.6% in 2025, supporting net profit growth [5][9]. Valuation - The report conservatively assigns a 15x P/E ratio for 2025, leading to a target market capitalization of 20.5 billion RMB, indicating a potential upside of 46% from current levels [5][8].
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