Core Viewpoint - Chevalier International (00025) has announced the conditional sale of its automotive business, which includes the sale and leasing of new and used OEM vehicles, maintenance services, and the sale of OEM parts, due to significant challenges in the Canadian automotive industry [1][2] Group 1: Business Context - The Canadian automotive industry has faced major challenges in recent years, including rising interest rates and increased costs of new vehicles, which have suppressed consumer demand for new cars [1] - The business has reported net losses before and after tax for the past two fiscal years, exacerbated by the global trade war [1] Group 2: Strategic Decision - The board of directors decided to exit the Canadian automotive agency market and put the business, along with its related assets and properties, up for sale due to increasing consolidation in the Canadian automotive retail market [1] - The company has not received any committed purchase offers, leading to the decision to ultimately close the business to mitigate further losses [1] Group 3: Buyer Interest - The buyer, a group already engaged in automotive agency business in Ontario, has expressed interest in continuing operations at the relevant properties or running the Chevalier automotive agency business [2] - The board views this sale as a strategic opportunity to bundle the business with its related assets and properties to reduce losses and realize the investment value of the related properties [2] - Upon completion of the sale, the company will cease operations of this business in Canada [2]

Group 1 - The company, Jianglong Shipbuilding, has established a ship repair division in recent years to expand its market in ship maintenance and repair [2] - The company has already provided repair and maintenance services for multiple units [2]

Core Viewpoint - Company reported a total revenue of 7.88 billion yuan for 1H25, representing a year-on-year increase of 10.5%, which exceeded the consensus expectation of 7.80 billion yuan [1] - Non-IFRS net profit reached 410 million yuan, also surpassing the consensus expectation of 360 million yuan, with a non-IFRS net profit margin of 5.2%, up 0.2 percentage points year-on-year [1] Revenue and Profitability - Revenue from automotive products and services increased by 10.8% to 7.36 billion yuan, slightly better than the consensus expectation of 7.28 billion yuan [2] - The gross margin for the automotive service segment was 22.8%, down 0.9 percentage points year-on-year, primarily due to external trade demand fluctuations and industry supply pressures [2] - Overall gross margin for the company was 25.2%, a decrease of 0.7 percentage points year-on-year, reflecting slight declines in tire and maintenance segment margins [2] User Growth and Store Expansion - The number of transaction users reached 26.5 million, a year-on-year increase of 23.8%, with registered users totaling 150 million, up 18.8% [3] - The number of factory stores reached 7,205, with a net increase of 894 stores year-on-year, achieving a 70% coverage rate in county-level cities with over 20,000 passenger vehicles [3] - The proportion of profitable factory stores remained at 90% as of June 2025, with same-store revenue growth of 2% for stores aged over 18 months [3] Operational Efficiency - The adjusted operating expense ratio improved slightly by 10 basis points to 22.4% due to operational leverage, despite some impact from investments in AI [4] - The company established 32 regional warehouses and 662 front warehouses, improving delivery rates by 6 percentage points year-on-year to 83% [4] - Adjusted fulfillment expense ratio improved by 0.5 percentage points year-on-year to 4.1% [4] Profit Forecast and Valuation - The company maintains a non-IFRS net profit forecast of 760 million yuan for 2025, with adjustments to 2026 and 2027 forecasts down to 840 million yuan and 1.08 billion yuan respectively [4] - The target price is set at 25.13 HKD, reflecting a premium to comparable companies due to the company's leading position in the industry [4]

Investment Rating - The report maintains a "Buy" rating for the company [7][14]. Core Views - The company's total revenue for 1H25 reached 7.88 billion RMB, a year-on-year increase of 10.5%, exceeding the consensus estimate of 7.80 billion RMB [1][2]. - Non-IFRS net profit for 1H25 was 410 million RMB, also above the consensus estimate of 360 million RMB, with a corresponding non-IFRS net profit margin of 5.2%, up 0.2 percentage points year-on-year [1][2]. - The company is expected to continue its revenue growth momentum into 2H25, with guidance indicating stable gross margins [1]. Summary by Sections Revenue and Profitability - The company's revenue from automotive products and services increased by 10.8% to 7.36 billion RMB, slightly above the consensus estimate of 7.28 billion RMB [2]. - The gross margin for the automotive service segment was 22.8%, down 0.9 percentage points year-on-year, primarily due to external trade demand fluctuations and industry supply pressures [2]. User and Store Metrics - The number of transaction users reached 26.5 million, a year-on-year increase of 23.8%, with registered users totaling 150 million, up 18.8% [3]. - The company has expanded its store count to 7,205, with a net addition of 894 stores year-on-year, achieving a 70% coverage rate in county-level cities with over 20,000 vehicles [3]. Operational Efficiency - The adjusted operating expense ratio improved slightly by 10 basis points to 22.4% in 1H25, despite increased investments in AI and other areas [4]. - The company has established a comprehensive logistics network, enhancing delivery efficiency with a same-day/next-day delivery rate of 83%, up 6 percentage points year-on-year [4]. Profit Forecast and Valuation - The report maintains the 2025 non-IFRS net profit forecast at 760 million RMB, while slightly lowering the 2026 and 2027 forecasts by 11.1% and 7.8% respectively [5][12]. - The target price is set at 25.13 HKD, reflecting a 25x target non-IFRS PE, which is a premium compared to the comparable companies' average of 23.6x [5][14].

Core Insights - Tuhu Car Service launched a "300 billion unlimited promotion" aimed at providing consumers with affordable car maintenance options, covering various services such as tires, maintenance, painting, washing, and waxing [1][3]. Group 1: Promotion Details - The promotion includes significant discounts, with tire prices reduced to as low as 50% off and additional incentives like a Huawei Pad for purchases [3]. - Maintenance services are offered at half price, with brands like Shell, Mobil, Castrol, Honeywell, and Fuchs included, allowing consumers to enjoy high-quality services at economical prices [3]. - Tuhu also provides affordable painting services starting at 148 yuan for minor repairs, with packages for larger areas priced at 289 yuan and 448 yuan [3]. - Car washing services feature summer discount packages, with prices as low as 0.1 yuan for specific services and 19.9 yuan for two standard washes [3]. Group 2: Strategic Implications - The "unlimited promotion" reflects Tuhu's long-term strategy of cost reduction through large-scale operations, digital management, and supply chain integration, benefiting consumers with lower prices [4][5]. - Tuhu's network has expanded to over 7,000 service centers, covering more than 95% of China's administrative regions, which enhances its ability to reach a broader customer base [4]. - The promotion is expected to stimulate consumer demand and invigorate the automotive service market, as evidenced by strong sales during previous promotional events [4][6].