Summary of Conference Call on China Autos & Shared Mobility Industry Overview - The focus is on the Chinese automotive industry, particularly the impact of the anti-involution campaign on auto dealers and manufacturers [1][2][6]. Key Companies Discussed - **Zhongsheng Group Holdings (0881.HK)** - Price Target: Reduced from HK$21.00 to HK$18.00 [1][17]. - **China Yongda Automobiles Services (3669.HK)** - Price Target: Reduced from HK$2.30 to HK$1.90 [1][17]. - **China MeiDong Auto Holdings Ltd (1268.HK)** - Price Target: Reduced from HK$2.10 to HK$1.70 [1][17]. Core Insights and Arguments - **Anti-Involution Campaign Effectiveness** - The campaign aims to curb excessive price discounts and improve dealer margins by enforcing pricing guidelines [2][9]. - Initial market expectations for the effectiveness of these guidelines are low due to industry fragmentation [2][9]. - BMW's recent MSRP cuts (10-20%) are seen as a positive sign for improving dealer margins [10][11]. - **Dealer New Car Losses** - There is a debate on whether overall new car losses will widen in 2026, despite expected declines in luxury ICE sales [3]. - Factors such as the ramp-up of EV stores and dealer closures may help narrow losses [3]. - **Earnings Recovery** - Earnings estimates for Zhongsheng, Yongda, and Meidong have been cut by 9-13% due to lower new car margins [4][17]. - Despite lower commission income, a recovery in dealer earnings is anticipated in 2026, supported by a growing after-sales business [4]. - **Impact of Memory Shortage** - A potential memory shortage could lead to vehicle production cuts, benefiting dealers by improving new car margins [14][15]. Financial Highlights - **Zhongsheng Group Holdings Financials** - Revenue projections for 2025E: Rmb 155,108 million, 2026E: Rmb 150,103 million, 2027E: Rmb 148,876 million [16]. - Net profit projections for 2025E: Rmb 2,160 million, 2026E: Rmb 3,419 million, 2027E: Rmb 4,874 million [19]. - EPS projections for 2025E: Rmb 0.88, 2026E: Rmb 1.40, 2027E: Rmb 1.99 [19]. Other Important Insights - **Market Sentiment** - The consensus rating distribution shows 79% overweight, indicating a generally positive outlook despite challenges [29]. - **Investment Drivers** - Growth in car collision repair services and expansion into EV brands are expected to drive future growth [26]. - The new car business is projected to bottom out in 2026, supported by capacity cuts and model upcycles [26]. - **Risks** - Risks include intensified competition from NEVs and potential declines in new car margins due to widening discounts [31][35]. This summary encapsulates the key points discussed in the conference call regarding the Chinese automotive industry and the specific companies involved, highlighting the challenges and potential recovery paths for auto dealers.