Tuhu Car Inc. (9690.HK)_ 2H24 review and NDR highlights_ 2H24 profit beat; Positive outlook on margin improvement and signs of stabilizing ASP; Buy

Summary of Tuhu Car Inc. (9690.HK) Conference Call Company Overview - Company: Tuhu Car Inc. (9690.HK) - Industry: Integrated online and offline auto service platform in China Key Financial Highlights - 2H24 Results: - Revenue increased by 8% year-over-year (yoy) to Rmb7.6 billion, in line with Goldman Sachs estimates (GSe) and slightly below Visible Alpha Consensus Data by 1% [1] - Adjusted net profit was flat yoy at Rmb266 million, with a 3.5% adjusted net margin, outperforming GSe and VA consensus by 13% and 12% respectively [1] - Gross profit margin (GPM) reached 24.9%, a decrease of 1 percentage point quarter-over-quarter (qoq) and 0.3 percentage points yoy, primarily due to pressure from average selling price (ASP) and competition [1] - Workshop capacity expanded with 563 net openings in 2H24, aligning with GSe expectations [1] Future Outlook - Revenue and Profit Growth: - Forecasted revenue growth of 9% and adjusted net profit growth of 24% in 2025E [1][27] - Expected normalized pricing strategy and consistent workshop openings to drive growth [1] - Target Price Adjustment: - 12-month target price adjusted to HK$20.2 from HK$20.9, based on a 17x forward P/E ratio [2] Market Position and Strategy - Market Cap: HK$14.9 billion (approximately$1.9 billion) [5] - Business Model: - Focus on digitalized solutions to consolidate China's auto aftermarket, with potential for margin improvement through rising private-label sales and high operating leverage under a capital-light model [1] - Workshop Expansion: - Anticipated growth in the number of Tuhu workshops at a 14% compound annual growth rate (CAGR) from 2024 to 2027, aiming to reach 10,000 by 2027 [16] User Growth and Market Penetration - Transacting Users: - LTM transacting user growth accelerated to 25% yoy in 2H24, with 2.7 million new energy vehicle (NEV) transacting users and an 11.2% penetration rate [18][22] - Store Distribution: - Tier-2 and below cities accounted for 58% of total stores in 2024, indicating a strategic focus on expanding in less saturated markets [20] Revenue Composition - Revenue Breakdown: - Tires and chassis parts accounted for 44% of automotive products/services revenue, while auto maintenance contributed 39% in 2024 [24] Important Metrics - Forecasts for 2025-27E: - Revenue expected to grow from Rmb14.8 billion in 2024 to Rmb18.7 billion in 2027 [5] - Adjusted net profit projected to increase from Rmb771 million in 2025E to Rmb1.2 billion in 2027E [2] Conclusion - Investment Recommendation: - Maintain a "Buy" rating with an 11% implied upside, reflecting confidence in Tuhu Car's scalable business model and growth potential in the auto service market [13]