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<Research> CMBI Cuts MEIDONG AUTO (01268.HK) TP to HKD2.2, Maintains Buy Rating
Recommend 2 Positive 2 Negative 0 |
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CMBI issued a report stating that MEIDONG AUTO (01268.HK) saw a rebound in new car gross margin in 2H last year, coupled with new HarmonyOS stores, which is expected to drive earnings growth for fiscal years 2026 to 2027. Results for 2H last year slightly beat expectations, mainly due to improved new car gross margin. Revenue in 2H last year declined 14% YoY, 6% below the brokers previous forecast, primarily due to lower-than-expected new car selling prices and auto financing commissions. Gross margin rose 2.1 ppts HoH to 6.8%, about 2.3 ppts above the brokers forecast, mainly driven by a 9.8 ppts HoH improvement in new car gross margin to negative 1%. Selling and administrative expenses and finance costs were broadly in line with expectations. As a result, net profit for 2H last year reached RMB60 million, about RMB80 million higher than the brokers previous forecast. The report noted that despite ongoing uncertainties, the broker expects dealers new car gross margins to improve slightly YoY in 2026, as most foreign luxury brands adopt more pragmatic targets on sales volume and pricing. MEIDONG AUTOs improvement could be more pronounced, as its operational efforts have led to HoH improvements in new car gross margin that outperformed peers. New car gross margin is projected to widen 2 ppts YoY to negative 3.8% in 2026. Therefore, although revenue is expected to decline 9% YoY, gross profit in 2026 is likely to remain broadly flat YoY. Net profit is forecast to reach RMB146 million in 2026. For 2027, new car gross margin is expected to improve slightly YoY to negative 2.1%. Overall gross margin is projected to rise 1.2 ppts to 7.5%, while net profit margin is expected to expand 1 ppt to 1.8%, with net profit increasing to RMB328 million. The Buy rating is maintained, with the TP lowered from HKD2.8 to HKD2.2. (ha/da) This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. Auto-translated by AI AASTOCKS Financial News |
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