Premium brand switching could dampen sentiment
- Premium brands switching could affect sales momentum in 2022 given its huge exposure to BMW brand
- Staying ahead of peers on NEV strategy
- M&A and new store authorisations to further enhance sales network
- Maintain BUY; HK$14 TP pegged to FY22F 8x PE
Premium brand switching. Overall, the premium car market is projected to grow at low double digits in 2022 as demand remains resilient. The long waiting list of certain imported brands such as Porsche is expected to prevail given the robust demand. Recent monthly sales indicate demand is healthy and auto OEMs are increasing supply to satisfy the domestic market.
However, automakers’ less exciting new model cycle plans could affect China Yongda vehicle volume sales in 2022. We believe Porsche sales in China to remain strong this year, while its BMW segment might see some fluctuations given the rising competition from rival brands such as Mercedes Benz. Since the BMW brand accounts for 30-40% of its business, this challenge could dampen its near-term vehicle sales performance.
Vehicle margin pressure remains low. We anticipate the overall new vehicle GP margins to further strengthen in 1H22 given the current tight supply. Factoring in the contributions from after-sales services and pre-owned car operations, we estimate blended GP margins to gradually improve from 9.3% in FY20 to c.9.7% in FY23.
Cut TP due to brand switching. We reduced target PE to 8x FY22F from 11x to arrive at new TP of HK$14 given its large single brand exposure to BMW.