Citigroup: Yongda Auto (03669) "Buy" rating, target price lowered to HK$2.82

Citigroup released a research report stating that the target price of YONGDA AUTO (03669) has been lowered from HK$2.98 to HK$2.82, with a "buy" rating. Due to lower-than-expected new car sales gross profit margin in the second half of last year, combined with weak used car sales, the bank has revised its net profit forecasts for 2024 to 2026 to RMB 205 million, RMB 645 million, and RMB 818 million, with gross profit margin forecasts also lowered from 8.7%, 9.2%, and 9.6% to 8.5%, 9.1%, and 9.5%. The bank expects a 30% quarterly growth in new car sales for YONGDA AUTO in the fourth quarter of last year. It is also estimated that the after-sales service gross profit margin in the second half of last year will be similar to that of the first half. The bank predicts a 20% year-on-year decrease in overall used car sales for the company in the second half of last year, mainly affected by pressure on new car retail prices. Due to sales exceeding expectations in December last year, the bank predicts weak orders in January this year, with new car sales in January expected to decline year-on-year. In addition, BMW announced special rebates to dealers in the fourth quarter of last year, but the amount was slightly lower than expected. The bank estimates that BMW's average retail price in the fourth quarter of last year declined quarterly, so it is estimated that YONGDA AUTO's BMW new car sales gross profit margin (excluding cross sales) will decrease by 6% quarterly, compared to a 2% decrease in the third quarter and a 5% decrease in the first half of last year. As for Porsche, the bank estimates that the gross profit margin of new car sales in the second half of last year will be lower than in the first half, with both the first half and the third quarter at 1.2%, but a quarterly decrease in the fourth quarter due to sales promotion.