Morgan Stanley: TUHU-W (09690) continues to expand its overseas footprint; Malaysia stores have a relatively fast payback period.

Morgan Stanley: TUHU-W (09690) continues to expand its overseas footprint; Malaysia stores have a relatively fast payback period. Morgan Stanley has released a research report stating that TUHU-W (09690) continues to expand its overseas footprint. The bank currently assigns Tuhu a target price of HK$15 and an "Overweight" rating. The bank noted that thanks to aggressive online promotion, Tuhu Car Care's Malaysia stores are growing faster than its mainland China stores. The report mentioned that Tuhu entered the Malaysian market at the end of 2025 and has since opened more than 20 stores, with more than 10 others in preparation. The bank visited a store that began operating in February this year, which has remained profitable every month since March. The store manager (i.e., franchisee) expects to recoup the initial investment within one to one-and-a-half years, compared with an average payback period of two and a half years in China. He has already opened a second Tuhu store in Kuala Lumpur and a third in Johor Bahru, targeting customers from Singapore, similar to how some Shenzhen stores target Hong Kong customers. The bank believes that in China, more than 30% of Tuhu's revenue comes from private-label products, which are sourced directly from manufacturers and typically carry higher margins. In Malaysia, however, Tuhu franchise stores still mainly procure parts locally, as obtaining import certification takes time. If the company can further leverage the cost advantages of China's auto parts supply chain, there is room to expand product variety and improve margins in both Malaysia and Australia. Amid intensifying competition in the domestic market, expansion into markets such as Malaysia, Hong Kong China, Australia, and others is of strategic importance to Tuhu. The bank expects Tuhu to continue expanding its presence in overseas automotive aftermarket, leveraging its digital platform and supply chain capabilities. Execution capability remains key, as the company may face challenges in maintaining customer retention after normalizing local hiring and promotional discounts.