DJ EQS-News: Citi initiated coverage on China MeiDong Auto Holdings Limited at Buy; TP of HK$39.00
EQS-News / 10/12/2020 / 19:00 UTC+8
Citi initiated coverage on China MeiDong Auto Holdings Limited (1268.HK) at
Buy; TP of HK$39.00
Citi initiated coverage on China MeiDong Auto Holdings Limited (1268.HK) at
Buy with a target price of HK$39.00, representing an upside of 32.6% from
the closing price of HK$30.65 on 1st December, after factoring in expected
dividend yield.
Citi reckons Meidong's strongest suit is its simple but favorable luxury
brand portfolio, which includes six high-performing brands such as Porsche
and Lexus, two of the fastest-growing luxury brands in China, as well as
BMW, which recorded a solid sales recovery since 2H19. The brand mix is
expected to deliver a new car sales growth of 25% CAGR in 21-23E, supported
by strong same store sales growth (11% CAGR in 2021-23E) and solid demand in
coverage regions (lower-tier cities luxury sales +11% YoY in 10M20).
In addition to the sales growth, Citi highlights MeiDong's precise
data-driven management approach and single-city-single-store strategy as the
key to deliver best-in-class efficiency (with inventory turnover days at 17
days). This would in turn, reduce pressure to offer discount and yield
better new car sales margins. Together with its maturing store network,
MeiDong was able to deliver industry-topping absorption rate (2022E 120%)
and after-sales margins (2022E 47.1%).
On top of its lucrative growth story, Citi also cited MeiDong's robust
dividend policy as a plus, with management guiding that almost all of the
free cash flow would be paid out as dividends, roughly translating to a 52%
payout in 2020E and 85-88% in 2021-23E.
In view of MeiDong's strong brand portfolio, data-driven management, high
operating efficiency and maturing store network, Citi estimates a 47% CAGR
in 21-23E net profit, which translates to the target price of HK$39.00 on
30x blended 21E P/E, 0.5x 21-23E PEG, 12x 21E P/B or 19x 21E EV/EBITDA.
Near-term order backlog strength and potential M&A could act as catalysts
for further valuation inflation.
File: Citi initiated coverage on China MeiDong Auto Holdings Limited at Buy;
TP of HK$39.00 [1]
10/12/2020 Dissemination of a Financial Press Release, transmitted by EQS
Group.
The issuer is solely responsible for the content of this announcement.
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(END) Dow Jones Newswires
December 10, 2020 06:01 ET (11:01 GMT)
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