中国高端汽车经销商：看好该行业

1、 cGlobal Research14 September 2020China Premium Auto DealersUBS Evidence Lab inside: Turning positive on the sectorWe turn positive on Chinas premium car dealersWe turn positive on Chinas premium auto dealers because we think: 1) sales momentum of premium cars is likely to remain strong due to pent-

2、up demand after COVID-19 and the release of additional licence plates. Premium car sales were up 12.8% YoY in Q220, significantly outperforming the 1.2% sales growth of the overall passenger vehicle (PV) sector. We expect premium car sales to grow 5.1%/6.8% YoY in 2020/2021. 2) Industry consolidatio

3、n benefits large dealer groups. 3) Sales of the “German 3” (namely Audi, BMW, and Mercedes) remain robust after Tesla Model 3s localisation, and this allayed our previous concern about the potential threat from Tesla. We upgrade Yongda from Neutral to Buy and Zhongsheng from Sell to Buy.Sometimes hi

4、story does not repeat itselfA material trend that caught our attention is OEMs improving view towards dealers. We believe OEMs are helping dealers to lower their inventories and providing regular rebates. Despite this, some premium car dealers with low management capability and poor brand portfolio

5、(such as Jaguar Land Rover JLR) still got into financial trouble recently. The retreat of underperforming dealers will likely benefit leaders such as Yongda and Zhongsheng. We expect Zhongsheng/Yongda to achieve 2021E ROEs of 22.7%/16.0%.Rising EV penetration is a key question for the aftersales bus

6、inessOur interactive model indicates dealers annual aftersales revenue growth will likely drop to 9% after 2025E compared with 17% before 2025E, assuming new energy vehicle (NEV) penetration rises to 30% by end-2030. The market rarely discusses the potential impact of direct sales on traditional dea

7、lers business models, in our view. Even though we do not believe direct sales will replace the traditional authorised dealer business model in the near to medium term, we think it is worthwhile to monitor this trend from a longer-term perspective. We believe the majority of the premium OEMs still ne

8、ed to rely on dealers to provide satisfactory aftersales services to their customers.Valuation: Buy Yongda and ZhongshengH-share dealers are trading at a roughly 15% discount to their historical average. We expect sector leaders, including Zhongsheng and Yongda, to rerate as we believe they could be

9、nefit from selling popular brands. We upgrade Yongda (PT of HK$12.10) from Neutral to Buy and upgrade Zhongsheng (PT of HK$61.20) from Sell to Buy.Figure 1: H-share coverage snapshotAutomobilesChinaEquitiesNora MinAnalyst S1460518050001 HYPERLINK mailto:nora.min nora.min+86-213-866 8905CompanyTicker

10、RatingPT (HK$)Old (HK$)Price (HK$)2021E PE (x)2022E PE (x)CommentYongda3669.HKBuy12.108.608.886.85.6Strong BMW sales momentum; more than 80% of stores located in first- and second-tier cities. Expect a 22% 2020-23E earnings CAGR.Zhongsheng0881.HKBuy61.2024.0048.5514.612.5Beneficiary of industry cons

11、olidation; continue to expand market share in Mercedes, Lexus and BMW. Expect an 18% 2020-23E earnings CAGR.Above data as of 11 September 2020. Source: Company data, Wind, UBS-estimates HYPERLINK / This report has been prepared by UBS Securities Co. Limited. ANALYST CERTIFICATION AND REQUIRED DISCLO

12、SURES BEGIN ON PAGE 43. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single fact

13、or in making their investment decision.China Premium Auto DealersUBS-S Research THESIS MAPa guide to our thinking and whats where in this report HYPERLINK l _bookmark1 OUR THESIS IN PICTURESMOST FAVOUREDLEAST FAVOUREDZhongsheng YongdaN/APIVOTAL QUESTIONSQ: Can Chinas premium car segment maintain its

14、 sales momentum?Yes, we think so. We expect Chinas premium car retail sales to grow 5.1%/6.8% YoY in 2020/2021. We think premium car sales growth will likely be supported by: 1) the release of additional licence plates in top-tier cities; 2) the wealth effect from the property market; and 3) the rel

15、ease of new models. Premium car sales were up 12.8% YoY in Q220 (a swift rebound from the - 26.1% drop in Q120), significantly outperforming the 1.2% sales growth of the overall PV sector in Q220. HYPERLINK l _bookmark2 moreQ: Is the consolidation of the auto dealer industry ongoing?Yes, and we thin

16、k consolidation could occur faster than we expect due to COVID-19. We forecast large dealers to accelerate their acquisitions of small dealers, and some small dealers may close stores willingly or unwillingly (i.e., pressured by OEMs). We think OEMs improving view towards dealers has improved over t

17、he years. This could benefit the large dealers, in our view. HYPERLINK l _bookmark3 moreQ: Will Teslas direct sales model become a threat to traditional dealers business model? Unlikely in the near term, but we will monitor this in the longer term. The current direct sales model makes it hard for Te

18、sla to penetrate lower tier cities, in our view. Meanwhile, we think Tesla hasexceptional owner-enthusiasm and its customers are typically forgiving of less-satisfactory aftersalesservices. However, incumbent companies such as the “German 3” (namely Audi, BMW and Mercedes) still need to rely on trad

19、itional dealers to provide high-standard services to maintain their brand image. HYPERLINK l _bookmark4 moreUBS-S VIEWWe turn positive on Chinese premium auto dealers because: 1) sales momentum of premium cars is likely positive, due to pent-up demand after COVID-19 and the release of additional lic

20、ence plates; we expect premium car sales to grow 5.1%/6.8% YoY in 2020/2021E; and 2) industry consolidation being accelerated by COVID-19, and we think this benefits large dealer groups. Sales of the German 3 remain robust even after the Tesla Model 3 localisation, and this allayed our previous conc

21、ern about the potential threat from Tesla. We upgrade Yongda from Neutral to Buy and Zhongsheng from Sell to Buy.EVIDENCEAfter the COVID-19 outbreak, several first-tier cities announced their plans to release additional licence plates in an effort to boost the local economy. For example, Shanghai/Sh

22、enzhens licence plates increased 33%/50% for 2020E. Tesla uses a direct sales model. It owns its showrooms (most of which are located in high-end shopping malls) and all the sales personnel are its own employees.WHATS PRICED IN?H-share dealers are trading at a roughly 15% discount to their historica

23、l average. We expect sector leaders, including Zhongsheng and Yongda, to rerate as we believe they could become leading dealers with the sale of popular brands. We think Zhongsheng and Yongda could continue benefiting from the consumption upgrade trend, which could last for a few years. As some prem

24、ium dealers exit the business after COVID-19, we think the competitive landscape could improve for market leaders such as Zhongsheng and Yongda. For 2020-23E earnings CAGRs, we expect Zhongsheng to achieve 18% and Yongda to achieve 22%.China Premium Auto DealersUBS-S ResearchOUR THESIS IN PICTURES H

25、YPERLINK l _bookmark0 return 60%50%40%30%20%10%Starting from March, several first- and second-tier cities announced their plans to release additional licence plates to boost the local economy after COVID-19.0%ShenzhenGuangzhouTianjinShanghaiHangzhouLicense plate increase % in 202030.0%20.0%10.0%0.0%

26、-10.0%-20.0%-30.0%-40.0%-50.0%2013201420152016201720182019 1Q20 2Q20Premium car retail sales growthOverall PV retail sales growthSince Q220, Chinas premium car sales have rebounded stronger than our expectation.100%90%80%70%60%50%40%30%20%10%0%43.1%39.2%41.0%21.1%32.9%37.7%35.8%28.0%21.3%PremiumJVDo

27、mestic ProfitableBreakevenLossIn 2019, premium brands had the highest proportion of profitable and unprofitable dealers.14,00012,00010,0008,0006,0004,0002,000After Tesla Model 3s localisation in December 2019, sales of the German 3 competing models such as the BMW 3 Series and Mercedes C Class still

28、 recorded robust monthly sales volume.-Mercedes C Class2019BMW 3 Series Mar-20 to Jul-20Tesla Model 3Sources: Company data, CPCA (China Passenger Car Association), CADA (China Auto Dealer Association), ThinkerCar, UBS-S estimatesChina Premium Auto DealersUBS-S ResearchPIVOTAL QUESTIONS HYPERLINK l _

29、bookmark0 return Q: Can Chinas premium car segment maintain its sales momentum?UBS-S VIEWYes, we think so. We expect Chinas premium car retail sales to grow 5.1%/6.8% YoY in 2020/2021E. We think premium car sales growth will likely be supported by: 1) the release of additional licence plates in firs

30、t-tier cities; 2) the wealth effect from the property market; and 3) the release of new models. Premium car sales were up 12.8% YoY in Q220 (quick rebound from the -26.1% drop in Q120), significantly outperforming the 1.2% sales growth of the overall PV sector in Q220.EVIDENCEAfter the COVID-19 outb

31、reak, several top-tier cities announced their plans to release additional licence plates in an effort to boost the local economy. For example, Shanghai/Shenzhens annual licence plate quotas increased 33%/50% for 2020E.Car buyers in first-tier cities have a high propensity to purchase premium cars, i

32、n our view, given the licence plate itself costs almost Rmb100k each.We expect 12/8 new premium car models to be launched in China in 2020/2021.Historically, there has been a positive correlation between premium car sales and property sales. After COVID-19, the property market has rebounded quickly

33、since Q220. In July, nationwide new housing sales were up 10% YoY, significantly beating market expectation.After Tesla Model 3s localisation in December 2019, sales of the German 3 competing models such as the BMW 3 Series and Mercedes C Class still recorded high monthly sales volumes between March

34、 and July.WHATS PRICED IN?We think the market was previously worried that: 1) COVID-19 could have a negative impact on the wealth effect; and 2) Teslas localisation could exert pressure on sales of the German 3. However, premium car sales have exceeded market expectation owing to the release of addi

35、tional licence plates and the wealth effect from the property market.Licence plate policy supports premium car sales momentumPremium car sales were up 12.8% YoY in Q220 (a swift rebound from the -26.1% YoY decline in Q120). Since March 2020, several first-tier cities have announced their plans to re

36、lease additional licence plates in an effort to boost the local economy after COVID-19. Some cities such as Shenzhen increased their licence plate quotas as much as 50%, which we believe had an immediate, positive impact on premium car sales in these cities. As licence plates are expensive and cost

37、almost Rmb100k, we think consumers in higher tier cities typically purchase premium cars.Figure 2: Chinas premium car sales growth vs. overall PV sales growth (%)Figure 3: Licence plate YoY increase in 2020F (%)30.0%20.0%10.0%0.0%-10.0%-20.0%-30.0%-40.0%-50.0%2013 2014 2015 2016 2017 2018 2019 1Q20

38、2Q20Premium car retail sales growthOverall PV retail sales growth60%50%40%30%20%10%0%ShenzhenGuangzhouTianjinShanghaiHangzhou License plate increase % in 2020Source: China Passenger Car Association (CPCA)Source: CPCAWe expect premium car sales to grow 5.1%/6.8% YoY in 2020/2021EWe expect Chinas prem

39、ium car retail sales to grow 5.1%/6.8% YoY in 2020/2021E. If we exclude Tesla, our growth rate forecasts for the rest of the premium brands are 3.0%/4.9%.New model pipelineIn the table below, we list the major new premium models to be released in China in 2020-21. Among them, blockbuster models incl

40、ude new-generation Mercedes S Class and localised Tesla Model 3/Model Y.Figure 4: Major premium brands new model pipeline for 2020/212020E2021ENew generationAudi A3LMercedes S ClassMercedes GLALexus NXLexus ISCadillac EscaladeCadillac CT4Infiniti QX55BMW 4 seriesNew modelAudi e-tron (EV)Mercedes EQB

41、 (EV)BMW iX3 (EV)Volvo XC60 (EV)Mercedes EQA (EV)Lexus LMVolvo XC40 (EV)New localised modelTesla Model 3Tesla Model Y(Previously import)Lincoln Corsair (MKC)Audi A7Lincoln Aviator (MKZ)Source: Company data, UBS estimatesStrong property sales support the wealth effectBased on our analysis, there has

42、historically been a positive correlation between premium car sales and property sales, which we think is very likely due to the wealth effect.Figure 5: Sales growth premium cars vs. property (saleable area, one-year lag)60%50%40%30%20%10%0%-10%-20%Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec

43、-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21-30%Property sales YoY (saleable area) (one year lagging)Premium car sales YoY growthSo

44、urce: CPCA, WindAfter the COVID-19 outbreak, the property market has rebounded quickly since Q220. In July, nationwide new housing sales were up 10% YoY, significantly beating market expectation.Tesla Model 3 and competing models sales performanceAfter Tesla Model 3s localisation in December 2019, s

45、ales of the German 3s competing models, such as BMW 3 Series and Mercedes C Class, still recorded high monthly sales volumes between March and July 2020.Figure 6: Monthly average retail sales volume Model 3 vs. C Class vs. 3 Series14,00012,00010,0008,0006,0004,0002,000-Mercedes C ClassBMW 3 SeriesTe

46、sla Model 32019Mar-20 to Jul-20Source: ThinkerCarChina Premium Auto DealersUBS-S ResearchPIVOTAL QUESTIONS HYPERLINK l _bookmark0 return Q: Is the consolidation of the auto dealer industry ongoing?UBS-S VIEWYes, and we think consolidation could occur faster than we expect due to COVID-19. We expect

47、large dealers to accelerate their acquisitions of small dealers, and some small dealers may close stores willingly or unwillingly (i.e., pressured by OEMs). We think OEMs improving view towards dealers has improved over the years. This could benefit the large dealers, in our view.EVIDENCEAccording t

48、o China Auto Dealer Association (CADA), only about 30.0% of the dealers nationwide were profitable in 2019 (versus 33.6% in 2018).According to CADA, more than 1,000 dealer stores were shut down nationwide in H120.In terms of 2019 sales target completion rate, 34% of the premium brand dealers achieve

49、d more than 100% of their sales target. 29% of the mass market brand completed more than 100% of the sales target. The ratio is only 16% for domestic brand dealers, according to CADA.OEMs tend to allocate more resources as well as offer more rebates and rewards to large dealers groups, in our view.

50、In addition, we think many OEMs have a separate business policy for their top dealers.In general, OEMs are becoming more lenient with the dealers by helping dealers to lower inventories, instead of pushing inventory to the dealers.Based on the 2019 survey by CADA, the most desirable brands to operat

51、e by dealers are Lexus, BMW and Mercedes for the premium brands; Toyota, Honda and Nissan for mass market brands; and Hongqi, Geely, Greatwall for domestic brands.Zhengtong Auto, one of Chinas top 10 premium car dealers (in terms of 2019 sales volume), incurred a significant loss of Rmb5.4bn in Q120

52、, and recorded Rmb30bn in debt.Rundong Auto, one of Chinas top 10 premium car dealers (in terms of 2019 sales volume), entered into bankruptcy legal procedures in August 2020.WHATS PRICED IN?We think the market underestimates the scale and pace of the potential consolidation of the auto dealer secto

53、r. In addition, we think the market has not recognised that dealer consolidation is also happening in the premium auto dealer space.Declining number of profitable dealers, including premium brand dealersIn 2019, only about 30% of the dealers nationwide were profitable, and we believe COVID-19 accele

54、rated the shutdown of unprofitable dealer stores during H120. If we compare the profitability of premium brand dealers with those of the dealers of JV and domestic brands, we find premium brands have the highest proportion of profitable dealers (36%) as well as the highest proportion of loss- making

55、 dealers (43%) in 2019. We think the main reason is that premium brand dealers usually incur higher working capital related cost as the cars pricing is more expensive and their financing cost burden is higher than JV brand and domestic brand dealers.Figure 7: Nationwide dealer profitability 2018 (in

56、ner ring) vs. 2019 (outer ring)Figure 8: 2019 dealer profitability by brand segmentProfitableBreakevenLoss100%39%30%34%41%29%27%90%80%70%60%50%40%30%20%10%0%21.3%28.0%35.8%21.1%37.7%32.9%41.0%39.2%43.1%PremiumJVDomestic Profitable BreakevenLossSource: CADASource: CADASome niche premium car brands su

57、ch as JLR and Infiniti have been under- performing the industry for years, and we expect these brands to downsize their dealer networks. Dealer groups that invested heavily in these brands in the past could be in financial trouble and could be exiting the business, in our view. As a result, we belie

58、ve the consolidation of the auto dealer sector will also happen in the premium car dealer space. Dealer groups with stronger management capabilities and brand portfolios will likely acquire stores from underperforming dealer groups. We think dealer groups such as Zhongsheng, which operates strong br

59、ands such as Mercedes and Lexus, will likely be able to deliver 15%-plus earnings growth (an 18% earnings CAGR in 2020-23E) and achieve consistent 20%-plus ROE.Figure 9: Polarised sales growth performance of premium brands30%20%10%0%-10%-20%-30%Source: CPCALexusBMWMercedesPorscheInfinitiJLR 20182019

60、China Premium Auto DealersUBS-S ResearchPIVOTAL QUESTIONS HYPERLINK l _bookmark0 return Q: Will Teslas direct sales model become a threat to traditional dealers business model?UBS-S VIEWUnlikely in the near term, but we will monitor this in the longer term. The current direct sales model makes it ha