Zhongtai Securities released a research report, giving Tu Huo-W (09690) a "buy" rating. The report stated that the company has been deeply involved in the automotive aftermarket for more than 10 years and is a leader in the IAM segment of the automotive aftermarket. Main business includes: tires and chassis components, automotive maintenance, other automotive accessories & beauty & repair, etc. With comprehensive advantages in brand, management, and capital, it has created a core barrier by establishing an online and offline integrated model, and subsequent growth depends on city expansion and business structure optimization to promote both quantity and profit.
Zhongtai Securities analysis is as follows:
Company profile: A leader in the automotive aftermarket IAM segment with more than 10 years of experience; the company has been deeply involved in the automotive aftermarket for more than 10 years and is a leader in the IAM segment of the automotive aftermarket. Main business includes: ① tires and chassis components; ② automotive maintenance; ③ auto parts dragon; ④ other automotive accessories & beauty & repair, etc.; with comprehensive advantages in brand, management, and capital, it has created a core barrier by establishing an online and offline integrated model; subsequent growth depends on city expansion and business structure optimization to promote both quantity and profit.
Industry analysis: Trillion-dollar scale of the automotive aftermarket, with dispersed pattern and continuous concentration; 1) Industry scale: Trillion-dollar market, formerly dominated by dealers (with high sales-after-sales stickiness, dealers have the advantage of high standardization and good service experience), third-party market share is relatively low. 2) Pattern change: ① Gradual increase in IAM market share: With the rise of independent brands, a large number of 4s stores are gradually exiting, and the advantages of IAM are highlighted, with IAM market share expected to increase rapidly; ② IAM pattern tends to be concentrated: the current IAM CR5 is only 3%. With the continuous precipitation of brands and the establishment of customer stickiness under the O2O model, it is expected to gradually clear out the traditional third-party at the tail end; ③ Under the trend of concentrated pattern, manufacturers with both brand + capital + management 3 major capabilities are more competitive.
Overall perception: Strong comprehensive advantages in brand, management, and capital, online and offline integrated model constructs a moat; advantage ①-Brand: The company has been deeply involved in the automotive aftermarket for more than 10 years, with a deep brand heritage, and continuously consolidates brand strength through perfect channel layout and expanding new energy supply chain. Advantage ②-Management: the company's self-built warehousing logistics and full-process digital management system, with strong supply chain management capabilities, operational efficiency significantly higher than the industry. Advantage ③-Capital: Benefiting from Tencent's endorsement and strong bargaining power, the company has strong financial strength and is conducive to ensuring ample cash flow.
Growth logic: Second-tier city expansion and business structure optimization, performance shows a trend of both quantity and profit; 1) Growth logic-Quantity: Registered user numbers and transaction user conversion rates are key factors. With the company's accelerated expansion into second-tier cities, coupled with the drive of online order conversion, the increase in registered user numbers and transaction conversion rate is expected to promote continuous growth of the company's revenue end. 2) Growth logic-Profit: ① Brand & business structure optimization: With the improvement of the company's high-profit business structure (the proportion of its own brand & automotive maintenance business continues to increase), the company's gross margin is expected to steadily increase. ② Under the scale effect and refined management, the company has achieved significant results in reducing costs and increasing efficiency, and is expected to further promote the improvement of profitability.