According to the Futu Securities app, Zhao Yin International has issued a research report stating that it maintains a “buy” rating on Meidong Auto (01268) with a target price of 3.0 Hong Kong dollars. The bank expects that US East Coast revenue in 1H24 will decrease by 15% year-on-year, and gross profit will decrease by 11% year-on-year. Without major impairment, the net profit of the US East Coast in the first half of the year is expected to increase by 9% to 43 million yuan compared with the same period last year.

Profit forecast for 1H24: Zhao Yin International predicts that the sales of new cars in the US East Coast in 1H24 will decrease by 8% year-on-year to 29,200 units (Porsche: 4,500 units, BMW: 11,500 units). Although Porsche’s sales in the Chinese market in 1H24 are expected to decrease by 39% year-on-year, Zhao Yin International predicts that the US East Coast's share in Porsche's Chinese market may expand from 16% in 2H23 to 17% in 1H24. Zhao Yin International predicts that the average selling price of new cars in the US East Coast in 1H24 will decrease by 13% year-on-year, mainly due to the increase in terminal discounts. Although the number of after-sales services may be reduced in the first half of the year, Zhao Yin International predicts that the after-sales service revenue in the US East Coast will increase by 12% year-on-year, mainly due to Porsche's higher share in after-sales revenue, as well as the year-on-year increase in automotive finance commission income (Meidong Auto treats auto finance commissions as after-sales service income, while other dealers treat them as other income).

Zhao Yin International expects the gross margin of new cars in the US East Coast in 1H24 to drop to -3.7% (Porsche: -4%, BMW: -7%, Lexus: -2%), the lowest in history. In addition, considering the redemption of convertible bonds, Zhao Yin International expects that interest expenses in the first half of the year will decrease, and the estimated provision of taxes due to the payment of cash in Hong Kong in the first half of the year is about 35 million yuan. In summary, Zhao Yin International predicts that US East Coast revenue in 1H24 will decrease by 15% year-on-year, and gross profit will decrease by 11% year-on-year. Without major impairment, Zhao Yin International predicts that net profit of the US East Coast in the first half of the year will increase by 9% to 43 million yuan compared with the same period last year.

Prospects for 2H24 and 2025: Although the industry and company's visibility is currently low, Zhao Yin International predicts that 2H24 and 2025 will be slightly better than 1H24. Zhao Yin International expects that Porsche’s sales volume in 2H24 may continue to be sluggish, but due to the reduction in sales targets, dealers' gross profit margin of new cars may recover slightly. Considering that foreign car companies may reduce their sales targets, Zhao Yin International predicts that the new car gross margin in the US East Coast is expected to increase by 1.2 percentage points year-on-year to -2% in 2025. In addition, after the impact of convertible bond interest expenses and provision for taxes is eliminated, Zhao Yin International predicts that relevant expenses of the company will decrease by 0.13 billion yuan year-on-year in 2025. In summary, Zhao Yin International predicts that net profit in 2025 is expected to increase by more than 100% year-on-year to 0.36 billion yuan.