Citi released a research report stating that it lowered the target price of Yongda Motor (03669) from HK$2.98 to HK$2.82, giving it a “buy” rating. In view of Yongda Motor's gross margin for new car sales in the second half of last year falling short of expectations, and weak used car sales, the bank lowered its net profit forecast for 2024 to 2026 to 0.205 billion, 0.645 billion, and 0.818 billion yuan. The gross margin forecast was also lowered from 8.7%, 9.2%, and 9.6% to 8.5%, 9.1%, and 9.5%.
The bank expects Yongda Motor's new car sales in the fourth quarter of last year to increase 30% quarterly. It is also estimated that the gross margin for after-sales service in the second half of last year will be similar to the first half of the year. The bank expects the company's overall used car sales to drop 20% year on year last year, mainly affected by pressure on retail prices for new cars. Since sales in December last year exceeded expectations, the bank predicts that orders for January this year will be weak, and new car sales in January will drop year-on-year.
Additionally, BMW announced special rebates for the fourth quarter of last year to dealers, but the margin was slightly lower than expected. The bank estimates that the average retail price of BMW fell quarterly in the fourth quarter of last year. Therefore, during the estimated period, Yongda Motor's gross profit margin for new BMW car sales (excluding cross-sales) fell 6% quarterly, compared to a 2% drop in the third quarter and 5% in the first half of last year. On the Porsche side, the bank estimates that the gross margin of new car sales in the second half of last year will be lower than in the first half of the year. It was 1.2% in the first half of the year and the third quarter, but declined quarterly in the fourth quarter due to sales.
