TUHU CAR(9690.HK)：A ONE-STOP AUTO SERVICE ECOSYSTEM-格隆汇

机构：招银国际
研究员：Sophie Huang/Eason XU

As a leader in O2O auto service, Tuhu is expected to surf on the growing industry tailwinds, with in-depth control over workshops, franchisee-friendly ecosystem and strong supply chain. We expect its rev to grow at 20% CAGR in FY23-25E, driven by stores expansion, higher efficiency, monetization diversification and technological enhancement. Auto maintenance would be the key mid-term driver, while NEV initiatives and other services would unlock longer-term TAM. We initiate BUY with DCF-based TP of HK$50.1, for its resilient growth and clear margin expansion.
An O2O auto service leader with one-stop & fully-digitalized ecosystem.
Tuhu ranked 1st among all automotive service providers in China in terms of no. of stores as of 31 Dec 2022, and ranked 3rd in terms of automotive service revenue in 2022, according to China Insights Consultancy (CIC). With Tuhu’s store network and trusted brand, we forecast its rev to surge at 20% CAGR in FY23-25E, backed by store expansion and monetization diversification.
Bullish on flywheel effects with industry tailwinds and stores expansion.
We expect Tuhu to surf on the industry tailwinds, with China’s automotive service mkt size in terms of GMV growing at 9% CAGR in 2023-27E, according to CIC. Tuhu excels itself with in-depth control over workshops, franchisee-friendly ecosystem and strong supply chain capabilities. We are bullish on its workshops expansion and orders upside, and expect its workshops/orders to grow at 21%/23% CAGR in FY23-25E. After the disruptions from lockdown in FY22, we see high visibility for Tuhu to show V- shaped recovery after China’s reopening. Tuhu can further enhance its monetization with richer offerings (expanding service spectrum with private label products). Auto maintenance would be the key mid-term driver, while NEV initiatives and other services (e.g. car detailing) would unlock longer-term TAM.
Clear margin improvement with more private label products and operating leverage. We are confident that Tufu will show a narrowing loss and expect it to achieve adj. NP breakeven in FY23E. GPM may pick up to 26.7% in FY25E from 19.7% in FY22, thanks to 1) more private label products; 2) higher rev mix of auto maintenance (with higher GPM), and 3) scale effect with higher bargaining power on pricing. Meanwhile, we expect its opex ratio to decline with efficiency improvement and enhanced brand awareness.
Initiate with BUY. We set our DCF-based TP at HK$50.1 (implying 2.8x FY24E P/S). The implied PS multiple is largely in line with global automotive services peers, not demanding.