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Public company info - China MeiDong Auto Holdings Ltd. , 01268.HK
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China MeiDong Auto Holdings Ltd., 01268.HK - Company Profile
Chairman Ye Fan
Share Issued (share) 1,245,000,000
Par Currency Hong Kong Dollar
Par Value 0.1
Industry Automobile Retailing, Maintenance & Repair
Corporate Profile Business Summary: The Group is principally engaged in automobile dealership business authorized by the respective automobile manufacturers of particular brands in the PRC including the sale of new passenger cars, spare parts, service and survey. Performance for the year: For the year ended 31 December 2019 (the “Year”), the Group recorded a revenue of approximately RMB16,210.0 million, representing an increase of 46.5% yoy (2018: RMB11,067.4 million). During the Year, driven by the rapid growth of overall revenue, the Group’s gross profit increased by 45.2% from RMB1,072.9 million in 2018 to RMB1,557.6 million in 2019. Overall gross profit margin remained stable and slightly declined by 0.1 percentage point to approximately 9.6%. The Group’s profit from the Year increased by 53.4% to RMB557.5 million (2018: RMB363.5 million). The profit attributable to shareholders for the Year increased by 51.8% to RMB550.8 million (2018: RMB362.9 million). Net profit margin increased to 3.4% (2018: 3.3%). Business Review The Group delivered good results again in 2019. Revenue grew by 46.5% to 16.2 billion RMB, and net profit by 53.4%, to 558 million RMB. Sales and services revenue were up 47.1% and 41.3% to 14.4 billion RMB and 1.8 billion RMB, respectively. The Group sold 49,359 cars, 30.3% more than 2018, and serviced 456,205, a 27.0% growth. Revenue mix improved to 291,412 RMB ASP in sales and 4,003 RMB ASP in services, with Porsche becoming the Group's fastest-growing segment. The gross margin for new car sales is up from 4.6% in 2018 to 5.0%, and the gross margin for services is down from 48.2% to 46.1%, resulting in a slight reduction of the Group's overall margin from 9.7% to 9.6%. Later in this letter the Group will discuss plans to improve services operations. the Group's expense ratio continues to trend downward, with significant improvements in total expense as a percentage of sales. 2019’s net margin ended in 3.4%, slightly higher than 3.3% in 2018. The Group built 9 new stores — 2 Porsche, 4 Lexus, 1 BMW, 1 Audi, and 1 Toyota — with a store count growth of 18.4%. Of the 58 stores the Group operates, 45 are luxury stores and 32 exist in single-city-single-store locations. With an average age of 4 years and a median of 3, the Group's existing stores will enjoy robust growth for quite a while. The 6 BMW stores in Anhui, the Group's first major acquisition, improved substantially, with 5 becoming profitable. With a combined profit of 18.3 million RMB, the Group will likely produce an M&A payback within 3 years, comparable to the Group's organic ROI. The Group improved efficiency at a fast pace in 2019. ROE and ROA were up to 31.5% and 9.4%. Inventory was 28, 23, and 17 days at the beginning, mid, and end of the year, respectively — a rapid downward trend. All these numbers are the Group's historical best and industry leading. The Group's net cash from operations was 931 million RMB — a growth of 223.6% over 2018. the Group declared another record-breaking dividend of RMB0.261 per share for the whole year, which represents 55.0% of the Group's profits. Prospects: Wuhan, the largest city in central China and a major transportation and economic hub, is under complete lockdown. Across China, cities big and small are turning into ghost towns, with people hiding in their homes and cars disappearing from streets. The mysterious coronavirus has claimed the lives of thousands of people and threatened tens of thousands. Panic is spreading across China and shock waves are reverberating around the world. The short-term economic impact of the virus is severe, with all activities frozen. The long-term ramifications may take a while to become evident. 2020 looks like another year full of uncertainties and risks. Risks and uncertainties — caused by “black swan” events like the COVID-19, geopolitical disputes like the US/China trade war, environmental regulations like the C5 to C6 conversion, or various capricious rules — have become the norm that businesses have to live with in China. The tiger, the analogy the Group used in last year’s letter in reference to uncertainties and risks, is becoming more ferocious, ubiquitous and unpredictable by the day. Yet despite difficulties and challenges, the auto market, especially the luxury one, remains a big opportunity for ambitious companies. The luxury segment is enormous and still growing at a fast rate. The consumption shift into luxury is structural and will continue for a long time, especially in 3rd to 5th tier cities where the luxury market share is significantly lower than that of the country’s average. In addition, with many dealerships unprofitable or unhealthy, there are plenty of consolidation opportunities.

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