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Public company info - Shanghai Dongzheng Automotive Finance Co. Ltd.- H Shares , 02718.HK

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Shanghai Dongzheng Automotive Finance Co. Ltd.- H Shares, 02718.HK - Company Profile
Chairman Lin Fan
Share Issued (share) 540,000,000
Par Currency Renminbi
Par Value 1.0
Industry Other Financials
Corporate Profile Business Summary: The principal activities of the Group comprise (i) retail loan business, where the Company provides retail loans, direct leasing products and other financial services to the end customers, major customers and corporate clients who wish to purchase vehicles; and (ii) dealer loan business, where the Company provides dealers with inventory financing to facilitate the procurement and sale of vehicles to end customers. Performance for the year: Net interest income increased by approximately 22% to approximately RMB536 million. Operating income decreased by approximately 2% to approximately RMB800 million. Profit and total comprehensive income decreased by approximately 14% to approximately RMB389 million. Business Review the Group is an automotive finance company licensed and regulated by the CBIRC focusing on the luxury vehicle market. the Group’s principal business comprises (i) retail loan business, where the Group provides retail loans, direct leasing products and other financial services to the end customers, major customers and corporate clients who wish to purchase vehicles; (ii) dealer loan business, where the Group provides dealers with inventory financing to facilitate the procurement and sale of vehicles to end customers. In 2019, the changing international arena (including the Sino-US trade frictions), coupled with major policies and measures including changes to environmental standards and decreased incentives for new-energy vehicles in China, had brought significant impacts on the automobile industry. According to the China Association of Automobile Manufacturers, for 2019, the production and sales volume of passenger vehicles amounted to 25.721 million and 25.769 million units, representing a year-on-year decrease of 7.5% and 8.2%, respectively. However, the luxury vehicle market continued to expand swiftly. According to the statistics of China Automotive Dealers Association, the retail sales of luxury vehicles amounted to 3.13 million units, representing a year-on-year increase over 12%. Sales contribution of luxury vehicles over total passenger vehicles is over 14%. Such increase is attributable to the fact that the luxury vehicle market continued to grow at a fast pace, as consumption upgrade drove the car replacement and first purchase of luxury vehicles, while efforts were made to launch promotions and reduce product prices. As for the auto finance industry, automotive finance companies, as licensed institutions, are subject to the strict regulation of the CBIRC. By the end of 2019, there are 25 (2018:25) licensed automotive finance companies in China, all of which are in competition with commercial banks, financial leasing companies and internet finance companies. Automotive finance companies demonstrate their significant advantages of being in close relationship with automobile manufacturers and dealers, as well as enhanced product offerings and service quality. In 2019, the auto finance market became increasingly tightened under the strengthened management of the CBIRC and Ministry of Commerce of the PRC, including the rectification of business of non-licensed financial leasing companies and P2P-based internet auto finance companies; the suspension of non-compliant loan facilitations for auto finance with banks; and enhancement of measures on customers personal data protection. Despite difficulties and challenges brought to the auto finance industry in the short term, these measures will benefit the healthy and regulated development of the industry in the long run. Although the overall domestic automobile production and sales volume continued to decline in 2019, the Group’s loan portfolio increased by 19% to RMB10.00 billion as at 31 December 2019 from RMB8.43 billion as at 31 December 2018, owing to the Group’s strategy of focusing on the luxury vehicle market. In 2019, the Group’s operating income amounted to RMB800 million, representing a decrease of 2% as compared to the operating income of RMB816 million in 2018. the Group recorded a net profit of RMB389 million in 2019, representing a decrease of 14% as compared to the net profit of RMB453 million in 2018, which was mainly due to the increase in the Group's cost of funding resulting from the impact of the macro market environment during the reporting period and the decrease in net fee and commission income, notwithstanding the increase in interest income. During the year, by capitalising on the advantages of 4S dealership channel under ZhengTong and its well-developed external dealer network, the Group extended its business network to nearly 200 middle to high-end 4S dealership stores, and more than 900 partnership-based dealers in more than 172 cities. In 2019, the Group is committed to optimize the dealer network by terminating the under-performing dealers and attracting new dealers. By focusing on sales to middle and high-end brands, these sales channels keep abreast with customers base of consumption upgrade demographic. The strengths of the sales network and reasonably established market presence enable the Group to introduce good user experience and services to the consumers. the Group disbursed total 28,815 retail loans throughout 2019, representing a decrease of 31% over that of 2018. Among which, 21,946 are disbursed to ZhengTong clients and 6,869 are disbursed to external clients, with a total disbursed amount of RMB4.895 billion, representing a decrease of 31%, which was mainly due to the decrease in new loan amounts resulting from the strategic adjustment of the dealer network. the Group’s net fee and commission income mainly consist of non-interest income received by the Group for referral of retail customers to commercial banks or other financial institutions and provision of loan-related services. The Group’s net fee and commission income in 2019 amounted to RMB174 million, representing a decrease of 47% as compared to that in 2018. This was mainly due to the lower income from consultancy services as a result of the adjustment made by the Group in its arrangements for collecting service fees from customers in response to changes in the market operating environment. In terms of dealer loan business, as of 31 December 2019, the dealer loan balance of the Group was RMB2.63 billion, representing an increase of 196% as compared to that of 2018. For the year ended 31 December 2019, the Group’s average yield of dealer loan increased from 7.65% to 9.75%. the Group’s interest income from dealer loan increased from RMB40 million in 2018 to RMB180 million in 2019 due to the increase in loan size and yield. For the purposes of risk management, the Group has established a comprehensive risk management system. In particular, the Group has formulated relevant risk management system and operating procedures with respect to admission review, approval requirements, disbursement process, post-loan monitoring and other procedures to manage the credit risk. To constantly optimise risk management and prevent risks, the Group also enhances the capability to identify and assess risks by implementing measures related to staff training, screening mechanism, client visits, data analysis, etc. In terms of loan quality, the Group’s balance of non-performing loans as of 31 December 2019 was RMB45 million, representing an increase of 96% as compared to that of RMB23 million at the end of 2018. As of 31 December 2019, the Group’s non-performing loan ratio was 0.44%, the loan provision rate was 1.89%, and the provision coverage ratio was 423.97%. Prospects: Under the influence of changing market conditions, increasingly tightened regulative environment for financial industries and the outbreak of the novel coronavirus pandemic (COVID-2019), 2020 would be a year full of challenges to the Group. To tackle such challenges, the Group will proactively implement several measures. On the one hand, the Group will keep a close watch on state-level policies in relation to economic revitalisation, especially those promoting purchase of vehicles as well as automobilerelated products, so as to translate the policies into concrete driving forces for the growth of the Group. On the other hand, the Group will stick to its business strategy of seeking progressive development while maintaining stable business operations and striving to improve on both business expansion and risk management while maintaining compliance in operation, so as to ensure the sustainable development of the Group. As for business expansion, on top of leveraging its cooperation with a network of more than 900 dealers, the Group will remain committed to identifying quality dealers and expanding its sales network, so as to drive the growth of new vehicle finance business. Meanwhile, the Group will actively expand into automobile finance business in such fields as used-car, thus laying a solid foundation for its future growth. As for capital resources, with its successful listing on the Stock Exchange, the Group’s comprehensive strength has been further enhanced. By leveraging its status as a listed company and a CBIRC licensed corporation, the Group will explore financing channels in the domestic and overseas markets, including inter-bank financing, syndicated loans, asset securitization, financial bonds, and cross-border financing. Meanwhile, the Group will strive to reduce its finance costs and enhance its capital base. the Group will strengthen the employment of technology and promote its WeChat mini-program and official public account to enhance consumer loyalty, better serve existing and potential customers and enhance brand awareness. In the meantime, the Group will further improve its risk management and reduce the operating costs of post-loan management by using big data analysis, credit information system and automated approval system. the Group is confident that by leveraging on its extensive sales network, broad range of financing channels and professional risk management, the Group can offer to its customers comprehensive financial services covering purchase, use and replacement of vehicles, while creating value for the Shareholders.

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