Company News - China MeiDong Auto Holdings Limited (1268.HK)

UOB Kay Hian, CCB International and Cinda International have issued rated reports on China MeiDong Holdings Limited ("MeiDong Auto", 1268.HK) with target price at HK$4.30, HK$3.90 and HK$3.30 respectively, representing an upside of 70.0%, 54.2% and 30.4% when compared to the closing price of HK$2.53 as at 28 August, 2017.

UOB Kay Hian maintained its rating of MeiDong Auto at "Buy" with the following highlights:
1. MeiDong Auto's 1H17 net profit amounted to RMB 108 million, up 73% year-on-year ("YOY"), beating UOB Kay Hian's estimate. If the strong momentum maintains, UOB Kay Hian believes 2017 net profit should be higher than their expectation.
2. Favorable product cycles will continue as BMW and Porsche will launch new models in the coming two years.
3. Store expansion is in line with UOB Kay Hian's expectation of 6 additional stores in 2017-19 and UOB Kay Hian keeps 2017-19 store count assumptions at 40,46 and 52 respectively, representing a CAGR of 16%.
4. The maiden interim dividend of RMB 0.035 signals the strong confidence of management towards the outlook of earnings and cash flow in 2H17 and beyond.

CCB International maintained its rating of MeiDong Auto at "Outperform" with the following highlights:

1. Solid 1H17 net income of RMB108m, up 72.6% YOY, beating CCB International's estimate by 8%.

2. Favorable luxury brand portfolio of Porsche, BMW and Lexus with 10 new luxury stores in the pipeline for 2017/18. CCB International thinks the current portfolio mix is the right mix for network penetration into the fast growing luxury market and expects the strong performance of MeiDong Auto will be likely to continue.

Cinda International maintained its rating of MeiDong Auto at "Trading Buy" with the following highlights:

1. 1H17 results beats expectation driven by strong new car sales GPM, which expanded from 4.2%/4.5% in 1H16/2H16 to 5.8% in 1H17.

2. Over 90% of stores are profit-making and GPM of these 22 "Single City Single Brand" stores were 0.3-0.6ppt higher than group level during FY15-1H17.

3. Management continues to be optimistic about the outlook of its three luxury brands