[Immediate Release]                                                     
21 August 2018

 
   
A fast expanding auto distributor with strong focus in the high-potential 2^nd to 4^th tier cities, China MeiDong Auto Holdings Limited ("MeiDong Auto", together with its subsidiaries, the "Group", stock code: 1268.HK), announced its interim results for the six months ended 30 June 2018 (the "Period") on 20 August 2018.
 
Results Highlight
In the first half of 2018, the automobile industry witnessed a steady growth and consumer demand maintained a good momentum. Despite of short-term market uncertainties in the second quarter due to factors such as tariff reduction, the growth of major luxury brands remained stable that outpaced the overall automobile market.
 
During the Period, the Group attained revenue of RMB4,346.7 million, presenting a significant year-on-year ("yoy") growth of approximately 30.4%, compared to RMB3,332.3 million for the six months ended 30 June 2017 ("1H2017"). Gross profit also increased substantially by approximately 27.8%, reaching RMB474.6 million (1H2017: RMB371.3 million) while gross profit margin had a slight decrease of approximately 0.2 percentage point ("p.p.") to approximately 10.9% (1H2017: 11.1%)  
 
Profit for the Period amounted to approximately RMB160.6 million, representing a yoy increase of 47.7%. Profit attributable to equity shareholders of the Company surged by approximately 46.1% to RMB157.6 million (1H2017: RMB107.9 million). Earnings per share also rose from RMB9.92 cents to RMB13.75 cents. The Board of Directors recommends an interim dividend of RMB0.041 per share for the Period (1H2017: RMB0.035 per share), payout ratio achieved 30%.
 
New Passenger Vehicle Sales 
The Group continued to maintain a balanced and expedited growth rate through the new-store expansion and the same-store growth. Together with the Group's effective "Single City Single Store" strategy, new passenger vehicles sales maintained a satisfactory growth during the first half of 2018. During the Period, the Group's revenue of new passenger vehicles sales amounted to RMB3,779.5 million (1H2017: RMB2,927.6 million), representing an increase of approximately 29.1% over the same period of last year. Luxury brands continued to be the core sales revenue source of the Group, accounting for 73.1% of the revenue of new passenger vehicles sales. During the first half of 2018, BMW, Porsche and Lexus recorded new passenger vehicles sales of approximately RMB1,397.9 million, RMB461.8 million and RMB901.6 million respectively, accounting for 37.0%, 12.2% and 23.9% of the revenue respectively. In terms of sales volume, the Group sold 15,587 new passenger vehicles in total, representing a YoY increase of 24.6% of new passenger vehicles sales. Among which, luxury brands were still the main source of revenue, the sales volume of BMW, Porsche and Lexus were 4,219 units, 576 units and 2,603 units respectively.
 
After Sales Services
Revenue from after-sales service amounted to approximately RMB567.3 million, representing an increase of 40.2% as compared with the same period of last year (1H2017: RMB404.7 million). A total of 170,889 units were served, representing a YoY increase of 16.2%. The gross profit margin of this segment remained at a stable and high level of 48.4%. The Group holds a young store portfolio; as the stores become matured, the contribution from after-sales services with high margin will gradually enhance. This serves as one of the major driving forces for the optimization of the Group's revenue structure. In addition, the Group is committed to providing high quality value-added services to increase customer loyalty. At the same time, with the growing demand for after-sales services in the second-tier to fourth-tier cities and the local competitive advantage brought by the Group's unique "Single City Single Store" strategy, the Group will fully capture the enormous growth potential in the after-sales service market.
 
Current network
As at 30 June 2018, there were 41 4S self-operated stores which operate in Beijing, Hebei, Hubei, Hunan, Jiangxi, Fujian, Guangdong and Gansu, including a joint venture that is operated by the Group.
 
Agreement to Acquire Assets of BMW Outlets
As at 20 August 2018, Dongguan Meixin Business Consulting Co., Ltd. (東莞美信企業管理咨詢有限公司) (the "Purchaser"), a wholly-owned subsidiary of the Company, recently entered into an agreement with an independent third party, the Purchaser agreed to acquire certain assets of six BMW selling and service outlets in Huaibei (淮北), Suzhou (宿州), Chuzhou (滁州), Tongling (銅陵), Chizhou (池州) and Huangshan (黃山), Anhui Province in the PRC. The Board believes the acquisition is consistent with its proven strategy of Single City Single Store focusing on mainstream luxury vehicles. The strategy allows us to enter many fast growing lower tier cities and to be the only dealer for certain luxury brand in those cities.
 
Prospects
For the second half of 2018, despite the uncertainties in China's macro economy and automobile market, supported by the consumption upgrade and the gradual implementation of encouraging policies, the automobile industry is full of opportunities. Such trend will be particularly recognizable in lower tier cities.
 
Mr. Ye Tao, Chief Executive Officer of China Meidong Auto, commented, "The Group will adhere to the "Single City Single Store" strategy with a focus on developing luxury brands portfolio in lower tier cities. Through the development of new stores and merger and acquisition projects, the Group will proactively yet cautiously expand its network, injecting new driving forces for the Group's sustainable and stable growth. While developing the sales network, the Group is also actively expanding its luxury brand products portfolio. Based on its current portfolio of Porsche, BMW and Lexus, the Group will bring in Audi and BMW Mini brands. Audi is one of the top 3 luxury brands in China and has a massive car ownership in China. BMW Mini brand focuses on the younger generation market. The inclusion of the above two brands will help the Group to cover a wider consumer base and further optimize the source of revenue."
 
Mr. Ye Tao, continued, "in addition to its active expansion, the Group is also committed to continually optimizing its internal data management system and implementing the Group's "simple, direct and data-driven" business principle. At the general management level, continuously optimizing capital and inventory management and enhancing the investment return remain as the managerial priorities of the Group. This aims to bring balance for the Group between maintaining a prudent and solid management approach while capturing market opportunities, ensuring the Group's sustainable long term developments with high returns."
 
 
About China MeiDong Auto Holdings Limited
China MeiDong Auto Holdings Limited is a fast expanding auto distributor with focus on 2nd to 4th tier cities and after-sales services. The Group mainly focuses on mid brands and main stream luxury brand, including Porsche, BMW, Lexus, Toyota, Hyundai, Mini and Audi. As of 30 June 2018, the Group owns 41 stores across different cities in Beijing, Guangdong, Guangxi, Fujian, Jiangxi, Hunan, Hubei, Hebei, Sichuan and Gansu provinces in China.
 
This press release is issued by DLK Advisory Limited for and on behalf of China MeiDong Auto Holdings limited.
 
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