80% Of The Company'S Sales Decline: Auto Dealers' Performance Accelerated Differentiation In The First Half Of The Year

The brutal Matthew effect has spread to the automobile distribution industry.

Recently, a number of listed auto distribution groups have successively released the half year report of 2020. These operating "report cards" in the first half of the year show that "several companies are happy and several are worried". Among the 10 A-share and Hong Kong stock listed auto dealers selected by the 21st century economic report, 7 of them showed a year-on-year decline in their operating income and net profit attributable to their parent companies, and only three of them rose against the trend. One of them was st Pang, which promoted restructuring and hit the bottom.

Specific to the company, in addition to the relatively special st Pang, the other two are Zhongsheng holding and Meidong automobile. In particular, due to the steady growth of revenue and net profit of Meidong automobile, it is warmly sought after by investors and seller analysts.

On the other hand, Yongda Automobile and harmony automobile, which are both focusing on luxury brands, are somewhat gloomy. Although their performance has won the market, they are still suffering from the impact of the epidemic. What's more tragic are Zhengtong automobile and Rundong automobile, which have lost performance and are in deep debt crisis. The former is seeking a new supplier, while the latter is being applied for bankruptcy reorganization by creditors.

However, Guanghui automobile is faced with similar troubles as SAIC: although it has the largest volume, it is difficult to adjust in time under the impact of the epidemic because of its large volume. Therefore, the overall performance in the first half of the year did not reflect the industry's first level, and its performance was not as good as that of many smaller peers.

In theory, the strength of distribution groups listed in the secondary market is better than that of the whole, but in fact, the performance of these listed dealers is the epitome of the industry - the above differentiation is close to the industry statistics. Recently, a survey report on the survival of dealers released by China Automobile Circulation Association shows that in the first half of 2020, only 21.5% of the dealers in China achieved positive sales growth, that is, 80% of the sales volume of automobile dealers is declining.

It is worth mentioning that from the perspective of profitability, the overall strength of listed distribution group is still higher. According to the above report, under the background of a large number of assistance policies provided by automobile manufacturers, the loss of dealers in the first half of this year decreased slightly, but still as high as 38.3%. Among the top 10 listed dealers, except Zhengtong automobile and Rundong automobile, they all made profits in the first half of this year.

Performance differentiation intensifies

The 10 listed distribution groups listed in the reporter's statistics are all enterprises with a certain scale, and in addition to national machinery automobile, they are basically engaged in automobile distribution. Under the impact of the epidemic situation and the relative depression of automobile consumption, the performance of these automobile dealers showed differentiation.

In terms of vertical comparison, Meidong automobile, St Pangda and Zhongsheng holdings performed well. In the first half of this year, their operating revenues were 8.45 billion yuan, 10.95 billion yuan and 58.2 billion yuan, respectively, with a year-on-year increase of 23.5%, 6.7% and 1.4%. The net profits were 300 million yuan, 44 million yuan and 2.29 billion yuan respectively. St Pang turned losses into profits, and Mideast and Zhongsheng increased by 27.6% and 10.1% respectively.

In the second echelon are Yongda Automobile, harmony automobile and xinfengtai group. Their operating revenues are 27.95 billion yuan, 5.75 billion yuan and 4.44 billion yuan respectively, with a year-on-year decrease of 4%, 2.3% and 2%. The net profits are 530 million yuan, 230 million yuan and 47 million yuan respectively, with a year-on-year decrease of 27.8%, 18% and 37.8%.

Guanghui automobile and SINOCHEM automobile, two comprehensive listed companies in a share market, had operating revenues of 66.08 billion yuan and 18.29 billion yuan, respectively, with a year-on-year decrease of 18.1% and 31.5%, and net profits of 500 million yuan and 200 million yuan, respectively, with a year-on-year decrease of 66.8% and 45%.

Zhengtong automobile and Rundong automobile, which have recently fallen into debt crisis, have not yet released a complete mid-term performance report. However, according to the previous profit warning announcement, Zhengtong auto is expected to lose more than 1.3 billion yuan in the first half of the year, and Rundong automobile is expected to lose 213-313 million yuan. This is also the only company with performance loss among the 10 listed dealers.

Meidong automobile is highly sought after by the market due to its performance exceeding expectations and adverse growth. Since its mid-term results were announced on August 19, the company's share price has risen by 9.2%, and has won the support of Daiwa General Research Institute (a Japanese think tank) and CITIC Securities. Since the beginning of this year, the stock price of Meidong automobile has increased by 152.7%, and the whole auto sector is proud of itself.

Measured by the stock price, Zhongsheng holdings, Yongda Automobile and Guanghui automobile all performed well this year, while Zhengtong automobile and Rundong automobile, which were in financial difficulties, were significantly reduced by 60%, and the market confidence in them gradually collapsed.

In fact, before the default of Zhengtong Auto's 100 million US dollar installment loan, and before Rundong automobile was applied for bankruptcy reorganization, their business situation had taken shape. Taking Zhengtong automobile as an example, its financial report in 2019 shows that the company's total assets are 44.858 billion yuan, and the total liabilities are 31.218 billion yuan, including current liabilities of 25.819 billion yuan (short-term loans as high as 17.028 billion yuan), while its unrestricted cash and cash equivalents are only 1.497 billion yuan.

Some automobile salesmen who have worked for many years told the reporter of the 21st century economic report that Zhengtong's capital leverage ratio has always been very high. "Up to now, I still rely on the mortgage vehicle certificate to find the manufacturer to buy a car. There are more or less problems. It's just when it will break out."

It is normal for dealers to carry out third-party financing, but in addition to the conventional mortgage assets, they also use the vehicle certificate, so their capital leverage ratio is likely to have exceeded the warning line. "Once the manufacturers can't digest the short-term pressure, the capital chain will be broken easily."

Selling luxury brands is the only way out?

It is not difficult to find that the performance of dealers is highly related to the car brands they operate. One of the significant trends this year is that the overall recovery of luxury brand car enterprises and dealers is faster, and the growth is also more significant.

Among the above-mentioned 10 listed dealers, Meidong automobile, Zhongsheng holding company, Yongda Automobile, harmony automobile, etc., which perform well, are mainly luxury brands and medium and high-end brands, while those with more complex business brands, such as Guanghui automobile, are facing greater pressure in the current market.

According to the analysis of the above automobile salesmen to the reporter, the excellent performance of Meidong automobile in recent years is due to its small plate size, and it is selling advantageous resources. "The profits of their 4S stores are very high, especially the sales of BMW in the past two years." According to the official website, the brands operated by Meidong automobile include BMW, Porsche, Lexus, Audi, Toyota and Beijing Hyundai.

The report of the automobile circulation association also points out that luxury brands are outstanding in this year's market. Among the dealers who achieved positive sales growth only 21.5%, luxury / imported brands were relatively good, accounting for 60%.

The growth of luxury brands against the trend is not the trend just beginning this year. In fact, since last year's market downturn, luxury brands have shown strong appeal. Under the epidemic situation this year, the overall sales volume in the first half of the year was only slightly reduced by 3.94%, which was significantly better than the overall car market.

In this trend, luxury brand dealers have been expanding scale against the market. According to the report, in the first half of this year, Meidong automobile added two stores, Zhongsheng holdings added five stores, and Yongda Automobile added eight outlets, including one Porsche, three BMW and one Lexus.

Big dealers are also starting to lean towards luxury brands. An insider of Guanghui automobile told our reporter that since 2019, the company has started strategic transformation, focusing on the upgrading and transformation of internal stores, so as to increase the sales proportion of luxury brand cars.

The above-mentioned people said that the store upgrade plan has achieved initial results, and the proportion of luxury car sales increased from 20.5% at the beginning of the year to 23.5% in the first half of this year. However, from the current store layout, this is not the result of upgrading, but more likely to be the result of better overall performance of the luxury car market. According to the data, there was no change in the number of super luxury / luxury 4S stores of Guanghui automobile during the reporting period.

The above-mentioned person explained that the store upgrade needs a cycle. At present, the company has more than 20 stores in the process of upgrading, and more than 30 stores are expected to be transformed in the second half of the year. In general, Guanghui automobile, which has a large volume, does not have a strong desire to build new stores, and it optimizes its structure through upgrading.

For Guanghui automobile, it is a feasible way to invest more resources to sell luxury brand cars or to improve its business structure and enhance its profitability. However, it is not difficult to find out from the experience of Zhengtong automobile and Rundong automobile, which are also operating luxury brands, whether the enterprise's operation is stable is also very important.

Some analysis points out that the common point of Zhengtong automobile and Rundong automobile is the radical expansion in recent years. As a dealer with less than 100 stores, Rundong has increased more than 20 stores a year, and Zhengtong is not afraid of borrowing with high leverage, which eventually leads to the fracture of the capital chain.