Recover gradually

Recover gradually Target PriceHK$1.80(Previous TPHK$2.50)Up/Downside29.5%Current PriceHK$1.39 Maintain BUY.Webelievefurtherdeterioration in new-car GPM is limited asluxuryOEMs lower MSRPs and exploreagencymodels. While the auto dealerindustry remains in a“survival of the fittest”phase, we expect establishedleaderslike Yongda to become long-term survivors.Since most brands willcontinue to rely on dealers, weviewYongda’sexpertisein NEV dealershipasakeycompetitiveadvantage. Wenjing DOU, CFA(852) 6939 4751douwenjing@cmbi.com.hk FY25impairments clearing the deck for recovery.Yongda’s 2H25revenue fell 15% YoY to RMB27.5bn, with GPM down to 7.0%, thelowestlevel since FY11,dragged by weaker new-car GPM.Its new-car salesvolumefell 8% YoY to about 81,000 units,with NEV brands accounting for19%. Revenue from after-sales services fell 6% YoY to RMB4.7bn withGPMlargely stable at 41.6%.The company booked RMB1.3bn inimpairment losses in 2H25,following RMB3.6bn in 1H25.Therefore, its2H25 net loss reached RMB1.7bn, or RMB367mn excluding impairments. Austin Liang(852) 3900 0856austinliang@cmbi.com.hk Stock Data Margin recovery amid OEMs’MSRP cuts.We project a recovery in new-car GPM this year astransaction prices have increased since 2H25and keyluxury OEMs,including BMW and Porsche,have lowered MSRPs toalleviate dealer pressure.We conservatively project Yongda’s new-carGPMto recover from 0.1% in FY25 to 0.3% in FY26E, giventhatOEMs maystill prioritize volume at times this year. Furthermore, we do not expectsignificant impairments this year, as the costsrelated tothe planned 15-20store closuresin FY26Ewere largely front-loaded into FY25, according tomanagement.Therefore, we expectYongda’sFY26Eopex ratio to remainstableYoY, despite apossiblerevenue decline amidsales declines for ICEbrands. Earnings/Valuation.We cut our FY26E/27E net profit forecasts toRMB38mn/RMB282mn, respectively, as theindustryrecovery maystilltaketime.We maintain a BUY rating and cut targetprice from HK$2.50 toHK$1.80, based on 10x FY27E P/E (prior 9x).The higher multiple reflectsincreasedearningssensitivityto new-car GPM recovery.Key risks to ourrating and TP include lower new-car margins, more severe after-salesservice declines,anda sector de-rating. Source: FactSet Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part,certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensationwas, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong KongSecurities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGMRatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 months CMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly ownedsubsidiary of China Merchants Bank) Important DisclosuresThere are risks involved in transacting in any securities. The information contained in this report may not be suitable forthe purposes of all investors.CMBIGM does not provide individually tailored investment advice. This report has been prepared without regard to the individual investment objectives, financial positionor special requirements. Past performance has no indication of future performance, and actual events may differ materially from that which is contained in thereport.The value of, and returns from, any investments are uncertain and are not guaranteed and may fluctuate as a result of their dependence on theperformance of underlying assets or other variable market factors.CMBIGMrecomme