Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

<ul>
<li>Zhongsheng share price surged by 26% on Friday as investors warms up to China, and accumulate beaten down consumer stocks. Zhongsheng was the top performing HSI stock.  </li>
<li>Businesswise, nothing has changed and consensus earnings for Zhongsheng remain largely unchanged. It is all about positive re-rating of the Chinese markets. </li>
<li>Our fair value is raised to HKD16-20.5, based on historical mean PE of 9.4x and ceiling of 12x. Zhongsheng is still cheap and have further upside potential in our view. </li>
</ul>


Zhongsheng share price surged by 26% on Friday as investors warms up to China, and accumulate beaten down consumer stocks. Zhongsheng was the top performing HSI stock.  
Businesswise, nothing has changed and consensus earnings for Zhongsheng remain largely unchanged. It is all about positive re-rating of the Chinese markets. 
Our fair value is raised to HKD16-20.5, based on historical mean PE of 9.4x and ceiling of 12x. Zhongsheng is still cheap and have further upside potential in our view. 


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

<ul>
<li>Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years </li>
<li>Chart analysis is to compliment our recent report <a href="https://www.smartkarma.com/insights/zhongsheng-group-holdings-881-hk-buy-tp-hkd12-5-a-contrarian-play" target="_blank" data-smartkarma-citation="insights:157671" rel="noopener">Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play</a> published yesterday</li>
<li>Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. </li>
</ul>


Historical valuation affirms that Zhongzheng is the cheapest it has been in the past 10 years 
Chart analysis is to compliment our recent report Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play published yesterday
Our TP of HKD12.5 is based on FY25 PE of 5x. This implies an UPSIDE POTENTIAL of 33%. It also delivers a dividend yield of ~9% at current prices. 


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): Chart Analysis Affirms Zhongsheng Is Too Cheap

<ul>
<li>1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)</li>
<li>Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality</li>
<li>ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.  </li>
</ul>


1H24 results were below expectations, with profits halved YoY. Irrational competition with overzealous discounts, and general decline in preference of traditional luxury cars for NEVs is hurting Zhongzheng (ZS)
Signs of bottoming as industry are trying to stop the discounting madness and instill some level of rationality
ZS is trading at 0.47x book, its cash = MCAP, and FY25 PE of 3.7x. Ridiculously cheap for a profitable and positive FCF churning company.  


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play

<ul>
<li>Most brands under control (Mercedes, Lexus, Toyota) are undergoing popularity downtrend by consumers in China.  </li>
<li>There will remain a loyal niche supporter base, every legacy auto does, but it also means Zhongsheng will be a smaller and niche distributor going forward. </li>
<li>Share price has plunged significantly YTD, trading at only ~5x, which we think is overdone. Yield hunters will like its ~8% DY. </li>
</ul>


Most brands under control (Mercedes, Lexus, Toyota) are undergoing popularity downtrend by consumers in China.  
There will remain a loyal niche supporter base, every legacy auto does, but it also means Zhongsheng will be a smaller and niche distributor going forward. 
Share price has plunged significantly YTD, trading at only ~5x, which we think is overdone. Yield hunters will like its ~8% DY. 


Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation

External broker reports(aggregated public sources), CMB International

CMB International

External broker reports(aggregated public sources)

Incorporated in Hong Kong, supported by the mainland and targeting in global market, CMB International Capital Corporation Limited (“CMBI”) is an integrated financial institution providing comprehensive and professional services. As a wholly-owned subsidiary of China Merchants Bank ("CMB"), by leveraging on the Group’s synergy and coordination in domestic and overseas markets, as well as CMB’s strong resources and outstanding social reputation, CMBI and its subsidiaries have been actively implementing diversified business strategies and set up an overall layout of main business segments including Corporate Finance, Asset Management, Wealth Management, Global Markets and Structured Finance, etc. Adhering to the philosophy of “being clients oriented and increasing our own values by the way of creating value for clients”, CMBI endeavors to provide quality and integrated financial services to institutional, corporate and individual customers both domestic and overseas including Hong Kong IPO sponsorship and underwriting, share placement and rights issue for listed companies, financial advisors, bonds issuance services, asset management, direct investment, wealth management, equity sales and trading, etc.

<ul><li>Initiate buy recommendations on ZHOSHK’25 (CB) and ‘26 We initiate the coverage on Zhongsheng and buy recommendations on ZHOSHK 0 05/21/25 (CB) and ZHOSHK 3 01/13/26.</li><li>We consider Zhongsheng (rated Baa2/BBB/BBB by Moody’s/S&amp;P/Fitch) a solid IG credit with leading market position and adequate liquidity profile.</li><li>Zhongsheng experienced lower car sales and weaker profit margin over the past 2 years. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Initiate buy recommendations on ZHOSHK’25 (CB) and ‘26 We initiate the coverage on Zhongsheng and buy recommendations on ZHOSHK 0 05/21/25 (CB) and ZHOSHK 3 01/13/26.We consider Zhongsheng (rated Baa2/BBB/BBB by Moody’s/S&amp;P/Fitch) a solid IG credit with leading market position and adequate liquidity profile.Zhongsheng experienced lower car sales and weaker profit margin over the past 2 years. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

CMBI Fixed Income - Zhongsheng: A Shorter-Dated Consumption Plays

China

Zhongsheng Group Holdings Ltd. retails automobiles.  The Company imports and retails primarily luxury and mid- to high-end automobile brands.

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Zhongsheng Group (881 HK)

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

Zhongsheng share price has finally popped after 3-year underperformance. The stock remains cheap based on historical valuation ranges, and we think...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): Chart Analysis Affirms Zhongsheng Is Too Cheap

Historical valuation shows Zhongzheng is the cheapest in 10 years for all the traditional valuation metrics. Stock is really cheap, our target...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play

Zhongzheng profits halved due to irrational competition and shift to NEVs, but signs of recovery as industry aims to curb discounts. ZS trading at...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation

Chinese consumers are turning away from popular car brands and impacting distributor Zhongsheng's market position. However, market has over...

Mohshin Aziz

CMBI Fixed Income - Zhongsheng: A Shorter-Dated Consumption Plays

Initiate buy recommendations on ZHOSHK’25 (CB) and ‘26 We initiate the coverage on Zhongsheng and buy recommendations on ZHOSHK 0 05/21/25 (CB) and...

CMB International

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD16.0-20.5): Long Overdue PoP, Still More Valuation Gap

Zhongsheng share price has finally popped after 3-year underperformance. The stock remains cheap based on historical valuation ranges, and we think...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): Chart Analysis Affirms Zhongsheng Is Too Cheap

​Historical valuation shows Zhongzheng is the cheapest in 10 years for all the traditional valuation metrics. Stock is really cheap, our target...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD12.5): A Contrarian Play

​Zhongzheng profits halved due to irrational competition and shift to NEVs, but signs of recovery as industry aims to curb discounts. ZS trading at...

Mohshin Aziz

Zhongsheng Group Holdings (881 HK, BUY, TP:HKD15.0): Challenging Outlook and Reflected in Valuation

​Chinese consumers are turning away from popular car brands and impacting distributor Zhongsheng's market position. However, market has over...

Mohshin Aziz

CMBI Fixed Income - Zhongsheng: A Shorter-Dated Consumption Plays

Initiate buy recommendations on ZHOSHK’25 (CB) and ‘26 We initiate the coverage on Zhongsheng and buy recommendations on ZHOSHK 0 05/21/25 (CB) and...

CMB International

Historical valuation shows Zhongzheng is the cheapest in 10 years for all the traditional valuation metrics. Stock is really cheap, our target...

Zhongzheng profits halved due to irrational competition and shift to NEVs, but signs of recovery as industry aims to curb discounts. ZS trading at...

Chinese consumers are turning away from popular car brands and impacting distributor Zhongsheng's market position. However, market has over...