Global Mobility/Transport, Equity Long-Short

Mohshin Aziz

Equity Bottom-Up

<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><p><em>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.</em></p>

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

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.</li>
<li>The index changes for HSCEI index for the March 2024 index rebal event will be announced on 16th February 2024. </li>
<li>In this insight, I have shown how my flow expectations have changed since I published my last HSCEI insight on 6th December 2023.</li>
</ul>


The HSCEI serves as a benchmark to reflect the overall performance of the top 50 "Mainland China" securities listed in Hong Kong.
The index changes for HSCEI index for the March 2024 index rebal event will be announced on 16th February 2024. 
In this insight, I have shown how my flow expectations have changed since I published my last HSCEI insight on 6th December 2023.


Quiddity HSCEI Mar 24 Flow Expectations: Zhongsheng (881 HK) Downtrend Could Continue

Analyst

Steve Zhou, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-meidong-auto-holdings-limited" target="_blank" data-smartkarma-citation="entities:10795:1" rel="noopener">China MeiDong Auto (1268 HK)</a> announced a profit warning this morning, expecting a 90% decline in net profit for 1H23.  </li>
<li>Luxury auto dealer in China is facing major uncertainties in its business model, with no visibility in the near term.  </li>
<li>However, <a href="https://www.smartkarma.com/entities/zhongsheng-group-holdings" target="_blank" data-smartkarma-citation="entities:10573:1" rel="noopener">Zhongsheng Group (881 HK)</a> currently employs the best long-term strategy amidst industry transformation.  Suggest to keep a close eye on the name. </li>
</ul>



China MeiDong Auto (1268 HK) announced a profit warning this morning, expecting a 90% decline in net profit for 1H23.  
Luxury auto dealer in China is facing major uncertainties in its business model, with no visibility in the near term.  
However, Zhongsheng Group (881 HK) currently employs the best long-term strategy amidst industry transformation.  Suggest to keep a close eye on the name. 


Zhongsheng Group (881 HK):  Could Be A Winner In The Long Run, But No Short-Term Visibility

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<ul>
<li>
<a href="https://www.smartkarma.com/entities/china-meidong-auto-holdings-limited" target="_blank" data-smartkarma-citation="entities:10795:1" rel="noopener">China MeiDong Auto (1268 HK)</a> presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). </li>
<li>China MeiDong Auto (1268 HK) 's integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. </li>
<li>The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. </li>
</ul>



China MeiDong Auto (1268 HK) presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). 
China MeiDong Auto (1268 HK) 's integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. 
The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. 


Meidong: Insights from Call with the Management for H1 2022

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: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

Quiddity HSCEI Mar 24 Flow Expectations: Zhongsheng (881 HK) Downtrend Could Continue

I estimate one-way flow to be US$235mn which translates to a turnover of ~2%. However, these estimates are based on the low-conviction assumption...

Janaghan Jeyakumar, CFA