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 <strong>UPSIDE POTENTIAL</strong> of<strong> 33%</strong>. 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

Analyst

Steve

<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

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