Monday, March 1, 2021
 
Columnist
Martin Hennecke
 
BAOXIN AUTO
HKEx Stock Code : 01293 
 
Corporate Profile
Principally engaged in the sale and service of motor vehicles.

Business Review - For the year ended December 31, 2012

Rapid expansion in dealership network

We are a leading luxury and ultra-luxury automobile dealership group in China with broad coverage of brands and well established dealership network across the country. We have developed leading position in major luxury and ultra-luxury brands, especially for BMW and Land Rover & Jaguar, in terms of sales volume and number of dealership stores. As at December 31, 2012, we had a well-established network of 75 stores, consisting of 60 luxury and ultra-luxury brand dealership stores (including three dealership stores in trial operation), 11 mid to upper market brand dealership stores, two automobile customization centers, one certified collision damage assessment center and one after-sales service center.

Among the 75 stores, 16 new dealership stores, one certified collision damage assessment center, and three additional dealership stores which were in trial operations were formally launched by the Group during the year of 2012 (the ˇ§New Dealership Storesˇ¨). 12 4S dealership stores and eight showrooms were acquired through our acquisition of the entire share capital of NCGA Holdings Limited (the ˇ§NCGA Acquisitionˇ¨) pursuant to a sale and purchase agreement dated August 29, 2012, and two other dealership stores were acquired during the year of 2012. Out of the 75 stores, 39 stores have been opened for less than two years, 16 stores have been opened for two to five years and the remaining 20 stores have been opened for over five years.

With our large and strategically located dealership network, we have been able to achieve synergies among our stores that provide significant competitive advantages in China's highly fragmented automobile dealership industry. Our operating scale allows us to better manage our automobiles and spare parts inventory turnover, coordinate and aggregate our purchases of automobile accessories and other products and implement a systematic approach to train and promote talented personnel.

NCGA Acquisition

We have expanded our dealership network through selective acquisitions since 2012. We completed the NCGA Acquisition in December 2012, through which we added 20 luxury and ultra-luxury dealership stores (including 14 BMW dealership stores and four Land Rover & Jaguar dealership stores). In terms of automobile brands, the NCGA Acquisition added one Porsche dealership and one Volvo dealership to our portfolio of luxury and ultra-luxury automobile brands. For the year ended December 31, 2012, the sales volume of NCGA and its subsidiaries (the ˇ§NCGA Groupˇ¨) was 20,922 units and its revenue was RMB10,302.8 million, of which 90.9% was from the sales of automobile and 9.1% was from the after-sales service. The year of 2012 was a challenging year for the NCGA Group and its profitability was substantially affected by its increasingly high level of labor, financial costs and administrative expenses. Following on the completion of the NCGA Acquisition, the Group has commenced restructuring of the NCGA Group to enhance its cost control, improve its operation efficiency and thus optimizing its revenue and profitability.

Expansion of geographical coverage and brand portfolio

During the year ended December 31, 2012, the geographic network of the group has expanded by way of organic growth and by acquisition. In terms of organic growth, we have expanded our geographic coverage by opening stores in Guangdong Province (Dongguan) and Shaanxi Province (Xi'an), all of which are new to the Group's geographical portfolio. Through the NCGA Acquisition, we further expanded our geographical presence in northeastern, northern and western China, including Beijing, Hebei Province, Liaoning Province, Shaanxi Province and Xinjiang Uyghur Autonomous Region. The substantial majority of our dealership stores are strategically located in populous and affluent coastal regions in China with rapidly growing local economies, such as Beijing, Shanghai, Tianjin, Jiangsu Province, Zhejiang Province, Shandong Province, Liaoning Province and Guangdong Province.

During the year ended December 31, 2012, we have continued in expanding and strengthening our brand portfolio. We established cooperation relation with various top luxury brands in the world and successfully added five luxury and ultra-luxury brands into our portfolio in 2012, making a total of 11 luxury and ultra-luxury brands. The newly introduced brands include Ferrari, Maserati, Porsche, Volvo and GMC. Besides the new additions, our brand portfolio includes luxury brands such as BMW, MINI, Audi and Cadillac, ultra-luxury brands such as the Land Rover and Jaguar, as well as other popular mid-to-upper market brands, such as Buick, Toyota, Honda, Nissan, Volkswagen, Chevrolet and Hyundai.

Significant growth in sales of luxury and ultra-luxury brand automobiles

As a result of our focus on luxury and ultra-luxury brands as well as strategic location of our stores, we have recorded significant growth in automobile sales and after-sales business for the year ended December 31, 2012. Our revenue from sales of automobiles for the year ended December 31, 2012 was RMB16,797.7 million, representing a growth of approximately 49.2%. The sales of luxury and ultra-luxury automobile contributed to 89.7% of our total automobile revenue for the year. In terms of sales volume, we sold 43,253 units of automobile in the year ended December 31, 2012, an increase of 13,754 units, or 46.6%, from 29,499 units of automobiles for the same period ended 2011. The sales volume of luxury and ultraluxury automobile contributed to 69.8% of our total sales volume for the year ended December 31, 2012 (2011: 60.8%). For the year ended December 31, 2012 we sold 30,175 units of luxury and ultra-luxury automobile, representing an increase of 12,240 units, or 68.2%, from 17,935 units for the same period ended 2011.

Enhanced after-sales services

The Group has always placed great emphasis on its after-sales service business as an important and stable income source of its future development. During the year ended December 31, 2012, the Group optimized and realized the revenue from same-store after-sales services by implementing advanced and efficient management systems, improving services quality, broadening the scope of services and improving the skills and efficiency of our after-sales personnel. In addition, the Group has also established networks of diversified network of after-sales service structure, such as showrooms, maintenance and repair center and secondhand automobile mobile center, to supplement our 4S dealership stores. Further, our aftersales customer base also augmented throughout the year as our stores mature and sale of new automobiles accumulate. As a result, we recorded a growth in revenue from our after-sales services. For the year ended December 31, 2012, the revenue from after-sales services reached RMB1,295.2 million, representing an increase of 71.3% as compared to that of 2011. The revenue from after-sales service for luxury and ultra-luxury brands was RMB1,060.8 million, representing an increase of 94.0% from RMB546.7 million from 2011, and contributed to 81.9% of the total after-sales revenue.

Business Outlook - For the year ended December 31, 2012

Looking forward, we expect China's economy continue to grow together with the wealth of its population. As wealth redistributes and evens out among the Chinese population, given the currently low market penetration rate of the luxury and ultra-luxury passenger vehicle sector, we are confident that demand for luxury and ultra-luxury passenger vehicles will continue to boom in the coming years.

Our Group will continue to focus on luxury and ultra-luxury brands and strengthen our leading position in key luxury and ultra-luxury brands. We will continue to seek opportunities to expand through further organic expansion and selective acquisitions in existing and new areas and to diversify our portfolio of luxury and ultra-luxury automobile brands. On the other hand, for the successful acquisitions that we have completed, we shall continue on integrating the acquired companies into the Group's operation, and restructuring and refining its operations with a view to optimize revenue and profitability of these companies.

With our extensive experience and skill in operating luxury and ultra-luxury automobile dealership, we have established very strong relationships with leading automobile manufacturers, including BMW and Land Rover & Jaguar. Going forward, we will not only strengthen our existing relationship with the luxury and ultra-luxury auto manufacturers, but also broaden our cooperation networks.

While developing our main business, the Group will continue to develop our businesses of automobile financing, automobile leasing and second hand automobile market, which we believe further promotes the growth of the luxury and ultra-luxury automobile market.

For the collaterally booming after-sales services market, we will continue to increase our after-sales service capacity, expand our service scope, and improve operational efficiency to increase overall after-sales revenue as well as revenue per store and profitability. We also aim to establish more authorized after-sales service centers for luxury and ultra-luxury brands particularly in tier 1 and 2 cities in China in order to meet the increasing service demand and to capture such market share.

From internal operation perspective, we will continue to implement stringent inventory management and cost control policies, improve capital structure and efficiency, and strengthen the training program and management of our employees. We believe that our well-established relationship with the automobile manufacturers, superior industry experience and operational capabilities, and customer-oriented services expertise will continue to enable us to strengthen our market position as a leading luxury 4S dealership group in China.

Source: Baoxin Auto Group (01293) Annual Results Announcement
Chairman YANG Aihua Issued Capital (shares) 2,557M
Par Value HKD 0.01 Market Capitalisation (HKD) 16,878M
 
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