UBS lowers Zhongsheng Holdings' target price to 12 yuan, urges buy, expects net profit to rebound starting this year

UBS published a research report indicating that ZHONGSHENG HLDG (00881.HK) recorded a net loss of 652 million RMB in the second half of last year, mainly due to banks tightening automotive finance commission policies leading to a decline in commission income, as well as a drop in after-sales service gross margin. The bank maintains the view that profits have bottomed out, expecting the company to benefit from the adjustments in suggested retail prices by the three major German car manufacturers: Mercedes-Benz, BMW, and Audi, as well as the new model cycle, along with an increase in contributions from the Aito brand.

The bank expects the company's net profit to rebound from 360 million RMB in 2025 to 2.9 billion and 3.9 billion RMB in 2026 and 2027, respectively; it also believes that the current stock price reflects the drag factors of major banks tightening commission policies, while the market overlooks the upcoming recovery; it has lowered the target price from HKD 18.6 to HKD 12, maintaining a "Buy" rating