2015 results in line with expectations
2015 rental revenue +54% to Rmb4,399mn, net profit +221%to Rmb1,401mn. Adjusted profit +68% to Rmb944mn, inline with our expectation, but 5% lower than consensus.
Total fleet size +44% YoY 91,179 by the end of 2015,mainly driven by the development of UCAR.
FY15 RevPAC remained flat at Rmb170, but 4QRevPAC down 2% YoY. Weak macro environment andfast development in ride-sharing business dragged downdriver demand growth.
One-off impacts: 1) a fair value gain of Rmb797mn due tothe valuation increase in UCAR; 2) a foreign exchange lossof Rmb253mn.Trends to watch
Despite the short-term RevPAC weakness, we expectshort-term rental revenue to grow 20% in 2016, as1) short-term rental market still has big potential to grow inChina; and 2) heavy subsidies from ride-sharing businessmay gradually come down in 2016.
UCAR shifting focus from quantity to quality, so wedo not expect much fleet expansion in long-term rentalbusiness in 2016~17. On the other hand, UCAR will bearless expense and may achieve breakeven faster under thepremium quality strategy.
Used car direct sales might be the next bright spot.The B2C used car sales business will help CAR Inc. to realizehigher residual values and capture the growth potential inChina’s used car market.Valuation and recommendationTrim adjusted profit forecasts by 5.7%/6.4% due toUCAR’s strategy adjustment. Cut TP by 8.8% to HK$13.1based on 20x 2017e P/E. Maintain Conviction BUY givenits robust earnings growth and development potential in UCARand used car business.RisksUsed car price fluctuation, weak performance of RevPAC.