Steering Through the Market Wavess
China’s accelerating car market has put online trader Autohome Inc. (NYSE:ATHM) on the road to a post-Covid recovery, with some bumps along the way.
Government measures to boost auto consumption, backed by promotions from manufacturers, powered a 5.6% rise in Chinese passenger car sales last year to 21.7 million units, according to vehicle industry statistics. The jump was nearly triple the 1.9% rise in 2022, making China the world’s biggest auto market.
Rising car ownership has added fuel to Autohome’s business as an auto trading portal, with sales increasingly driven by new energy vehicles (NEVs).
Financial Growth and Costs
Autohome’s profits rose about 4% last year to 1.88 billion yuan, with sales of new energy vehicles soaring, jumping nearly 82% last year. The company reported a fifth straight quarter of revenue growth at the end of 2023, with its latest results showing a 1% year-on-year increase in revenue to 1.91 billion yuan ($269 million) in the fourth quarter. However, net profit fell 25.6% to 432 million yuan.
For the whole year, Autohome’s revenues and net profit increased about 4%. Despite the rise in revenues, operating expenses for the quarter leapt 14.2% to 1.24 billion yuan and increased 2.4% to 4.9 billion yuan for the full year. Rising costs were also observed in sales and marketing expenses, general and administrative expenses, and research and development expenses.
Driving Towards Immersive Technology
Autohome’s investment strategy significantly contributed to its positive earnings performance, with returns from interest and investments rising a hefty 47.1% to 831 million yuan last year. The company reported collaborating with Baidu in the fields of artificial intelligence and big data to develop and apply innovation across a range of areas from content creation to marketing, customer service, and business decision-making, using Baidu’s Qianfan intelligent platform.
Autohome ramped up marketing efforts under growing competitive pressure from NEV manufacturers and expanded its offline showrooms to gain greater traction in the NEV market. By the end of last year, Autohome had rolled out 20 of its so-called Energy Spaces in cities across China, using holographic technology to help buyers browse suitable cars in an immersive setting.
Tech Tie-Up With Baidu
Market watchers expect the high-tech Autohome centers could fuel the company’s advance into third- and fourth-tier Chinese cities, helping to introduce buyers there to a range of NEVs, as well as rev up the used car business. Autohome plans to extend the network to 50 Chinese cities this year, doubling to 100 cities the following year and broadening out to include overseas markets, helping Chinese car companies to build a global presence.
Autohome, as one of the few vehicle trading platforms to turn a profit, enjoys a price-to-sales (P/S) ratio of 3.16 times. Its hefty premium implies that investors are confident the company is on a profitable track.
This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
