Industrial Securities Initiates Coverage on ZHONGSHENG HLDG (00881) with "Buy" Rating, Highlights Premium Auto Service Brand Strategy

Stock News12-15

Industrial Securities Co.,Ltd. initiated coverage on ZHONGSHENG HLDG (00881) with a "Buy" rating, citing the company's leadership in China's luxury auto dealership sector and its strategic focus on building a premium automotive service brand to sustain steady after-sales growth. The firm is also optimizing its network and brand positioning, which is expected to enhance new car sales scale and profitability. Key insights follow:

**Premium Service Brand Strategy Drives After-Sales Growth** Since June 2023, ZHONGSHENG HLDG has pivoted toward establishing itself as "China's premium automotive service brand," concentrating on 32 key cities and millions of luxury car owners. Despite challenging market conditions, its high business density and brand concentration in local markets support its cross-brand centralized operations.

As of June 30, 2025, 46% of ZHONGSHENG's 439 dealerships were locally dominant (over 50% market share), with 89 being exclusive local dealers. The company serves 14.6% of the 20.1 million luxury car owners across its 32 core cities, averaging 15 dealerships and service centers per city, catering to approximately 137,000 active clients per location. Total active clients reached 4.54 million, up 15.2% YoY.

In H1 2025, 20%, 36%, and 30% of maintenance/accident repair/insurance renewal customers in Chengdu, Dalian, Nanjing, and Shenzhen respectively were non-ZHONGSHENG car buyers. After-sales revenue grew 9.6% in 2024 and 4.4% in H1 2025, with gross profit up 9.9% and 8.1% respectively.

**Network Optimization Amid Traditional Brand Upgrades** Per industry data, joint-venture brands operate 7,744 outlets while luxury brands have 3,990. Traditional automakers like Toyota and Audi are rolling out smart models in collaboration with third-party suppliers (e.g., Huawei, Momenta) and adopting fixed-price sales, improving dealer margins.

Since November 2024, ZHONGSHENG completed its largest-ever network restructuring, splitting multi-service sites, converting dealerships into service centers, and repurposing existing properties. Over 20% of stores underwent adjustments, with 57 new dealerships (48 luxury-branded, including 36 AITO, 1 HIMA, 1 Mercedes-Benz, 3 Lexus, 1 Audi, and 6 Volvo) and 20 service centers added.

**Risks**: Macroeconomic downturns, lower-than-expected OEM rebates, and intensifying competition.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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