While capital markets remain hesitant amid sluggish automotive consumption, mainland China's leading auto dealership ZHONGSHENG HLDG (00881) has quietly carved out an independent rally. During trading on September 8, the company's share price climbed steadily higher, rising over 3% at one point before closing at HK$16.45, up 1.61%, as market enthusiasm rekindled. This represents more than just a simple stock price advance—it signals a profound preview of industry landscape reshaping and leading enterprise value reassessment.
Multiple major domestic and international investment banks, including Morgan Stanley, Citibank, CMB International, and CICC, have recently published research reports expressing optimistic views on ZHONGSHENG HLDG's development prospects. The consensus among these institutions is that after enduring two years of deep industry adjustment, ZHONGSHENG HLDG now stands at the critical juncture of a bottom-up performance reversal. With accelerating industry consolidation, brand portfolio optimization, deepening new energy transformation, and continued strength in after-sales business, this "automotive market guardian" is taking steady steps toward a new growth cycle.
CMB International's research explicitly noted that ZHONGSHENG HLDG's first-half net profit attributable to shareholders fell short of market consensus expectations, primarily due to pressure on profitability from new and used car segments. Company management judges that the new car market is about to see dawn, capable of bottoming out or even potentially reversing, driven by continuous dealer channel consolidation and market share concentration toward industry leaders. Additionally, strong anti-involution policies favor automotive sales price stability. Furthermore, the company's core pillar after-sales business maintains steady growth while new energy business progresses smoothly. CMB International maintains a "Buy" rating.
Citibank expresses even stronger confidence in ZHONGSHENG HLDG. Its analysis suggests that the company's gross margin will recover by 0.9 percentage points to 6.3% in the second half of this year compared to the first half, subsequently expected to reach 7.3% and 8.2% in 2026 and 2027 respectively. Citibank raised ZHONGSHENG HLDG's target price from HK$23.31 to HK$23.35, maintaining a "Buy" rating, with compound annual growth rate projections of 60% for net profit from 2025 to 2027.
Looking at the broader auto dealership industry, Morgan Stanley provided its assessment. The firm stated that looking ahead, given Chinese consumers' continued preference for Chinese electric vehicles over global internal combustion engine vehicles, it expects dealer new car profit margins to remain at relatively low levels this year. However, Morgan Stanley emphasized it favors ZHONGSHENG HLDG over MEIDONG AUTO (01268) and YONGDA AUTO (03669), explicitly stating belief that the worst times have passed. This judgment is based on stable growth in profits from the company's Aitong new car sales and automotive maintenance service units, which will help ZHONGSHENG HLDG's earnings recover from last year's trough.
CICC published research highlighting observations of ZHONGSHENG HLDG's continuous revenue structure optimization, particularly during the industry's deep adjustment phase, where steady after-sales business advantages effectively offset new car market pressures. While company profitability faces pressure, cash flow has improved and operational efficiency steadily enhanced. With new car sales structure optimization and major partner OEMs entering new product cycles, CICC believes the company's profitability is poised for recovery.
Notably, ZHONGSHENG HLDG also demonstrates numerous positive changes in business structure. The luxury car customer base continues expanding, with active customers reaching 4.54 million, up 15.2% year-over-year. Channel network optimization deepened, with 57 new dealerships and 20 new service centers added in the first half, including 48 luxury brand locations.
Looking forward, as industry requirements for regulating irrational competition increase, vehicle terminal prices are expected to stabilize. Combined with the successive launches of new-generation German luxury brand products such as Audi A5L and Mercedes-Benz CLA, business recovery appears promising.
China Galaxy Securities also conducted in-depth analysis of ZHONGSHENG HLDG and the broader auto dealership industry. The firm noted that since the second half of 2024, China's 4S dealership count has entered decline for the first time. High-leverage acquisition debt and cash flow pressures, combined with sharply declining new car sales profitability and BBA OEM network optimization, are collectively driving less efficient dealers to exit the market. This industry consolidation trend is creating a more favorable operating environment. Due to the highly localized nature of new car sales, the exit of same-city competitors will greatly alleviate promotional pressure among dealers and drive gross margin recovery.
Simultaneously, ZHONGSHENG HLDG actively seizes new energy transformation opportunities, having become the largest domestic dealer channel for AITO. In the first half of 2025, AITO contributed to a 0.6 percentage point marginal improvement in new car gross margin. Assuming the company's fuel vehicle new car sales gross margin turns positive in the long term, this could directly generate RMB 2.4 billion in after-tax profit, representing a 72% profit increase based on 2024 performance.
Considering the company's historical valuation range and potential profit improvement space, China Galaxy Securities initiated coverage with a "Recommended" rating.
From perseverance through industry winter to counter-cyclical expansion amid consolidation waves; from deep cultivation in traditional luxury cars to forward-looking deployment in new energy tracks—ZHONGSHENG HLDG stands at a new valuation starting point with strategic determination and operational resilience. As the industry environment gradually improves and profit recovery trends establish, ZHONGSHENG HLDG's investment value is being rediscovered by an increasing number of institutions.