EQS-News / 05/02/2021 / 15:05 UTC+8 
Merrill Lynch initiated coverage on China MeiDong Auto Holdings Limited (1268.HK) at Buy; TP of HKUSD40.50 
 
Merrill Lynch initiated coverage on China MeiDong Auto Holdings Limited (1268.HK) at Buy with a target price of 
HKUSD40.50, representing an upside of 56.0% from the closing price of HKUSD25.90 on 29th January. 
 
Merrill Lynch appreciates Meidong's differentiated strategy, which focuses on luxury brand car dealerships in 
fast-growing yet under-penetrated tier 3-5 cities, making it a key beneficiary from consumption upgrade as regional 
income rises. Merrill Lynch also likes Meidong's laser focus on high operating efficiency and inventory turnover, which 
sees the company generates significantly higher returns and faster growth than peers. Supported by its strong operating 
cash flow and net cash position, Merrill Lynch believes it has a growing capacity to pursue acquisitions, which could 
pose further upside to the stock's valuation. 
 
Driven by new store additions (12% CAGR), increase in sales per store (14% CAGR) and higher margins, Merrill Lynch 
predicts a revenue CAGR of 28% and net income CAGR of 41% through 2023E. As the median age of MeiDong's stores is only 
3 years, Merrill Lynch believes its operating margin will be lifted by 120bps to 6.2% by 2023E, as after-sales services 
revenue will grow as stores mature. 
 
Merrill Lynch's target price of HKUSD40.50 is set at 28x 2022E P/E - based on a PEG of 0.8x on its 2023E EPS growth of 
35%. While this is a premium to peers and its average, Merrill Lynch sees it as justified due to the faster growth, 
higher ROE and net cash balance sheet that offers potential of faster growth via M&As. 
File: Merrill Lynch initiated coverage on China MeiDong Auto Holdings Limited (1268.HK) at Buy; TP of HKUSD40.50 
05/02/2021 Dissemination of a Financial Press Release, transmitted by EQS Group. 
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(END) Dow Jones Newswires

February 05, 2021 02:05 ET (07:05 GMT)