Inventory under control, cash stable, service enhanced: the resilient path of distributor Wing Tat (03669)

In the first half of 2025, the Chinese automobile market is experiencing a triple overlap of "intensified competition in existing stock, continued price wars, and breakthrough penetration of new energy". Data from the China Association of Automobile Manufacturers shows that in the first half of the year, domestic passenger car sales increased by 10.8% year-on-year to 10.92 million units. However, the oversupply situation has further intensified the competition among existing stocks. Automakers are continuously expanding production capacity in order to grab market share, but demand growth lags behind capacity expansion. In terms of competition, price wars are still prevalent, with the average price of new cars in the first half of the year dropping by 11.4%. Both upstream component suppliers, primary manufacturers, and distribution channels are facing significant profit pressures. In terms of industry structure, the penetration rate of new energy vehicles reached 50.2% (surpassing 53.3% in June), squeezing the market share of traditional fuel cars and shifting the industry's competitive focus from price wars to technological and service competition. Against this backdrop, transitioning from scale expansion to quality prioritization has become the core direction for dealers to overcome challenges. YONGDA AUTO's mid-year performance report for 2025, with the implementation of "manageable inventory, stable cash flow, and increased service", provides a resilient development model for the industry. Financial data shows that the company achieved revenue of 27.072 billion yuan in the first half of the year, remaining profitable after deducting the impact of asset impairment. Meanwhile, the company's operational quality indicators have steadily improved, with inventory turnover days at 26.3 days, a decrease of 0.4 days year-on-year, effectively avoiding the risk of price fluctuations of new cars. Operating cash flow net inflow reached 1.167 billion yuan, a significant increase of 66.9% year-on-year, providing financial support for business adjustments; the net debt ratio at the end of the period was 9.8%, a decrease of 0.4 percentage points year-on-year, showing continued optimization of the financial structure. Behind these performances is YONGDA AUTO's active departure from the traditional logic of winning through volume and achieving a balance between quantity and profit through refined operational management. While controlling scale, the company has gradually shifted its core competitiveness from scale to operating efficiency. This is also the key transformation for high-quality dealers during the industry's transition period. Significant effects of refined operations Specifically, in inventory management, YONGDA AUTO adopts a proactive inventory control and dynamic adjustment strategy. On one hand, by actively controlling new car sales and further enhancing control over funds for various brand new car stocks (including prepayments) to maintain the overall stability of the new car business, the company further strengthens management of new car stocks above 30 days through the linkage of new car sales and inventory fund digital systems. This is further reinforced by binding assessments of enterprise general managers and management team performance, effectively ensuring the health of new car inventory and improving fund turnover efficiency. As of the end of June, the company's on-the-way and in-stock balance was 4.986 billion yuan, a decrease of 6.8% from the end of 2024. This measure not only reduces the capital occupied by inventory, but also mitigates the risk of price fluctuations in new cars, providing solid support for cash flow health. In terms of improving the quality of individual store operations, YONGDA AUTO is promoting network optimization and efficiency enhancement. In the first half of the year, the company accelerated the closure and transfer of non-core brand and non-core regional stores, with a total of 19 stores closed (including 12 traditional brands and 7 new energy brands), concentrating resources on the development of top brands with greater potential. The company established 7 top new energy stores (including 5 Hongmeng Zhixing points), added 30 new energy brand authorizations, and is in the process of building 14 new energy stores (13 of which are Hongmeng Zhixing). As of the end of June, the company operated a total of 209 network points, with luxury brands accounting for 64.6% and the sole Xinjiang Lixin Energy brand accounting for 16.7%, further increasing brand concentration. The direct effect of network optimization has effectively improved the efficiency and output of individual store operations. At the same time, through the diversified utilization of showrooms and aftersales properties, the operating costs of individual stores have been further reduced, forming an advantage in the layout of "precision and excellence" network points. New energy and aftermarket, constructing a new growth curve With the irreversible trend of electrification in the automotive industry, YONGDA AUTO regards new energy business as a strategic core, using sales expansion and service extension to make it a "ballast stone" against fluctuations in traditional business. Leveraging large customer retentions, the company strengthens its aftermarket service capabilities, enhancing profit margins through high-margin, highly sticky aftersales business. In terms of new energy business, YONGDA AUTO achieved a brand of Xinjiang Lixin Energy sales of 10,312 units in the first half of the year (including 4,455 through distribution channels and 5,857 through direct sales), a year-on-year increase of 49%. The direct sales mode saw a growth of 123.1%, reflecting the company's channel advantages in cooperation with emerging brands. Particularly noteworthy is the quality attribute of the new energy business. The average selling price of new energy vehicles in the first half of the year was 267,300 yuan, focusing on the high-end market, with a comprehensive profit margin per unit remaining above 4%, significantly higher than that of traditional fuel vehicles. As of the end of June, the brand of Xinjiang Lixin Energy had nearly 6,000 retained orders, laying the foundation for sales growth in the second half of the year. On the aftersales end, the growth potential of new energy business has also been further released. In the first half of the year, Xinjiang Lixin Energy repair revenue reached 216 million yuan, a year-on-year increase of 75.8%; the average revenue per vehicle was 3,447 yuan, a 16.5% increase year-on-year; the number of aftersales retained customers reached 72,300, a 25.9% increase from the end of 2024, with a monthly compound growth rate exceeding 5%. This means that the new energy business of YONGDA AUTO has transitioned from simply selling cars to a full-cycle operation of "sales + service", continuously increasing the customer lifetime value. With the support of the new energy business, YONGDA AUTO achieved aftermarket service revenue of 4.784 billion yuan in the first half of the year, with maintenance and repair revenue of 4.660 billion yuan and a gross profit margin of 40.35%; the absorption rate of zero services (the ratio of after-sales gross profit covering sales and management expenses) increased to 84.2%, up 5.6 percentage points year-on-year. To further explore incremental opportunities in the existing market, YONGDA AUTO is actively exploring and innovating business models, constructing a diversified sales strategy. These measures aim to consolidate the company's profitability contribution in the aftermarket, enhance customer stickiness, and accumulate valuable user assets for long-term development. In addition, YONGDA's used car business has also achieved breakthroughs in stable operations. In the first half of the year, the company traded 30,427 used cars, achieving a gross profit margin of 5.21% through strict inventory turnover control and optimizing profit structures; the gross profit reached 113 million yuan, an 8.2% increase from the previous period; and the turnover days were 17.7 days, a decrease of 2.5 days year-on-year and 4 days from the previous period. The company is actively exploring new models such as new energy used cars, bulk car source cooperation, and used car exports to build a used car ecosystem, making it an important link between new cars and the aftermarket. The sustainable development logic of "quality dealers" is more advantageous Looking at YONGDA AUTO's operational practices in the first half of the year, the series of actions it took in "inventory control, stable cash flow, and enhanced services" precisely confirms the core leap in dealer competition logic from increment market to stock market in the automotive industry. The competition in the industry is no longer about who can sell more cars through scale but about who can efficiently serve customers and resist risks with stable financials. The "quality dealer" characteristics demonstrated by YONGDA AUTO have established a long-term sustainable development foundation. The advantage of this logic is first and foremost reflected in the prioritization of operational efficiency over scale expansion. Currently, many companies in the automotive dealership industry are still trapped in a dilemma of being tied to OEM tasks. Dealers strive for excess rebates to get more cars, resulting in inventory turnover days exceeding 40 days, a large amount of capital being inefficiently tied up in inventory, and also facing the risk of price fluctuations in new cars. YONGDA AUTO optimizes inventory turnover efficiency by implementing proactive inventory control and dynamic adjustment strategies. This efficiency differential directly translates into a financial safety net, not only covering dividends of over one billion yuan, but also providing financial support for the construction of new energy network points and the upgrading of digital systems. Secondly, the core competitiveness of "quality dealers" lies in the establishment of a profit structure that does not rely on new car sales, which is particularly prominent in YONGDA AUTO's performance in the aftermarket. With an 84.2% absorption rate of zero services, over eighty percent of fixed operating costs are covered by the aftersales business, and new car sales only need to contribute a small amount of profit to achieve overall profitability. This aftersales-backed structure is the key difference between quality dealers and scale dealers. Looking at long-term development, YONGDA AUTO's quality-oriented layout aligns well with industry trends, further magnifying the sustainability of its development logic. With new energy penetration rates surpassing 50%, the industry's competitive focus is shifting from a singular price war to a comprehensive competition of "technology + service + ecosystem", where a dealer's service attributes are gradually replacing sales attributes to become the core value. YONGDA AUTO's early layout of the new energy business not only achieves rapid sales growth year-on-year but also accumulates high-value new energy user assets through high-end and full-cycle services. Additionally, its combination of luxury cars and new energy brands, relying on the high consumption power of luxury car customers to ensure short-term profits and capturing long-term growth opportunities through the new energy business structure, forms a business structure that combines offense and defense. Moreover, the company's exploration of the battery recycling industry, intelligent Siasun Robot & Automation layout, and research on AI technology-enabled sales and services have opened up new growth spaces beyond traditional dealership businesses, injecting long-term imagination driven by technology into the quality-oriented logic. In the context of accelerated industry consolidation, "scale dealers" rely on incremental dividends, have weak risk resistance, and gradually weaken market competitiveness. However, "quality dealers" represented by YONGDA AUTO, with the triple advantages of efficiency, profitability, and strategy, not only can maintain resilience in the current cycle but also seize opportunities in reshaping the industry landscape, further highlighting the superiority of its development logic.