Autohome Inc.

ATHM Details

Autohome Inc. (NYSE: ATHM) operates an automotive internet platform that offers interactive content and tools to automobile buyers, manufacturers, and dealers in China. Its operating segments are 1) Media Services, which offers targeted-marketing solutions for brand and sales promotion, 2) Leads Generation Services, which enables dealers in creating their online stores, listing pricing and promotional information, placing advertisements, and managing customer relationships, and 3) Online Marketplace & Others, providing facilitation services and other platform-based services for new and used car transactions. As of October 29, 2021, it had 127.35 million American Depositary Shares (ADS) listed and outstanding (each ADS representing four Class A ordinary shares). 

Latest News:

• Change in Leadership: On October 08, 2021, ATHM announced the appointment of Bibo Xiang as its new Chief Technology Officer, effective immediately. In this role, Mr Xiang will be tasked with managing the company's overall technology framework and development roadmap. The position was previously held by Mr Xiao Wang.

Q2FY21 Results:

• Decline in Topline: ATHM reported a YoY decrease of 16.22% in total revenue to RMB 1.94 billion in Q2FY21 (ended June 30, 2021) compared to RMB 31 billion in Q2FY20, attributable to a 35.65% YoY reduction in revenue from the Media services segment.
• Reduction in Profitability: Net income for Q2FY21 was RMB 746.71 million vs. RMB 824.48 million in Q2FY20.
• Strong Balance Sheet: As of June 30, 2021, the company had cash & cash equivalents (including short-term investments) of RMB 18.43 billion and no outstanding debt.

Risks:

• Ownership Concentration Risk: As of December 31, 2020, Yun Chen Capital Caymen, a subsidiary of Ping An Group, controlled 49.0% of ATHM's common stock, thus gaining substantial control over its operations. This constrains the ability of other shareholders to influence corporate decisions.
• Regulatory Risk: The Chinese authorities' recent crackdown on its US-listed businesses and the consequent possibility of stricter rules could dent its operations. After the passage of a bill in the US, this could lead to the delisting of some Chinese companies from the country's exchanges (in case the US authorities cannot satisfactorily audit the company for three consecutive years). These constitute significant political and regulatory risks for the firm.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ATHM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ATHM's stock price has declined 64.21% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 35.65 to USD 147.67. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 30.34. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 47.33.

Considering the significant correction in the stock price in the past nine months, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 39.45, down 1.58% as of October 29, 2021, 11:00 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.