Autohome Inc.

ATHM Details

Autohome Inc. (NYSE: ATHM) provides an online platform for automotive consumers in China. It offers immersive content and tools to automobile buyers, manufacturers, and dealers. Its operating segments are 1) Media Services, which provides targeted-marketing solutions to automakers for brand and sales promotion, 2) Leads Generation Services, which allows dealers to develop their online stores, list pricing and promotional information, place advertisements, and manage customer relationships, and 3) Online Marketplace & Others, offering facilitation services and other platform-based services for new and used car transactions. As of August 18, 2021, ATHM's market capitalization stood at USD 9.61 billion, with 127.35 million American Depositary Shares (ADS) listed and outstanding (each ADS representing four ordinary shares). 

Management Change: On July 2, 2021, ATHM's current Chief Financial Officer (CFO), Mr. Jun Zou, resigned from his position effective July 9, 2021. As a result, the company is currently searching for a suitable candidate and plans to appoint a new CFO in the near term. Accordingly, Ms. Hong Jiang, the financial director and current in-charge of financial operations, will report to Mr. Quan Long, Chairman of the Board of Directors and Chief Executive Officer on an interim basis.

Q1FY21 Results: ATHM reported a 19.07% YoY growth in total revenue to RMB 1.84 billion in Q1FY21 (ended March 31, 2021) from RMB 1.55 billion in Q1FY20, primarily due to a 73.99% YoY increase in revenue from the Online Marketplace segment. Net income for Q1FY21 was RMB 631.11 million vs. RMB 587.26 million in Q1FY20. As of March 31, 2021, the company had cash & cash equivalents (including short-term investments) of RMB 17.27 billion and no outstanding debt.

Key Risks: ATHM generates most of its revenue from a limited number of customers. In FY20, its top 5 customers accounted for 22.7% of its media services revenue. The loss of any of these key customers could hurt the company's financials. In addition, ATHM operates in a highly competitive media and services industry and faces direct competition from automotive websites and mobile applications such as BitAuto and Dongchedi and online automobile transaction platforms such as Uxin and Guazi, which could undermine its business interests.

Moreover, 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 FY21E 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 has declined 35.80% in the past month 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 far lower than its 50 and 200 DMA levels, and its RSI Index is 23.84. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 50.53. Considering the significant correction in the stock price, increasing demand for online vehicle service platforms, solid financial performance, tremendous growth potential, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 38.22, up 1.25% as of August 18, 2021.

 * 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.

Leju Holdings Limited

LEJU Details

Leju Holdings Limited (NYSE: LEJU) is an online to offline (O2O) real estate services provider in China. LEJU offers e-commerce, advertising, and listing services of real estate in 391 cities on its platform. It has combined its online portal with offline services to facilitate residential property and home renovation transactions. In addition to its websites and mobile applications, LEJU also operates the real estate and home furnishing websites of SINA Corporation (SINA), China's leading internet media company. As of August 17, 2021, the company's market capitalization stood at USD 201.89 million, with 136.41 million American Depositary Shares (ADS) listed and outstanding (each ADS representing one ordinary share). 

FY20 Results: The company reported YoY growth of 3.89% in total revenues to USD 719.53 million in FY20 (ended December 31, 2021) compared to USD 692.61 million in FY19, attributable to an 18.78% growth in revenue from Online Advertising. Net income for FY20 was USD 21.0 million, 1.93x higher than USD 10.87 million reported in FY19. As of December 31, 2020, the company had cash & cash equivalents (including short-term investments) of USD 288.79 million and no outstanding debt.

Key Risks: China's major urban canters Beijing, Hainan, Guangzhou, and Ningbo, accounted for 38% of LEJU's revenue in FY20. As a result, any unfavourable changes in the economic environment of these markets could significantly affect its financial performance. In addition, LEJU faces direct competition from real estate listing and internet portals such as fang.com and anjuke.com and online mobile applications such as toutiao.com, which could undermine its business interests.

Moreover, 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.

Outlook: In FY21, LEJU expects to generate revenues in the range of USD 755 - 790 million, representing a 5% - 10% growth over FY20 revenues.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

LEJU Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: LEJU's share price has decreased by 26.67% and 62.47% in the past three and six months, respectively, and has breached its previous 52-week range of USD 1.44 to USD 3.97. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 32.23. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 1.84. Considering the significant correction in the stock price in the past six months, the increasing demand for digital services, no long-term debt, and the associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 1.43, down 3.38% as of August 18, 2021.

* 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.