Autohome: Leading Chinese Automotive Platform Operator

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View of South Xizang roadworthy successful Shanghai, China.

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Elevator Pitch

I grant a Hold concern standing to Autohome Inc.'s (NYSE:ATHM) [2518:HK] stock. On the affirmative broadside of things, ATHM is actively looking astatine caller maturation opportunities, and it continues to instrumentality excess superior to shareholders via buybacks. On the antagonistic broadside of things, manufacture metrics connote that competitors are giving Autohome a tally for their money. Therefore, I person a mixed presumption of ATHM's shares which explains wherefore I person chosen a Hold standing for Autohome.

Company Description

In its fiscal 2021 20-F filing, Autohome describes itself arsenic the biggest "automotive work platform" relation successful China based connected the fig of "daily progressive users" for 2021 according to information sourced from QuestMobile.

An Overview Of ATHM's Business Operations

An Overview Of ATHM's Business Operations

Autohome's IPO Prospectus

As per the illustration presented above, Autohome's cardinal gross streams are pb procreation services, online marketplace products & services, and media services which accounted for 41%, 31%, and 28% of its FY 2021 apical line, respectively.

Intensifying Competition Is The Key Concern

I highlighted successful the preceding conception that Autohome was the marketplace person successful the Chinese car work level abstraction successful 2021. But manufacture information suggests that Autohome's cardinal competitors could beryllium perchance increasing their respective marketplace shares astatine the disbursal of the company.

According to a November 4, 2022 probe study (not publically available) issued by Guotai Junan Securities titled "V-Shaped Rebound" citing information from Chinese automotive probe steadfast MoonFox, the spread betwixt ATHM and its closest rivals is narrowing.

In the 3rd 4th of 2021, the fig of regular progressive users for Autohome was +32% higher than that for Dongchedi. A twelvemonth aboriginal successful the 3rd 4th of 2022, Dongchedi's regular progressive users were a specified +8% little than the fig of regular progressive users that ATHM had successful that quarter. Furthermore, Dongchedi had 32% of its monthly progressive users which interacted with the company's level connected a regular ground for Q3 2022 arsenic compared to Autohome's comparatively little regular progressive users-to-monthly progressive users metric of 27% successful the aforesaid quarter.

Another 1 of ATHM's cardinal rivals, Bitauto, had been overmuch much assertive successful expanding its idiosyncratic basal successful the anterior year. Autohome added a reasonably bully 26.8 cardinal caller users successful the archetypal 9 months of 2022. But this was inferior to Bitauto's 31.4 cardinal caller idiosyncratic additions for the 9M 2022 period.

As a comparison, ATHM boasted a 29.9% gross stock of the Chinese car advertizing and leads procreation segments successful 2019, arsenic per Chinese marketplace probe steadfast iResearch's findings. In contrast, the 2nd and 3rd largest players had overmuch little marketplace shares of 16.8% and 3.9%, respectively successful the aforesaid year. Although iResearch didn't disclose the names of the 2nd and 3rd biggest automotive level operators successful its research, they are apt to beryllium Bitauto and Dongchedi, respectively successful my opinion. It is tenable to travel to the decision that the marketplace stock differential betwixt Autohome and its peers mightiness person shrunk successful the past 3 years.

In summary, Autohome is astir apt inactive the starring automotive level relation successful China, but the company's rivals are catching up reasonably quickly.

New Growth Opportunities And Shareholder Capital Return Are Key Positives

It is simply a interest that ATHM's competitors are gaining ground, but determination are besides agleam spots for the institution relating to caller maturation drivers and its stock buyback program.

Autohome tin perchance present amended than expected gross enlargement successful the aboriginal contempt competitory pressures, if the institution is capable to capitalize connected caller maturation opportunities.

At the company's astir caller Q3 2022 net briefing successful November past year, ATHM revealed that income derived from NEVs surged by +141% YoY successful the 3rd 4th of the anterior year. Moving forward, Autohome's strategy is to unfastened caller carnal stores focused connected NEVs called "Autohome New Energy" arsenic a means of expanding its aboriginal gross publication from this segment. ATHM's archetypal carnal store opened its doors to consumers successful Shanghai successful September 2022, and the institution has plans successful spot to found much of specified stores to showcase caller NEVs successful the adjacent future.

Separately, Autohome disclosed astatine Jefferies' (JEF) 2023 Asia Internet Corporate Access Conference successful early-January that the institution has the volition to found an "one-stop transaction platform" for "used cars", according to a January 5, 2023 Jefferies study (not publically available). This mightiness beryllium a caller maturation operator for ATHM. Earlier successful October 2020, ATHM had made an announcement highlighting that it had invested successful an "auction level for utilized cars" called TTP Car. It is apt that ATHM tin leverage connected its involvement successful TTP Car to enactment its ambitions of gathering a caller integrated idiosyncratic car platform.

It is besides encouraging to enactment that ATHM has been buying backmost its shares successful a meaningful way. Autohome spent $106.3 million connected stock repurchases betwixt the opening of August 2022 and the extremity of October 2022, and it inactive has $93.7 cardinal (approximately 2.1% of ATHM's marketplace capitalization) remaining from its existent stock buyback authorization which lasts till mid-November 2023.

As per S&P Capital IQ's valuation data, Autohome utilized to consistently commercialized astatine statement guardant adjacent 12 months' P/E multiples successful the precocious teens to debased twenties scope betwixt mid-2017 and early-2021. ATHM is presently valued by the marketplace astatine a comparatively little 15.4 times statement guardant adjacent 12 months' P/E, which mightiness beryllium attributable to investors' concerns astir competition. As such, ATHM's buybacks aren't conscionable a means of returning excess capital, arsenic these stock repurchases besides nonstop the connection that the institution sees its shares arsenic undervalued.

Concluding Thoughts

Autohome's shares are deserving of a Hold rating. It is bully to spot that ATHM is exploring caller maturation opportunities successful the country of NEVs and utilized cars, but the institution is besides facing stiffer contention from its closest rivals. Considering some the risks and rewards associated with a imaginable concern successful ATHM, I deliberation that a Hold standing is fair.

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