Deutsche Bank maintains auto overweight rating of USD 39

In the early hours of August 8 in Beijing, Deutsche Bank issued a study in Thursday to keep Nyse:athm's stock rating at auto (Hold) unchanged, while its target price was raised from $37 trillion to $5.4% to $39.

The following is a summary of the contents of the report:

and Baidu Aladdin's cooperation to consolidate the dominance of the PC market, E-commerce business in the "product" phase

-second-quarter results exceeded expectations;

Auto's second-quarter revenue was 507 million yuan (up 72% year-on-year and 48% per cent), exceeding the upper limit of the company's expected range (up 66% per cent), compared to our expectations and Wall Street analysts ' average expectations of 3% and 4% respectively. Auto's earnings for the second quarter, at $0.31 trillion, were 22% and 21% higher than our forecasts and Wall Street analysts ' average, mainly because of the impact of operating leverage. Auto's outlook for third-quarter revenues grew 53% to 59% Year-on-year, largely in line with or better than expected.

We expect that in the second half of the auto will still achieve strong revenue growth, mainly due to: 1 distributor penetration rate increased, especially in the lower-line cities (the second quarter of the number of paid dealers increased 86%); 2 in the PC business with the Baidu (Nasdaq:bidu) Aladdin platform cooperation will bring positive results (The number of daily active users in the PC business grew by 14%); 3) Mobile Traffic (25% in the chain, 40% in total traffic) is still at a low level; 4) The E-commerce business is progressing stably.

But given the increase in the number of employees due to auto's reinvestment and geographical expansion plans, we are cautious about its profitability. We keep the auto stock rating unchanged.

-with Baidu Aladdin platform after the first month of cooperation is the flow of significant increase:

While mobile is still a priority driver for growth, we believe that auto is balancing its PC and mobile business to get the maximum return on profits. Auto has been grabbing PC traffic from rivals since working with Baidu Aladdin, according to the data released by the auto, which showed that the number of clicks and visitors from Baidu in July grew by 48% and 37% respectively, Thus the July PC business daily active users pushed up to 7.4 million people, the chain growth of 14%, effectively safeguarding the company's position in the PC market leadership.

While we expect the dealer business (up 118% in the second quarter) to continue to gain momentum from the positive results of Auto's cooperation with Baidu, the company's profitability outlook remains conservative, given that the associated costs are expected to increase in the next 12 months ( Deutsche Bank estimates that the 2014 and 2015 fiscal auto do not have operating margins of 47% and 44% per cent of the U.S. General accounting standards.

-The steady development of E-commerce business, limited profit and loss impact

We note that auto's online trading business is stable: 1 sales in May Auto sold 1000 cars, June Car mall sales were 3,000; 2 July Car Mall offers 47 cars from 195 brands, compared to 36 cars from 137 brands in June.

Although auto is testing 4 e-business models (discounts, presale, fixed prices, and auto only), most of the potential customers so far come from cash discounts offered via the PC platform. Auto's main competitor, easy Car network, is also actively promoting its E-commerce platform (which can buy cars and shopping malls), while Auto is still focused on acquiring user traffic and nurturing user behavior. We expect that e-commerce business has little impact on auto profit and loss.

-Raise the target price 5.4% to 39 USD; maintain the "hold" rating:

We will increase the 2014, 2015 and 2016 auto revenue estimates by 3%, 4% and 8% respectively, while their earnings per share of the expected increase of 8%, 2% and 6%, mainly due to Baidu Aladdin related cost impact. The new target price we set for the auto stock is based on a peg value of 1 time times 3, which means it is 35 times times earnings per share in fiscal year 2014. We keep the auto stock rating unchanged.

Main risk: Competition from other car sites; the commercialization process is faster or slower than expected. (Tangfeng)