Autohome Inc. (ATHM) PT Lowered to $115 at HSBC for 4 Reasons

HSBC analyst Ritchie Sun lowered the price target on Autohome Inc. (NYSE: ATHM) to $115.00 (from $137.00) as uncertainties mount making the analyst incrementally cautious for 4 reasons:

1) Industry growth momentum is weakening: New cars sales volume grew 69% yoy in 1Q then slowed to 11% in April.

2) Competitors are catching up closely in traffic YTD. Per Sohu news on 15 Apr 2021, Dongchedi set an aggressive revenue target of RMB5-6bn in 2021, vs RMB3bn in 2020 (vs ATHM’s cRMB10bn revenue in 2021e), potentially intensifying competition

3) Leader of data products (Mr. Zhang) resigned

4) Exiting some low-margin business (e.g. offline insurance, unprofitable price competition for customers) and tweaks in business practices (e.g. introducing SMS verification to clean fake leads) could have revenue impact. However, we expect some concerns might be resolved by strategy upgrade details presented by the new CEO Mr. Long in 2H21

The analyst reiterated a Buy rating, stating "We cut our revenue forecasts by 5-6% for 2021-23e to reflect exit of some low-margin businesses and competition risks and hence lower net profit by 4-7%." "We maintain Buy rating because it (1) differentiates against with peers with its targeted used base (42m DAU), comprehensive auto lifecycle solutions and unique high-margin big data products, (2) enjoys rapid growth in under-penetrated used car market, and (3) the market underappreciates its transformation to intelligent auto ecosystem."

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