Production | Tiger Sniff Investment Research
Author ｜ 丁 萍
On March 17, Shenzhou Car Rental announced its 2019 annual results announcement. The total revenue for the year was 7.691 billion yuan, an increase of 19.35% year-on-year. The net profit attributable to the parent was 31 million yuan, a year-on-year decrease of 89.31%.
As China’s “first car rental company”, China Car Rental has experienced a short period of high revenue and profit growth. Since 2016, it has entered a weak revenue growth, net profit has fallen sharply, and its performance has continued to deteriorate. What is the reason behind this? Facing all kinds of difficulties, where do we go from here? Let us interpret them one by one through the financial report.
I. What is the income source of Shenzhou car rental?
China’s car rental income is mainly derived from car rental business and second-hand car sales income, of which car rental business is the company’s largest revenue. In 2019, the leasing business contributed 77.28%, a decrease of 10.59 points compared to 2018.
Data source: company announcement
Second-hand car sales income means that the company will sell second-hand leased vehicles with expired holding periods to end consumers, dealers and franchisees through online bidding and auction platforms.
In 2018, all car rental businesses in China were sluggish, leading to negative growth in total revenue; second-hand car sales revenue increased significantly in 2019, driving the overall revenue growth rate to pick up.
Second-hand car sales revenue in 2018 decreased by 58.64% year-on-year, which was mainly due to the decrease of 56.88% in the disposal of second-hand vehicles in the current period, which was the main reason for the company’s total revenue to decline by 16.5% year-on-year. The leasing business in 2018 only increased by 5.78% year-on-year, and fleet leasing and other revenues were 855 million yuan, a decrease of 32% year-on-year. China Car Rental said that it was mainly due to the reduction in the scale of the China Car Special Car Network.
In 2019, the company disposed a total of 29,203 second-hand vehicles. The sales revenue of second-hand vehicles increased by 93.12% year-on-year to 2.13 billion yuan. Among them, more than 12,000 vehicles were disposed of in the fourth quarter of last year, setting a record quarterly sales record and driving the growth of total revenue. Warm up to 19.35%.
Data source: company announcement
Second, how is the growth and profitability of Shenzhou car rental?
Concerns about second-hand car and leasing business have limited revenue growth. Since 2016, China Car Rental’s revenue and profits have declined to varying degrees, and its performance has continued to deteriorate. In 2019, although the second-hand car sales revenue rose sharply to bring revenueGrowth is picking up, but it has not reversed the downward trend in profits.
China’s car rental revenue scale expanded rapidly from 2012 to 2017, but its revenue growth rate has continued to slow since 2016 and slowed to -16.50% in 2018, making its revenue scale shrink. It was mainly attributable to the decrease of 58.64% in sales of used cars and 31.9% in fleet rental income. The decline in used car sales revenue was mainly due to the decrease in the sale price of used cars, and the decline in fleet rental income was due to the decrease in the number of vehicles on the Shenzhou UCAR.
In 2019, the sales revenue of second-hand cars increased by 93.12% year-on-year, prompting the total revenue growth rate to rise to 19.35% year-on-year.
Data source: company announcement
Revenue growth is picking up, but it hasn’t led to a positive increase in profits.
The net profit attributable to Shenzhou Car Rental continued to be negative in 2012 and 2013, and turned a deficit in 2014, mainly due to the company’s expansion and high operating costs. With the proper control of Shenzhou car rental operating costs, a certain amount of profit space has gradually been released.
The scale of net profit for returnees of Shenzhou Car Rental reached its peak in 2016 and gradually declined after 2017. In 2019, the company achieved net profit of RMB 31 million, down 89.31% year-on-year, which was significantly lower than the growth rate of revenue during the same period.
The main reason is that costs and expenses have not reached effective control. During the reporting period, operating costs increased by 34.27% year-on-year; administrative expenses and financial costs increased by 29.70% and 16.09% year-on-year, respectively.
Data source: company announcement
3. How efficient is Shenzhou Car Rental?
The fleet size is expanding, but the marginal benefits continue to decline, which means that the operating efficiency of Shenzhou Car Rental is decreasing.
From the data point of view, in 2018 and 2019, the fleet size of Shenzhou car rental increased by 31.89% and 10.14% year-on-year, respectively, which are higher than the rental growth of 5.78% and 4.10%. The expansion of the fleet size, but the decline in rental income growth, means that the utilization efficiency of the Shenzhou car rental fleet is decreasing.
Data source: company announcement
The average daily car rental of Shenzhou car rental has increased year by year, while the average daily rent and the average daily income of bicycles have been decreasing year by year. It means that with the expansion of the fleet size, Shenzhou car rental is forecasting demand. Difficulties in managing and dispatching convoys have led to a gradual decline in the marginal benefits of car rental.
In 2019, auto rental business revenue increased by 9.6% year-on-year to