Nomura resumed coverage on Zhongsheng Group (00881) with a "buy" rating and a target price of HK$56.5.
The research house said there is much to like regarding Zhongsheng's geographical reach, company size, and brand portfolio; the merits and catalysts are enough to justify a 20x P/E valuation due to a well established recurring after-sales service model.
At the same time, Nomura is bullish on the long-term outlook for luxury personal vehicles (PVs), which is estimated to grow at a high-single-digit rate annually to FY2022.
Nomura expects nine net new store openings to 369 shops this year, coupled with low-single-digit new car sales growth and 2H pent-up demand, to offset the 7.8% 1H drop in unit sales due to COVID-19, resulting in a 2020 revenue (including aftersales services) increase of 4.7% to CNY129.8bn.
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