Grand Baoxin Auto Announces 2017 Interim Results

Continuously Enhancing Synergies; Profit Attributable to Owners of the Parent Increase 521.3%

HONG KONG — Grand Baoxin Auto Group Limited (“Grand Baoxin Auto” or the “Company” and, together with its subsidiaries, the “Group”, Stock Code: 1293.HK), a leading luxury 4S dealership group in China, today announced the interim results for the 6 months ended 30 June 2017 (“period under review”).

In the first half of 2017, through integration with the CGA Group last year, the Company further optimized its operation and management capabilities within regions and 4S stores, and continued to deepen cooperation among business sectors, resulting in stable development of new automobile sales and after-sales services, substantial increase in business income of the automobile value-added business, and the overall enhancement of profitability and sustainable development of its stores. For the six months ended 30 June 2017, the Group’s revenue was RMB15,671.0 million, representing a growth of approximately 44.1% compared to the same period in 2016. Gross profit increase by 40.5% to RMB1,344.0 million as compared to the corresponding period in 2016. Profit attributable to owners of the parent significantly increased by 521.3% to RMB400.3 million as compared to the corresponding period in 2016. And basic earnings per share increased by 433.3% to RMB0.16 as compared to the corresponding period in 2016.

Further Advancement of Internal Integration Continuously Enhancing Synergies

In the first half year of 2017, the Group continuously optimize business model through stable sales and after-sales business development of new automobiles, and continued to increase the contribution from value-added automotive business, forming mature business development models and distribution services systems for automobiles to allow for the sustainable development of the traditional business and extended business. In addition, The Group further enhancing its management system and the ERP management system has been fully functional in all regions and 4S stores. Such information management system could provide timely solid basis for the management and decision-making at headquarters and regions, significantly enhancing management efficiency and maximizing synergies.

Stable Recovery of New Automobiles Sales Volume Increased by 56.6% YoY

During the period, the Group upgraded its sales management system and fully enhanced the new car price management model through resources integration to strengthen the ability to obtain manufacturers rebate, increase the penetration rate of whole car extended business, thereby stabilizing and improving consolidated gross margin of new automobiles.

Regarding new automobiles sales, as at 30 June 2017, the Group had sold a total of 45,591 new cars, representing a year-on-year increase of 56.6%, of which sales for luxury brand cars was 33,040, representing a year-on-year increase of 36.7%, and sales for cars of medium- to high-end brands amounted to 12,551, representing a year-on-year increase of 153.9%.

Regarding after-sales services, the Group continued to strengthen internal control, integrate resources and streamline management and carried out innovative projects and introduced new products to enhance the overall scale of after-sales services. Meanwhile, the Company fully focused on and met the different maintenance requirements and experience of customers for various models and age groups. Also continued to carry out technical upgrade and innovation, develop products and services to meet customer needs, nurture and strengthen online and offline customer communication channels to increase customer retention rate. As at 30 June 2017, revenue from after-sales services of the Group reached 1,754.3 million, representing a year-on-year increase of 30.5%, and gross margin of after-sales services increased to 47.6%.

More Profit Contribution from Automobile Value-added Services
Commission Income Increased by 83.6% YoY

During the period, the Group and Grand Auto company Limited initiate close and deep cooperation in fields like insurance, pre-owned automobile business and automobile finance business. In the first half year of 2017, the proportion of gross profit contributed by automobile value-added services amounted to 18.1%, representing a year-on-year of 3.7%.

The Group continued to improve the organization structure and system of the insurance business department, and stepped up internal evaluation on first-time insurance, insurance renewal and extended insurance services to enhance the penetration rates of various businesses. In the first half of 2017, the commission income from the Group’s automobile insurance business increased by 162.4% as compared to the same period in 2016, the ratio of first-time insurance of the Company increased by 2.6% as compared to the full year of 2016, the average commission rate of return increased by 10%. The insurance renewal rate and commission rate of return on insurance renewals also increased by different extents.

Starting from the second half of 2016, the Company’s pre-owned automobile business model upgraded to all-round pre-owned automobile business in various automobile consumption segments surrounding the customers of 4S stores and the sources of automobiles were more diversified. Meanwhile, the Company established a brand new performance evaluation system and management system for pre-owned automobiles. Thus the trading volume of pre-owned automobiles increased by 258% in the first half of 2017 on the year-on-year basis.

Leveraging on the experience and management of All Trust Leasing, a wholly-owned subsidiary of CGA Group, in automobile finance business, the Company developed its automobile finance business through the Group’s stores. Through collaborated development of automobile loans and finance leasing business, the Company provided its customers with diversified financial instruments for purchase and use of automobiles, thus achieving a persistent increase in its financial penetration rate reached over 40%, representing an increase of 9% as compared to the first half of 2016.

Further Improved Distribution Network Layout Become the Agent for Alfa Romeo

In the first half of 2017, following its brand and regional strategies, the Group expanded its distribution networks into regions with great market potential. Apart from a new 4S store of BMW in Wuxi, the Company has newly acquired six 4S stores and a showroom, including two 4S stores of BMW, two 4S stores of Porsche, a showroom of Porsche and two 4S stores of Maserati in March. Through such layout expansion in developed areas in the middle and lower reaches of the Yangtze River, the Company further integrated with the acquired companies in aspects such as brand layout management, region management, business cooperation, salary and performance appraisal management and fund management. The new stores of Maserati have further expanded the Group’s distribution network of the brand, making the Group the largest distributor of the brand in China. In the first half of the year, the Company newly became the agent for the brand Alfa Romeo. As at 30 June 2017, 7 stores have obtained the distribution rights of the brand. As at 30 June 2017, the Group had 108 automobile dealership stores, including 86 stores for luxury brands, 17 stores for mid- to high-end brands, 2 independent repair centers and 3 decoration and damage assessment centers.

Mr. Li Jianping, Chairman of Grand Baoxin Auto Group Limited said: “The successive launch of new models of BMW and Jaguar & Land Rover and the rapid growth of Maserati will provide the space of rapid growth for all business segments of the Group. Meanwhile, the Group will grasp the development trend of the post-automobile service industry, explore and expand on new investment areas, extend the industrial chain and build the ecosystem for the whole industry chain of automotive services. In the future, we will continue to improve and implement prudent business strategies, make timely adjustments to the development direction by focusing on our long-term interests, adapt to the latest trend and grasp opportunities in the market. Based on traditional business such as sales and maintenance of new cars, the Company will vigorously develop insurance, extended insurance, second-hand vehicles, automobile finance and other formats of business to enhance its profitability.”


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