ZhengTong Auto Delivers Remarkable 2010 Annual Results

Turnover and Profit Attributable to Equity Holders Increased by 61.3% and 89%

• Focusing on premium branded automobile dealership
• Optimizing the automobile dealership network

HONG KONG, March 14, 2011 /PRNewswire-Asia/ --

ZhengTong Auto Services Holdings Limited (“ZhengTong Auto” or the “Company”, together with its subsidiaries, the “Group”, stock code: 1728.HK), the second largest BMW dealer and the major 4S dealership group in China in terms of number of stores, today announced its annual results for the year ended 31 December 2010 (the “year under review”).

During the year under review, the automobile sales market has been growing rapidly. With the continuous enhancements of the dealership network and operating efficiency of its automobile dealership business, the Groups achieved satisfactory results. For the year ended 31 December 2010, the Group generated turnover of approximately RMB8,034 million, representing an increase of approximately 61.3% over the same period of 2009. The gross profit for the year has increased by 74.9%, reaching approximately RMB726 million. Gross profit margin increased by 0.7% points to 9%. Profit attributable to equity holders of the company was RMB276 million, representing a significant increase of 89.0% over the same period of last year. Net profit margin also increased by 0.7% points to 3.7%. Earnings per share amounted to RMB18 cents.

Chief Executive Officer of ZhengTong Auto, Mr. Wang Kunpeng said, “While the global economy was gradually recovering in 2010, the economy of China maintained steady and yet fast growth. The government’s proactive measures to boost consumption and fast growing disposable income of households became the major drivers of the rapid growth in the automobile sales market. As a premium branded automobile dealership group, the Group fully capitalizes on the tremendous potential in the passenger automobile market in China. During the year under review, the Group adopted its strategies consistently to specialize in the dealership of premium branded automobiles through the expansion of 4S dealership network by establishing new dealership stores and placed its strategic focus on the popular premium branded automobiles in China such as BMW, MINI and Audi. Meanwhile, the Group endeavored to enhance the operating efficiency of its automobile dealership business and achieved satisfactory results both in regional expansion and brand building.”

During the year under review, the Group generated revenue mainly from the sales of new automobiles, whereas the remaining from the provision of after-sales services. During the year, revenue from the sales of new automobiles amounted to approximately RMB7,009 million, representing an increase of approximately 64.1% over the same period of 2009, and accounted for approximately 87.2% of the total revenue for the year ended 31 December 2010; whereas revenue from the provision of after-sales services amounted to approximately RMB602 million, representing an increase of approximately 58.1% over the same period of 2009, and accounted for approximately 7.5% of the total revenue for the year ended 31 December 2010.

After years of development, the Group has successfully expanded its automobile dealership business in 14 cities. It has 24 dealership stores (2009: 17 stores) covering not only the developed automobile market such as the affluent first tier cities or provincial capitals, but also areas where the GDP per capita is higher than the average nationwide level namely Inner Mongolia, Hunan, Hubei and Jiangxi, and the mid-west market where the automobile penetration is relatively low. The Group holds key positions in first tier developed cities and fast growing cities. During the year, the Group extended its coverage to higher growth regions and forayed into the first premium in northern China.  

The Group has been devoted in expanding its premium branded 4S dealership network and continuing optimizing the middle market brands network. In response to the huge market demand for premium automobiles, its brand strategies focused on the most popular premium and ultra premium brands in China, namely BMW, MINI and Audi, where its sales proportion continued to increase. During the year, revenue from the sales of premium and ultra premium branded automobiles accounted for 68.5% of the total revenue from the sales of new automobiles of the Group.

Having maintained years of relationship with BMW, the Group is currently the second largest BMW dealer in China and the only BMW dealer which covers 6 provinces and cities. For the year ended 31 December 2010, the Group operated 10 BMW dealership stores. During the year, Porsche became the first ultra premium brand of the Group through its dealership. Located in Dongguan, the Porsche 4S dealership store has commenced operation which further expanded the Group’s brand portfolio through dealership networks. In addition, the Group’s BMW flagship store in Guangzhou and Audi flagship store in Shanghai also commenced operation at the end of 2010.

Looking into the future, ZhengTong will continue to consolidate and enhance its leading position in the dealership of premium branded automobiles in China, and endeavor to strengthen the core business of automobile dealership, expand the existing dealership network and optimize the existing portfolio of premium branded automobiles. The Group intends to expand its 4S dealership stores to 48 stores and 68 stores respectively in 2011 and 2012, where the majority of the dealership stores feature premium and ultra premium branded automobiles. On the basis of balanced development, the Group will also endeavor to expand and optimize the network distribution for automobile dealership and strengthen its leading position in the existing regions. Meanwhile, the Group will step up the development of the customer-oriented after sales services, strive to speed up the growth of used automobiles as well as automobile financing and insurance business, and carry on strengthening its after sales core business segment to ensure steady and sustainable growth of the Company.

Mr. Wang Kunpeng concluded, “The Company will become a leading premium branded 4S dealership group in China by differentiating and growing itself in the fast growing automobile market in China in an effort to maximize the returns for shareholders. In the course of this, ZhengTong Auto’s team will make the best endeavor to contribute to the Group’s development and continuous progress. ”

About China ZhengTong Auto Services Holdings Limited

ZhengTong Auto is the second largest BMW dealer and a major 4S dealership group in China focused on premium brands such as BMW, MINI and Audi. In addition to the premium brand dealership, the Group also operates dealership stores for ultra premium brand such as Porsche, and middle market brands such as Nissan and Honda. The Group operates 24 dealership shops covers 14 cities in China provides them with a strong presence in both the large, established automobile markets of the affluent regions of China as well as the rapidly developing regions. Each of the dealership stores is a 4S dealership store that integrates four principal automobile-related businesses: sales, spare parts, service and survey, and offers a broad range of sales and services.

Issued by Porda Havas International Finance Communications Group for and on behalf of China ZhengTong Auto Services Holdings Limited. For further information, please contact: 

Porda Havas International Finance Communications Group

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