Bitauto recently announced that their CTO, Lei Zhu, has resigned. Zhu will now be the CEO of a car company that is keyed onto Artificial Intelligence and IoT within Bitauto's platform.
Bitauto, a leading provider of internet content, marketing and transaction services in China's fast-growing automotive industry, recently posted its third quarter results. Although revenues were largely in line with consensus, earnings beat analyst estimates driven by better than expected savings from SG&A in 3Q18. However, analysts reduced earnings estimates for Bitauto due to rising concerns on account of a slowdown in China’s auto vehicles industry and rising competition. Despite these concerns, Bitauto continues to focus on its strategy of increasing user growth. The company released a major update to its app which significantly drove its daily average user growth. Therefore, in our view, the current share price fairly reflects the balance of risk versus reward.
3Q18 revenues were RMB2.72bn, in line with consensus, driven primarily by the growth in the digital marketing business which recorded a 47.7% Y-o-Y growth in the third quarter (revenue reached RMB 305m in 3Q18 in comparison to RMB 206.5m in 3Q17). The increase in the digital marketing business was driven by a higher spending from advertising customers. Despite a slight decline in operating margins due to increasing funding costs (gross margin in 3Q18 dipped from 63.1% in 2Q18 to 61.3%), adjusted net profit grew 116% Y-o-Yon account of better than expected savings from SG&A in 3Q18. The adjusted net profit reached to RMB 266m, beating analyst consensus of RMB 250m.
Even as traffic and brand purchases transform into more marketing spending, Bitauto is still determined to increase their users. Bitauto recently started a new app update that focuses on more efficient content recommendations, social features with review functions, a new design and user interface, updated features that cover 95% of the top car models, and AI-based tools to help boost consumer service efficiency. These new updates increased the daily average user growth by 25% in one money as well as overall user engagement.
Edited by M. Hunt
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