Autohome At Home In China Auto Buyer Website Market

By
A A A

You might say that Autohome is in the driver's seat as the leading online destination for automobile consumers in China.

Through its two websites, autohome.com and che168.com, it leads the auto website market in China in all key metrics, including daily users, page views and time spent online, the company reports. In 2013,Autohome ( ATHM ) accounted for about 47% of the total time that China's Internet users spent viewing automotive information online, more than four times that of its closest competitor. As of Sept. 30, it averaged 5.7 million daily users.

It's a good place to be. China is the world's largest car market, as measured by sales volume of new automobiles. Carmakers in China sold 21.98 million vehicles in 2013, up 14% from 2012, according to the China Association of Automobile Manufacturers. China also has the most Internet users by country -- 591 million at the end of June 2013.

"Our mission is to engage, educate and inform auto consumers with everything they need to know about buying, owning and selling cars," Autohome CEO James Qin said on a conference call with analysts after the company reported fourth quarter results on Feb. 24.

How The Business Works

Autohome generates revenue through ads from automakers and auto dealers, extending the reach of their physical showrooms to millions of Internet users.

Revenue in the fourth quarter rose 74% to $63.8 million from the year-ago quarter. The company reported earnings per share, minus items, of 21 cents, both beating the consensus estimates of Wall Street analysts. In 2013 revenue rose 66% to $201 million, with net income of $75.3 million, up 114% from 2012. It reported cash and equivalents of $188 million.

For the first quarter Autohome expects revenue between $52.5 million and $54.8 million, a rise of 55.6% to 62.5% from a year earlier.

Autohome became a publicly traded company in the U.S. on Dec. 11, raising $133 million by offering 7.8 million shares at $17, above the upwardly revised range. The stock rose 77% on its first day of trading.

"We are in the right place at the right time," Qin told IBD in an interview that day. He said the online automotive advertising market in China has achieved rapid growth as a result of the development of China's automotive and Internet industries. Chinese consumers are increasingly Internet-savvy, fueled partly through the success of China Web portals such asSina ( SINA ) andSohu ( SOHU ), he said.

These trends have enabled successful IPOs for other China-based tech companies, such as online travel siteQunar ( QUNR ) and online marketplace58.com ( WUBA ) (profiled in The New America in December), further expanding and enhancing China's Internet audience.

Qin, prior to joining Autohome in 2007, was chief operating officer of 265.com, a website directory service that was acquired by Google that year. He was previously employed by IBM and Hughes Network Systems. He received a master's degree in computer science from the University of Iowa in 1999 and an MBA from Harvard Business School in 2005.

Deals With Dealers

Autohome reported having subscription services with 10,617 dealers at the end of the fourth quarter, up from 5,052 dealers in 2012. The increase was due in part to Autohome's expansion into new geographic markets and deeper penetration into existing markets.

"Consumers in China mostly rely on the Internet for auto-related information than any other medium," Qin said on the conference call.

Citing data from iResearch, Qin said less than 20% of the auto advertising is being allocated to online media, compared with about 40% in the U.S. market. That suggests Autohome has great growth potential.

"Historically the U.S. has been a leading indicator of where China goes in terms of online advertising," wrote Gene Munster, analyst at Piper Jaffray, in a report on Autohome. "We believe that Chinese online ad budgets have the potential to double."

Munster maintained a hold rating on Autohome and a price target of 38.

Qin outlined four growth strategies for 2014. First, Autohome will continue to expand its service to attract more ad dollars from auto dealers.

Second, it will continue to push out its regional footprint, including second-tier and third-tier markets, to gain market share.

Third, Autohome intends to increase its user base by expanding its mobile product offerings.

Fourth, it plans to expand into the used car market, which is still in the early stages in China.

Among rivals in the China market isBitAuto Holdings (BITA) (profiled in The New America in October), which has a marketing relationship with China's Internet search giantBaidu (BIDU). Qin expects competition in the sector to be "furious."

On Monday, Goldman Sachs upgraded Autohome to neutral from sell and upgraded its price target to 34 from 26.

"Similar toSouFun (SFUN), Autohome's leading traffic and specialized content caters well to brand advertisers in the underlying industry," analyst Piyush Mubayi wrote. "Its margin profile is comparable to leaders in other verticals, reflecting the website's organic traffic source and high quality execution."

Autohome's largest shareholder is Telstra Holdings, a wholly owned subsidiary of Telstra Corp., the leading telecommunications company in Australia.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: ATHM , SINA , SOHU , QUNR , WUBA

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

Stocks

Referenced

Most Active by Volume

91,252,153
  • $13.78 ▼ 4.31%
68,133,496
  • $12.93 ▲ 6.77%
57,268,074
  • $46.13 ▲ 2.47%
43,432,023
  • $105.22 ▲ 0.37%
40,880,685
  • $13.46 ▲ 8.90%
40,712,405
  • $98.62 ▲ 0.82%
39,776,976
  • $16.72 ▲ 0.72%
34,688,871
  • $11.16 ▲ 3.05%
As of 10/24/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com