Tuhu's 1H26 revenue was in line, while non-operating gains boosted profit; store expansion accelerated and GPM is expected to stabilize in 2H26

Overview

The report reviews Tuhu Car's 1H26 results, focusing on store expansion, growth despite industry contraction, GPM trends, expense investment, AI applications and the share-repurchase plan. Goldman Sachs believes the company continues to gain share in a weak industry and that its long-term business model has expansion potential, but aggressive near-term pricing and cost pressures continue to limit margin improvement. It therefore maintains its Neutral rating.

Core views

Tuhu's 1H26 revenue was approximately RMB8.8 billion, up 11% year over year and broadly in line with Goldman Sachs' forecast. Adjusted net profit was RMB240 million, down 42% year over year, 12% above Goldman Sachs' forecast but 4% below Visible Alpha consensus. The profit beat was mainly attributable to higher-than-expected government grants recognized in other income and gains, rather than materially stronger-than-expected core operations. By segment, revenue from tires and chassis parts increased 19% year over year to RMB3.9 billion, 7% above Goldman Sachs' forecast; auto-maintenance revenue increased 6% to RMB3.1 billion, 4% below Goldman Sachs' forecast; Longteng Auto Parts revenue declined 2% to RMB714 million, 9% below expectations; and advertising, franchise and other services revenue increased 11% to RMB571 million, 2% below expectations. 1H26 GPM was 23.3%, down 1.8 percentage points year over year and up 0.2 percentage points half over half, and 0.2 percentage points above Goldman Sachs' forecast. The year-over-year pressure mainly reflected the company's more value-oriented pricing amid weak demand and intense competition, with average selling prices for tires and maintenance declining approximately 5% year over year, as well as higher raw-material costs driven by the situation in the Middle East and the Russia-Ukraine conflict and a high comparison base. Management expects 2H26 GPM to stabilize half over half as selling prices recover and supply and demand rebalance. Goldman Sachs further expects 2H26 GPM to increase 0.3 percentage points half over half to 23.6%, mainly driven by lower costs at self-operated Tuhu workshops, and raised its 2026 GPM forecast by 0.2 percentage points. Management continues to target a long-term GPM of 30%, but Goldman Sachs believes visibility into near-term improvement remains limited. Store expansion is the primary growth driver. Tuhu had 8,825 Tuhu workshops at the end of 1H26, with 817 net additions during the first half, broadly in line with Goldman Sachs and Visible Alpha consensus; stores in tier-two and lower-tier cities accounted for 60% of the total. Management reiterated its target of reaching 10,000 Tuhu workshops by the end of 2027 to consolidate its leading position amid industry consolidation and proposed expanding to 15,000 to 20,000 over the long term, reducing the number of passenger vehicles served per workshop from approximately 30,000 recently to approximately 20,000. Goldman Sachs expects approximately 11,800 Tuhu workshops by the end of 2028, indicating continued capacity expansion over the next several years. Despite weak industry demand, the company continued to gain share in its major categories. Management stated that 1H26 tire and motor-oil sales volumes increased 18% and 12% year over year, respectively, while the industry declined 2% and 7% over the same period. Online and offline revenue from quick-repair services increased 38% and 68% year over year, respectively; light auto-detailing order volume increased 120%, while the cross-category repurchase rate remained stable at approximately 40%, supporting both customer acquisition and retention. The report also expects year-over-year growth in trailing-12-month transacting users to reach 18% in 2H26. As of 1H26, trailing-12-month new-energy vehicle transacting users totaled 5.3 million, with new-energy vehicle user penetration at 17%, indicating that NEV-related services have established a certain user scale. However, faster NEV penetration is also a clear risk to traditional aftermarket demand. Expense investment remains focused on supporting growth. Adjusted operating expenses increased 13% year over year, 2% above Goldman Sachs' forecast, mainly because sales and marketing expenses exceeded expectations. The sales and marketing expense ratio increased 0.3 percentage points year over year, driven by customer acquisition through third-party channels such as Douyin and Meituan and promotional support for rapid store expansion. Meanwhile, the general and administrative and R&D expense ratios declined 0.5 and 0.2 percentage points year over year, respectively, reflecting operating leverage from scale and AI-driven efficiency improvements. Management believes the adjusted operating expense ratio could still trend toward approximately 20% over the long term. Goldman Sachs expects higher spending on online traffic acquisition and offline store-expansion marketing to offset lower general and administrative and R&D expenses and therefore broadly maintains its 2026—2028 adjusted net profit forecasts. AI has been applied to internal operations, customer interactions, supply chain and store management. AI coding shortened average R&D delivery time by approximately 35%, while more than 140 AI agents participated in product selection, pricing and data analysis. In 1H26, the resolution rate of AI customer service inquiries increased 8.4 percentage points year over year. The company also uses AI for demand forecasting, inventory allocation, logistics optimization, technician-assisted inspections and remote safety monitoring. Management views it as a tool to improve efficiency and user experience rather than as an independent revenue source. Regarding capital returns, the company has repurchased approximately 43.50 million shares year-to-date in 2026, representing approximately 5.3% of shares outstanding, above the approximately 30.10 million shares and 3.6% in 2025. On June 29, Tuhu announced a new repurchase plan of up to HK$1.5 billion, equivalent to 15% of its market capitalization. The plan includes repurchasing and canceling no fewer than 50.00 million shares, or approximately 6% of shares outstanding, by the end of July 2028, as well as raising the cap on shares purchased by the trustee for future employee share awards. As of 1H26, the company held RMB6.5 billion in net cash, equivalent to 66% of its market capitalization, providing a funding base for the repurchase plan. Goldman Sachs broadly maintains its 2026—2028 revenue forecasts: the new forecasts are RMB18.4675 billion, RMB20.7101 billion and RMB22.4968 billion, respectively, versus previous forecasts of RMB18.5246 billion, RMB20.6397 billion and RMB22.3220 billion. The table shows that 2026—2028 EPS forecasts were revised from RMB0.65, RMB0.84 and RMB1.00 to RMB0.67, RMB0.86 and RMB1.01, respectively. Goldman Sachs also expects 2H26 revenue to increase 13% year over year, with an adjusted net margin of 3.1%. From an investment perspective, Goldman Sachs recognizes Tuhu's relatively resilient business, the replicability of its digital capabilities and standardized franchise model, and the support for long-term earnings expansion from private-label sales growth and operating leverage under its asset-light model. However, aggressive pricing, rising raw-material and merchandise costs, and higher oil prices that could lengthen maintenance and parts-replacement cycles mean that near-term margin improvement remains insufficiently clear. Goldman Sachs maintains its Neutral rating and 12-month target price of HK$13, still based on 15 times next-12-month P/E. Based on the HK$11.99 share price stated in the report, the potential upside is 8.4%.

Analysis framework

Goldman Sachs first compares 1H26 revenue, segment revenue, margins and expenses with its own forecasts and Visible Alpha consensus, then combines management's earnings-call commentary to analyze store expansion, industry share, new businesses, AI efficiency and capital returns. It subsequently projects 2H26 margins based on selling prices, raw-material costs, self-operated store costs and expense leverage, updates its 2026—2028 forecasts accordingly, and finally determines the target price using next-12-month P/E.

Methodology notes

• Valuation MethodPE/PEG valuation

  Next-12-month target P/E valuation

  The report values Tuhu at a target P/E of 15 times next-12-month earnings and accordingly derives a 12-month target price of HK$13.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Breakdown of sales volume, average selling price and revenue by segment

  The report separately examines sales-volume growth in categories such as tires and motor oil, an approximately 5% decline in average selling prices for tires and maintenance, and changes in segment revenue to assess market-share gains and GPM pressure.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-demand rebalancing and cost pass-through

  Management attributes the decline in 1H26 GPM to demand, competitive pricing and raw-material costs and expects recovering selling prices and supply-demand rebalancing to stabilize 2H26 GPM half over half.

• Corporate Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Store-expansion investment and back-office expense leverage

  The report attributes higher sales and marketing expenses to customer acquisition and store expansion, while using scale effects and AI efficiency to explain declines in general and administrative and R&D expense ratios, and assesses how the two offset each other's impact on net profit.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Tuhu Car (9690.HK)

  A Chinese independent automotive aftermarket service provider; the report believes it benefits from store expansion, industry consolidation, category share gains and digital efficiency, but near-term margins remain constrained by pricing and costs.

  Strengths

  Its leading revenue scale in China's independent automotive aftermarket, integrated online-offline platform, standardized franchise model, digital capabilities, net cash and continued share repurchases constitute its main strengths.

  Weaknesses

  Its recent market-share strategy relies on more value-oriented pricing and higher customer-acquisition investment, placing pressure on GPM and earnings growth.

  Comparison

  1H26 tire and motor-oil sales volumes increased 18% and 12%, respectively, significantly outperforming the industry's declines of 2% and 7% over the same period.

  Risks

  Rising raw-material costs, weakening aftermarket demand, changes in consumer behavior, faster new-energy vehicle penetration, and higher-than-expected investment in store expansion and customer acquisition.

Key data

• 1H26 RevenueApproximately RMB8.8 billionUp 11% year over year and broadly in line with Goldman Sachs' forecast
• 1H26 Adjusted Net ProfitRMB240 millionDown 42% year over year, 12% above Goldman Sachs' forecast and 4% below Visible Alpha consensus
• 1H26 GPM23.3%Down 1.8 percentage points year over year and up 0.2 percentage points half over half, 0.2 percentage points above Goldman Sachs' forecast
• Number of Tuhu Workshops at End-1H268,825817 net additions in the first half; tier-two and lower-tier cities accounted for 60% of total stores
• Tire and Motor-Oil Sales Volumes+18%/+12% year over yearIndustry sales volumes declined 2% and 7%, respectively, over the same period
• Online and Offline Revenue from Quick-Repair Services+38%/+68% year over year1H26 growth rates stated by management
• Light Auto-Detailing Orders and RepurchasesOrder volume +120% year over year, cross-category repurchase rate approximately 40%Continued to support customer acquisition and retention in 1H26
• Expected 2H26 GPM23.6%Up 0.3 percentage points half over half from 1H26, mainly driven by lower costs at self-operated Tuhu workshops
• 2H26 Operating ForecastRevenue +13% year over year, adjusted net margin 3.1%Goldman Sachs forecast
• Repurchases Year-to-Date in 2026Approximately 43.50 million sharesApproximately 5.3% of shares outstanding
• New Share-Repurchase PlanUp to HK$1.5 billionEquivalent to 15% of market capitalization, including the repurchase and cancellation of no fewer than 50.00 million shares by the end of July 2028
• 1H26 Net CashRMB6.5 billionEquivalent to 66% of market capitalization
• 12-Month Target PriceHK$13.00Based on a target P/E of 15 times next-12-month earnings; 8.4% upside versus the current price of HK$11.99

Impact & implications

The report believes Tuhu is consolidating its leadership in China's independent automotive aftermarket through rapid store expansion, category share gains and digital operations, while back-office expense ratios and AI efficiency also demonstrate long-term operating leverage. However, current market-share gains are accompanied by lower selling prices and higher marketing investment, while raw-material costs weigh on GPM. Whether GPM can stabilize in 2H26 is therefore key to the gradual realization of its long-term earnings potential.

Risks

• An upside risk is faster-than-expected market-share expansion, which could drive stronger revenue growth.
• An upside risk is faster-than-expected growth in private-label products and supply-chain optimization, which could improve GPM.
• An upside risk is the rapid scaling of high-margin services, which could enhance overall profitability.
• A downside risk is continued increases in raw-material and merchandise costs, placing greater pressure on GPM.
• Aggressive pricing and intense competition could result in weaker-than-expected near-term margin improvement.
• Changes in consumer behavior and higher oil prices could lengthen maintenance and parts-replacement cycles, weakening aftermarket demand.
• Faster-than-expected new-energy vehicle penetration could weaken demand for some traditional automotive aftermarket services.

What to watch

• Monitor whether 2H26 GPM can increase from 23.3% in 1H26 to Goldman Sachs' forecast of 23.6%, as well as the contributions from selling-price recovery and cost reductions at self-operated Tuhu workshops.
• Track whether the number of Tuhu workshops can reach 10,000 by the end of 2027 and progress toward Goldman Sachs' forecast of approximately 11,800 by the end of 2028.
• Monitor sales volumes and market-share changes in core categories such as tires, motor oil and auto maintenance relative to the industry.
• Track whether year-over-year growth in trailing-12-month transacting users can reach 18% in 2H26 and changes in new-energy vehicle user penetration.
• Monitor whether businesses such as quick repair, light auto detailing and private-label products can improve margins while scaling up.
• Observe the balance between sales and marketing investment and leverage in general and administrative and R&D expenses, as well as progress toward an adjusted operating expense ratio of approximately 20% over the long term.
• Track execution of the share-repurchase plan of up to HK$1.5 billion and the target to repurchase and cancel no fewer than 50.00 million shares by the end of July 2028.