Stock Analysis & Valuation CAR Inc. (0699.HK)

• Previous Close: HK$16.86
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, HK$	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method		n/a
Graham Formula	24.40	45

Strategic Investment Analysis

Company Overview

CAR Inc. (China Auto Rental) is a leading car rental service provider in Mainland China, operating as a comprehensive mobility solutions company. Headquartered in Beijing, the company offers short-term and long-term rental services to both individual and corporate customers through its extensive network of 1,098 directly-operated service locations across 118 Chinese cities. CAR Inc.'s business model encompasses short-term rentals for travel needs, long-term corporate leasing, and finance leasing services, complemented by value-added offerings including 24/7 roadside assistance, insurance products, GPS navigation, and vehicle delivery services. As a key player in China's rapidly growing mobility sector, the company leverages its nationwide presence and diversified service portfolio to capture opportunities in the country's expanding transportation market. CAR Inc. represents a critical infrastructure component in China's evolving transportation ecosystem, serving the mobility needs of both urban and inter-city travelers while supporting corporate fleet management requirements across various industries.

Investment Summary

CAR Inc. presents a high-risk investment profile characterized by significant financial challenges. The company reported a substantial net loss of CNY -4.16 billion for FY 2020 despite generating CNY 6.12 billion in revenue, reflecting severe operational pressures. While the company maintains a strong operating cash flow of CNY 5.01 billion and a cash position of CNY 2.18 billion, its elevated total debt of CNY 6.50 billion raises liquidity concerns. The absence of dividends and negative EPS of -1.96 further underscore the company's financial distress. Investors should carefully consider the competitive intensity in China's car rental market, the capital-intensive nature of fleet operations, and the company's ability to navigate pandemic-related disruptions before considering any investment position.

Competitive Analysis

CAR Inc. operates in a highly competitive Chinese car rental market where scale, network density, and operational efficiency are critical success factors. The company's competitive positioning is built on its extensive nationwide network of 1,098 service locations, which provides significant geographic coverage advantages over regional players. However, this scale comes with substantial fixed costs and capital requirements for fleet maintenance and expansion. CAR Inc. faces intense competition from both domestic specialized rental companies and emerging mobility platforms that offer alternative transportation solutions. The company's comprehensive service portfolio, including value-added services like 24/7 roadside assistance and insurance products, provides some differentiation, but these features are increasingly becoming industry standards. The capital-intensive nature of the business creates high barriers to entry but also results in significant financial leverage, as evidenced by the company's substantial debt load. CAR Inc.'s competitive advantage lies in its established brand recognition and corporate customer relationships, though these are being challenged by digital-native competitors with more flexible business models and lower cost structures. The company's financial performance indicates ongoing challenges in converting scale advantages into sustainable profitability.

Major Competitors

• Avis Budget Group, Inc. (CAR.N): Avis Budget Group is a global leader in vehicle rental services with extensive international operations. The company benefits from global scale, brand recognition, and diversified revenue streams across leisure and business segments. However, its limited direct presence in China reduces immediate competitive pressure on CAR Inc. Avis's strength lies in its sophisticated revenue management systems and global partnerships, but it faces challenges adapting to local Chinese market dynamics and competing with domestic players who have deeper understanding of regional customer preferences.
• Hertz Global Holdings, Inc. (HTZ): Hertz is another global car rental giant with significant fleet operations worldwide. The company possesses strong brand equity and extensive airport location coverage globally. However, Hertz has faced financial restructuring challenges and has limited market share in China compared to domestic players like CAR Inc. Its strengths include international network effects and corporate account relationships, but weaknesses include higher cost structures and less flexibility in adapting to local Chinese market conditions compared to domestic competitors.
• eHi Car Services Limited (eHi Car Services): eHi Car Services is a major domestic competitor to CAR Inc. in the Chinese market. The company operates a significant rental fleet and has established a strong presence in key Chinese cities. eHi benefits from local market knowledge and potentially lower operational costs compared to international competitors. However, it faces similar challenges as CAR Inc. regarding fleet utilization rates, maintenance costs, and competitive pricing pressure. eHi's strength lies in its focused China strategy, but it may lack the scale advantages of larger competitors like CAR Inc.
• Didi Global Inc. (DIDI): Didi represents a disruptive competitive force as China's dominant ride-hailing platform. The company offers alternative mobility solutions that compete with traditional car rental services, particularly for short-term urban transportation needs. Didi benefits from massive user base, advanced technology platform, and strong brand recognition in China. However, its focus on ride-hailing rather than rental services means it doesn't directly compete in long-term corporate leasing, which is a core business for CAR Inc. Didi's strength is its digital ecosystem, but it faces regulatory challenges and different capital requirements compared to traditional rental companies.