CICC has published a research report maintaining its earnings forecasts for TUHU-W (09690) for 2026 and 2027. The current share price implies a price-to-earnings ratio of 22.8 times for 2026 and 18.2 times for 2027. The firm keeps its Outperform rating with a target price of HK$15.00, which corresponds to 28.5 times 2026 earnings and 22.8 times 2027 earnings, offering a 25.1% upside from the current price.

The company released its interim results for the first half of 2026, with revenue reaching RMB 8.78 billion, up 11.4% year-on-year. Net profit attributable to shareholders stood at RMB 184 million, while adjusted net profit was RMB 240 million. The first-half performance came in line with expectations, reflecting steady revenue growth.

Revenue growth remained steady, with store expansion in lower-tier cities contributing most of the incremental growth. Segment-wise, tire and chassis parts revenue grew 19.0% year-on-year, automotive maintenance increased 6.4%, and franchising, advertising, and other platform activities rose 11.0%. During the first half, the total number of TUHU workshops reached 8,825, up 22.5% year-on-year, with new stores in lower-tier cities accounting for approximately 65%. The expanding store network is expected to help the company increase its market share.

Profitability faced near-term pressure, though operational efficiency improvements are anticipated. The gross margin for the first half was 23.3%, affected by rising raw material costs, shifts in product mix, and temporary promotional discounts. On the expense side, the adjusted total operating expense ratio increased 0.4 percentage points year-on-year to 22.8%, driven mainly by higher investment in channel promotion and store expansion. The company is also advancing its use of AI applications to improve operational efficiency, which could help gradually reduce the expense ratio going forward. As store expansion continues and operational efficiency improves, profitability is expected to improve progressively.

New energy vehicles and quick-service repair businesses continue to expand, while share buybacks signal long-term confidence. As of the end of the first half, the company had reached 5.3 million new energy vehicle transaction users, accounting for 17.2% of total platform transaction users. The new energy specialized repair program now covers more than 160 workshops, and the company has established after-sales partnerships with 18 manufacturers, accelerating its expansion into out-of-warranty maintenance and the battery, electric motor, and electronic control service market. In quick-service repair, the company continues to improve parts availability across more than 100 product categories and expand on-site hands-on training. The company has initiated a share buyback program of up to HK$1.5 billion, planning to repurchase and cancel no fewer than 50 million shares, reflecting management confidence. The new energy and quick-service repair businesses, combined with a scalable service network, are expected to continue opening up growth opportunities.