Ladies and gentlemen, thank you for standing by for Autohome's Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's prepared remarks. As a reminder, this conference call is being recorded. If you have any objections, you may disconnect at this time. A live and archived webcast of the earnings conference call will also be available on Autohome's IR website. It is now my pleasure to introduce your host, Mr. Sterling Song, Autohome's IR Director. Mr. Song, please go ahead.

Thank you, operator. Thank you. Hello everyone and welcome to Autohome's fourth quarter and full year 2023 earnings conference call. Earlier today, Autohome distributed its earnings release, which can be found on the company's IR website at ir.autohome.com.cn. Joining me today on today's call are Chief Executive Officer, Mr. Tao Wu; and Chief Financial Officer, Mr. Craig Yan Zeng. Management will go through their prepared remarks, which will be followed by a Q&A session, where they will be available to answer all your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the U.S. Securities and Exchange Commission and the Hong Kong Stock Exchange. Autohome doesn't undertake any obligation to update any forward-looking statements, except as required under applicable law. Please also note that Autohome's earnings press release and this conference call include discussions of certain unaudited non-GAAP financial measures. A reconciliation of the non-GAAP measures for the most directly comparable GAAP measures can be found in our earnings release. I will now turn the call over to Autohome's CEO, Mr. Wu for opening remarks. Please go ahead, Mr. Wu.

[Foreign Language] Thank you, Sterling. Hello, everyone. This is Tao Wu, CEO of Autohome. Thank you for joining us in our earnings conference call today. [Foreign Language] We delivered solid operational and financial results in 2023 with overall growth driven primarily by our new businesses. Total net revenues for the year grew by 3.5% year-over-year to RMB7.18 billion. Revenues from the online marketplace and others business increased by 14.6% year-over-year and accounted for 30.6% of total revenue. Notably, we continue to see strong growth in revenues from data products and TTP, which each increased by more than 10% compared to 2022. We also saw robust growth in our NEV business with revenues for the year increasing by over 80% year-over-year and accounting for nearly 18% of total revenue. Adjusted net income attributable to Autohome for the year was RMB2.16 billion with an adjusted net margin of 30.1%. We also completed a US$200 million share repurchase program and significantly increased the dividend payout to shareholders, demonstrating our commitment to generating returns for investors. [Foreign Language] In 2023, we made breakthroughs in the application of AI and large language models and innovative new business model. We launched new AI-driven data products, deployed large language models in various business scenarios, and combined model-based decision-making with human expertise to enhance the service quality of our data products. We also made rapid progress in spending our physical new retail presence, particularly in mid- to low-tier cities, where we see significant potential for growth as the NEV market evolves. Our Autohome Energy Space stores as a strong offline channel to complement our online capabilities are now present in 20 cities across the country, helping us build brand awareness among NEV users. [Foreign Language] Autohome has always been at the forefront of digitalization and business innovation proactively…

[Foreign Language] Thank you, Ms. Song. Hello, everyone. I am Craig Zeng, the CFO of the Autohome. [Foreign Language] In 2023, we made user experience our core focus, creating a comprehensive system encompassing content, tools and services to provide our users with high quality, convenient and efficient auto consumption experiences. [Foreign Language] In the fourth quarter we launched NEV Breakthrough Plan, a comprehensive evaluation program that assesses NEV’s safety across the three dimensions: collusion, battery and intelligent driving, this program which aims to address user concerns and accelerate the decision-making process has received 325 million impressions and over 200 million views across the entire network. Additionally, we launched NEV Super Test, a program which carries out real-world evaluation of NEV performance over a period of two months. This initiative give us the opportunity to collaborate with other parties on developing a more consumer-centric vehicle evaluation system, promoting the overall NEV category and helping automotive brands develop strong products with a better user experience. Looking ahead, we'll maintain our focus on catering to the evolving needs of users so that we can create a rich and diverse content ecosystem that provides value and drive engagement. We will also leverage a broad range of online channels to ensure that our high-quality content reaches the widest possible audience. According to QuestMobile, our mobile DAUs increased by 25.4% year-over-year to reach 68.19 million last December, demonstrating the effectiveness of our content-based user growth strategy. [Foreign Language] Our NEV business has grown rapidly with the expansion of the Autohome Energy Space to 20 cities across the country. We've upgraded our brand, technology and store services to provide a high quality consumer experience across regional auto markets in east, south, southwest, and north China. We've also increased the number of energy space brand partners and expanded…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is comes from the line of Thomas Chong from Jefferies. Please go ahead.

[Foreign Language] Thanks management for taking my questions. My question is about the industry outlook. Can management comments about the 2023 industry performance and how we should think about the trend and the outlook in 2024 as well as the opportunities ahead. Thank you.

[Foreign Language] Thank you very much for the question. Actually, in 2023, we do see the trend of the first low and then high momentum in the auto market in China. In terms of 2023, the sales volume hit historical high. According to the statistics of the CPCA, in Q4, we do see a quick recovery in auto sales, especially for the retail sales had gone up by 13.8% year-over-year and quarter-over-quarter for the third quarter, it was up 1.4%. That is because close to the end of the year, there are a lot of promotions nationwide. For example, the offline auto show and providing consumption vouchers and coupons for car purchasing and some of the de-stock for the combustion cars, which failed to meet the National Six Standards. And also in this way, it boosted the sales. As for 2023, the passenger car sales has gone up by 5.3%, majorly due to the NEV cars. [Foreign Language] We also see some challenges in this industry. For example, it's very competitive in starting the price wars and the margins has been squeezed. According to the data published by CPCA, for 2023, the whole auto industry, especially the revenue has gone up by 12%. However, the margin is only 5% compared with the overall industrial corporate margin, which was 5.8%. The auto market margin is quite low. So in this way, according to the data of CADA, for the first half of 2023, there were 50.3% of the dealers suffered loss and it's quite challenging for the fewer stores. [Foreign Language] Now looking into 2024, we firmly believe that the auto market will be a pillar industry for the national economy. It will be continuously supported by the government, especially at the beginning of 2024. We do see a lot of…

Thank you for the questions. One moment for the next question. Next questions we have the line from Xiaodan Zhang from CICC. Please go ahead.

[Foreign Language] So thanks management for taking my questions and I got two questions here. So, first of all, we have noticed that the gross margin and operating profit margin declined year-on-year in 2003. So what's your expectation for the margin trend in Q1 2024 and onwards? And secondly, could you please elaborate on your strategies for enhancing the synergies between Autohome and Ping An Group? Thank you.

[Foreign Language] Well, thank you very much for the question. Now, talking about the GP margin. Well, yes, in 2023, compared with 2020 or 2023 – with – compared with 2022, we do see some slightly down in the GP margin. Well, now talking about the cost, we have provided more diversified content ecosystem. So that's why it drives up some of the cost. In terms of the user experience, we have enhanced the recruiting of the new customers and the promotions. In this way, we also expanded about 20 renewable energy – NEVs offline experience stores. And we provided some promotion subsidies and we also offered a lot of support for the dealers. So in this way, we provided also training and a lot of other resources to attract the local consumers to come to the store, to do the test drive, and to boost the car sales. Now, in terms of the content, we have invested more and more in high quality content. Not only the text and the picture based, we also invested in video and the live streaming. So in this way, it spreads up some of the cost. [Foreign Language] Now in terms of the cost and expenses, we have enhanced some marketing investment. For example, we launched the 818 Auto Show, Global Auto Show, and also on-line auto show, et cetera. And also, we invested more heavily in high quality IP. For example, we have initiated the NEV breakthrough plan and NEV Super Test. So in this way, we are providing more professional content. So in – we are focusing on providing professionalism and a unique content. Now, in terms of the momentum of the process, we do see that the whole industry is under stress and is receiving a lot of challenges. But Autohome has always been quite stable in terms of the profit, although we are facing with some challenges. But if we can strictly control the cost and expenses, and we would enhance efficiency as a long-term goal, we believe we can achieve a good balance.

[Foreign Language] Now, talking about the second question, which is about the synergy between Autohome and the Ping An Group, now I want to make the comments. So, first of all, Autohome and the Ping An Group, each of them have its own unique characteristics as well as resources, and we can make our business quite complementary to each other. For example, Autohome has a lot of traffic. We have about 70 million DAUs every day, and we have professional content and tools. We have very enriched 2C and 2B services and experiences. For Ping An Group, they have about 60 million car owners, which are their insurance customers, and in their platform, there are about 200 million registered customers. So, they also have a lot of enriched 2B and 2C services and experiences. So, in terms of the service quality, we believe that each of us can play the merits of our strengths, and we can provide the online plus offline seamlessly connection and also providing the car owners from shopping the car, using the car, and the post sales of the car services to create the closed-loop ecosystem for the car users. [Foreign Language] In terms of the tools, content, and services, we believe that we can create a lot of synergy. We can consolidate a lot of resources to create the one plus one is higher and more than two effect. So, in this way, we believe that our two companies are quite complementary to each other, and in this way, Autohome would leverage on the resource of Ping An Group and to enhance our investment yield, and to enhance efficiency and try to build our vision and make our vision – realizing our vision, we want to be the first-class international to be and to see content provider, the tools and the service provider and we want to be the unified auto, purchasing and auto sales and service platform.

Thank you. Operator, please go ahead.

Thank you. Your next question comes from the line of Brian Gong from Citi. One moment, please.

[Foreign Language] I will translate myself. Thanks, management, for taking my question. I have two quick questions. First one is along with rising mix from NEV traditional OEMs, their scale is declining. And this also impacts the scale of the dealer store. How does this impact our business, especially for our leads generation? And the second question is, in the end of last year, we announced the dividends. How should we think about our dividend plan in the future? Thank you.

[Foreign Language] Well, thank you for the question. Well, tell me about the market, if you look at the market, we do see the major sales were still contributed by the traditional combustion cars. And also, the dealership model is still the mainstream model because 60% of the sales are still combustion cars. In 2023 for the combustion cars, there were about 336 million cars, but whereas renewable energy car is only about 20 million. So we do believe that to serve the most base market, we do still need a lot of dealers and four stores. However, in terms of the future momentum, we do see that with the penetration rate of the EV cars gradually going up, we do see the shrinking of the four stores and the dealership model would be the future momentum, but it will not drop very sharply. So, during this process, we would work together with risk dealers and they try to transform along with risk dealers and they try to readjust our business model. [Foreign Language] Now, in terms of our cars ecosystem and as well as our service system, we are also trying to work very closely with those combustion car dealers and they try to work together and build a lot of our synergy. [Foreign Language] Now, talking about our performance in the NEV car market, we are quite promising. In terms of the revenue, our revenue growth is higher than the market average. [Foreign Language] Now, if you look at the NEV car OEMs, originally they showed the responsibilities for R&D, manufacturing, sales, marketing, and post sales. But the whole value chain is too long. That is quite risky to cover all the value chain. So in this way, we do see some of the NEV OEMs started to…

Operator?

Thank you. Our next question comes from the line of Ritchie Sun from HSBC. Please go ahead.

[Foreign Language] Thank you, management, for taking my questions. I want to ask about the Energy Space stores. So we plan to open to 30 more cities in 2024. So could management share what would be the revenue contribution in 2024 and how much cost will be allocated to such expansion plan? Thank you.

[Foreign Language] First, thank you for the question. Yes. We build about 20 Autohome Energy Space stores in 2023. In 2024, our plan is to open 30 new stores covering from Tier 1 city to Tier 3, Tier 4 cities, because we providing the franchising model. So in terms of the cost, opening new stores would not drive up a lot of cost because we provide more function, supporting function, so that’s why we didn’t providing very rapid growth of these stores, because we want our business to be stable, healthy and prudent, because this is a new business. We are still in the exploration phase. Now talking about revenue, if you look at the revenue, especially in Q4 of 2023, it already reached to over RMB10,000, actually, it was RMB16 million. And we do see with more and more stores get into a maturing operating stage that would drive up our retail revenue. And as for the future revenue incurred in 2024, because it’s still too early for me to provide any guidance at the current stage, but I believe that we would keep in a timely manner to communicate with you if we further generate more and more revenue in the future.

Operator?

Thank you. There are no further questions at this time. I’ll turn the conference back to management for closing comments.

[Foreign Language] Thank you. Thank you, everyone for joining us today. We appreciate your support and we look forward to updating you in our next quarter’s conference call in a few months time. And in the meantime, if you have any further questions, please feel free to contact us. Thank you. Good bye.