| • In 4Q of 2024, we reported on a private stock challenge and the winning stock picks (28 Stocks, 11 Investors: Massive Gains for Who at Year-End Finish Line?) • The top stock turned out to be Hong Kong-listed Launch Tech, with an eye-popping 75% gain in 3 months (Oct-Dec 2024). Guess what, since then -- ie the past 6 months -- the stock couldn't keep rising another 40%.  A Launch Tech diagnostic tool plugs into a vehicle’s computer system to scan for problems. It reads error codes, displays them with explanations, and helps guide repairs. After fixing issues, the tool can clear codes and reset warning lights. • UOB Kay Hian recently put out a non-rated report on Launch Tech, excerpts of which we publish below. • Its two key business segments are the Automotive Data Business and the Software Business. This segment focuses on providing automotive diagnostic data, repair information, and technical solutions to workshops, repair centers, and manufacturers. This segment involves developing and licensing software for automotive diagnostics, fleet management, and smart workshops. • Together, the 2 business segments support Launch Tech’s goal of being a leader in smart automotive repair solutions against competitors such as Bosch and Autel. • Out of the past 6 years, only for FY2023 and FY2024 when profit growth was strong did Launch Tech pay out dividends (generous ones!), so a key risk is whether it will be sustained. |
Excerpts from UOB Kay Hian report
Analysts: Gigi Cheuk & Kate Luang
| Launch Tech (2488 HK) Fast-growing Global Provider Of Vehicle Diagnostic Tools |
Launch Tech is a leading provider of vehicle diagnostic tools with an established global presence. The company is positive on its business outlook and expects its software business, super remote diagnostics platform and automotive data business to contribute to rising profits in the future.It maintained a generous dividend payout of 147% and 80% in 2023-24 on strong cashflow generation and is open to share buyback to enhance shareholder returns. |
WHAT’S NEW
• Launch Tech is a leading provider of vehicle diagnostic tools, which cumulatively covered over 370m vehicles globally as of end-24.
Its diagnostic tools can read and analyse vehicles’ computer systems to identify and troubleshoot issues, and are catered to professional mechanics and vehicle repair stores.
The company has been proactively expanding in Europe, the US and East Asia, and its overseas revenue (including overseas e-commerce operations) reached a record-high of Rmb1.3b in 2024, representing 69% of total revenue.
• Growing software business and super remote diagnostics platform. In 2024, software revenue grew 34% yoy to Rmb170m, outgrowing its main operation with a 21% yoy revenue growth, and contributing 9% of 2024’s revenue (vs about 8% in 2023).
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Stock price |
HK$13.14 |
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52-wk range |
HK$3.08 – 14.18 |
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PE |
14.7 |
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Market cap |
HK$5.4 b |
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Shares outstanding |
421 m |
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Dividend |
5.6% |
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1-yr return |
327% |
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P/B |
3.8 |
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Source: Yahoo! |
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Meanwhile, the company is also fostering its super remote diagnostics platform, which matches technicians and vehicle owners for remote diagnostics.
Launch Tech began to monetise the platform in Mar 24 and generated service revenue of Rmb12.99m in 2024 while its transaction volume grew 83% yoy.
STOCK IMPACT
• Limited impact from US tariffs. Launch Tech’s software products, remote diagnosis and data services are not impacted by the latest rounds of US tariffs, and its hardware products are manufactured by OEMs, which are capable of flexible supply chain management.
The company is in negotiation with OEMs for contingency plans, including production process optimisation and cost reduction. It is also actively seeking OEMs in regions with low tariffs.
| • 2025 outlook. Launch Tech expects its revenue growth to be driven by: a) robust sales growth of vehicle diagnostic tools in overseas markets, and b) software business. It is positive on its net profit growth, contributed by its software business, super remote diagnostics platform and automotive data business (2024 revenue: Rmb10.76m), as well as strengthened cost control. • Robust shareholder returns. The company maintained a generous dividend payout ratio of 147% in 2023 and 80% in 2024. It repurchased 16.4m/3m shares in 2023/5M25 respectively (10%/1.9% of H shares), and is open to share buybacks in the future, subject to market conditions. VALUATION/RECOMMENDATION • Trading at a 5.6% trailing dividend yield. The company is trading at a 5.6% trailing 12- month dividend yield. |
Full UOB KH report here.