Uxin's future hinges on upcoming quarters with its superstores strategy and strong analyst backing.

Uxin Limited, a NASDAQ-listed company, has a growth strategy focused on superstores. However, the majority of its margins are negative, and revenues have been stagnant. Despite strong analyst support, the company's success hinges on the next few quarters.

Uxin Limited (NASDAQ: UXIN), a Chinese used car e-commerce platform, has been navigating a challenging financial landscape. The company's growth strategy centers on superstores, which aim to provide a superior quality standard and consumer experience. However, the majority of its margins remain negative, and revenues have been stagnant [1]. Despite this, analysts express strong support for the company's expansion plans, with the next few quarters being pivotal in determining its success or failure.

Uxin Limited, founded in 2011, initially operated as an asset-light business model, connecting consumers to dealerships (B2C) and between dealerships (B2B). In 2020, the company transitioned to an inventory-owning model, owning its own inventory to gain greater control over vehicle supply and quality. This shift has been crucial for the company's capital needs and risk profile. The company's superstores, which act as large Inspection and Reconditioning Centers (IRCs), have been integral to this new strategy. The first superstores were opened in Xi’an and Hefei in 2021 and 2022, respectively, through partnerships with local governments [1].

The used car market in China is one of the largest in the world and is projected to continue growing. Data Bridge Market Research estimates that by 2032, the market will reach $298 million, growing at a rate of 12.67% [1]. Mordor Intelligence projects a growth of 6.17%, reaching $379 million by 2030 [1]. The market's immaturity, with used car sales still significantly lower than new car sales, presents an opportunity for Uxin Limited. The company's B2C model, with its own inventory, differentiates it from competitors like Guazi and Renrenche, which initially operated in the C2C model [1].

Uxin Limited's revenue has shown volatility since the transition to the inventory-owning model. In 2021, revenue was $100.3 million, a 50% decrease from the previous year. However, in 2022, revenue surged by 157% to $273.1 million. The company's projections for 2025 indicate a further acceleration in revenue growth, with analysts expecting a 100% increase [1]. The company's guidance for 2026 is even more optimistic, projecting revenue to reach $2.0 billion [1].

The company's valuation metrics are challenging to interpret due to its recent losses. The P/E ratio is not applicable, and the EV/EBITDA multiple is negative (-37.07x) [1]. In an optimistic scenario, if the company manages to reverse its negative EBITDA, the EV/EBITDA multiple could range from 0.5x to 3x [1]. This would place the company in similar multiples to its competitors and project its EV to $800 million, with a price per share of $2.78 [1].

The success of Uxin Limited's superstores is a key driver for the company. If these superstores prove profitable, the company can replicate this model in other large cities, creating a national line of superstores. This would solidify the company's brand and increase its market share [1]. The company's ability to deliver a superior consumer experience, reflected in its Net Promoter Score (NPS), will be crucial in this regard.

Uxin Limited faces significant risks, including market volatility in new car sales and the need to generate profits from its superstores. However, with strong analyst support and a promising growth strategy, the company is poised to turn a corner in the coming quarters.

References:
[1] https://seekingalpha.com/article/4805478-uxin-stock-next-quarters-decisive