Water Tower Research Publishes Initiation of Coverage Report on DSC Holdings Ltd., “Training Wheels Off; AI Agents Hit China’s Car Lot”

October 6, 2026, ST. PETERSBURG, FL – Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on DSC Holdings Ltd. (NASDAQ: DSC) titled, “Training Wheels Off; AI Agents Hit China’s Car Lot”. The report can be accessed here.

DSC Holdings Ltd. (NASDAQ: DSC) is the leading provider of digitalization software and transaction services for China’s used car industry, the world’s largest auto market. Its flagship platform, DaFengChe, has held more than 90% market share in operating systems for China’s used car dealers since at least 2021 and manages more than 50% of the country’s used car inventory by VIN, handling more than RMB1.0 billion (US$147 million) of daily used car transaction value in January 2026, per China Insights Consultancy (CIC). Most DaFengChe functionality is free by design; DSC earns most of its revenue from transaction services layered on the platform, including B2B matching and auctions through CheYiPai, China’s second largest online B2B used car marketplace by transaction volume, used car inspection, and certification under the 268V brand, where DSC is China’s largest provider, delivery through China’s largest single-car delivery network, and dealer channel services. Management believes the real-time dataset this position generates is the key ingredient for vertical AI agents that price, source, and sell vehicles for dealers and would be difficult for a competitor to replicate.

AI has moved from pilot to deployed products. As of the end of June 2026, AI tools were in use at more than 4,100 dealerships, and DSC reported more than 3,215 paying deployments of an AI social media operations specialist and 295 of a management assistant, with sales and procurement agents in training, aimed at the 40-50% of a typical dealer’s gross margin consumed by procurement and sales. DSC is also using AI to drive its own operating efficiency: excluding share-based compensation, 2Q26 operating expenses fell 18% Y/Y to RMB75.2 million (US$11.1 million), and adjusted net loss narrowed 61.5% Y/Y to RMB7.4 million (US$1.1 million). We forecast adjusted net profitability in FY27.

DSC trades at 1.8x 2027E and 1.5x 2028E EV/sales on our estimates, which we frame against three peer groups. China auto-related and marketplace platforms trade at averages of 1.0x 2027E and 0.9x 2028E EV/sales. B2B wholesale and auction platforms, the closest listed analogues to portions of DSC’s transaction services portfolio, trade at averages of ~1.6x and ~1.5x. Profitable dealer marketplace benchmarks trade at averages of ~4.3x and ~4.0x.

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