The company's recent situation

The company's sales volume in October 2024 was 226,686 units, +28% year over month, +12% month on month, of which new energy sales volume was 108,722 units, +75% year over year, and +19% month over month. By brand, Galaxy, ZEEKR, and Lynk & Co sold 63,492 units, 25,049 units, and 31,074 units, respectively, +84%/+92%/+26% year-on-year, and +21%/+17%/+20% month-on-month. The export sales volume in October was 32,544 units, +18% year-on-year, and a cumulative total of 346,582 units were exported from January to October, +58% year-on-year.

reviews

The new car cycle is strong, and a new generation of Thor Super Electric Hybrid technology is boosting the full renewal of the Galaxy brand. Thanks to the decline in sales of new models such as the Galaxy E5, ZEEKR 7X, Xingyuan, and Lynk & Co Z10, the company's total sales volume and NEV sales in October both reached record highs. The monthly NEV penetration rate further increased to 48% month-on-month, and the growth rate was strong. Recently, the company released a new generation of Thor EM superhybrid technology, including the EM-i version, which focuses on extreme fuel efficiency, and the EM-P version, which combines energy efficiency and performance. Among them, the EM-i single-gear system can achieve fuel consumption of only 2.62 liters per 100 kilometers, and the technical parameters are comparable to the BYD DM5.0 platform. The company plans to release a new model Galaxy Starship 7 equipped with the EM-i system in November. We believe that Geely Starship 7 is expected to directly target BYD Song PLUS and has high growth potential. We are optimistic that Geely's strong new product cycle will have a driving effect on the company's sales volume and market share growth.

Export sales are steady, and the global layout is deep. The cumulative export sales volume from January to October 2024 was +58% year-on-year to 0.347 million vehicles. The export product matrix continues to expand. Geely's main brand, Jikrypton, and Lynk & Co are all overseas, and are deeply involved in the five markets of ASEAN, the Middle East, Africa, Mexico and Central Asia. Furthermore, the company accelerates the localization of brand operations and supply chain management, broadens the layout of other markets such as Southeast Asia and South Korea through cooperation with joint ventures such as Proton and Renault Korea, and continues to enhance its core competitiveness in overseas markets. We believe that the company has benefited from the accumulation of a global layout and is expected to further open up space to go overseas.

The new energy sector gradually reversed losses and waited for performance flexibility to be released. Geely's main brand's new generation PHEV product cycle is strong, driving a boost in NEV business sales. Driven by scale effects and GEA architecture cost reduction, we expect the NEV sector to gradually turn losses into profits. Furthermore, export models are more profitable than domestic sales. As export sales continue to climb, the export business makes a steady contribution to performance.

Looking ahead, we believe that as the company continues to strategically integrate brand resources and implement cost reduction and fee control, we can expect to achieve flexible performance.

Profit forecasting and valuation

Due to increased profitability in the new energy sector, we raised 2024/2025 net profit by 3.3%/15.4% to 16 billion yuan/11 billion yuan. The current stock price corresponds to the 2024/2025 price-earnings ratio of 7.8 times/11.1 times. Maintaining an outperforming industry rating, we raised our target price by 37.4% to HK$18.60, corresponding 10.5 times the 2024 price-earnings ratio and 15.0 times the 2025 price-earnings ratio, with 34.4% upside compared to the current stock price.

risks

There is a risk of trade friction, increased market competition, and the development of the new energy business falls short of expectations.