According to the Zhituo Finance APP, everbright released a research report maintaining a "buy" rating for Geely Auto (00175). Given the supportive policies and the launch of several high-cost performance models by the company, which are expected to drive sales positively, the forecast for net income attributable to the parent company for 2024E-2026E has been raised by 3.8%/23.7%/26.2% to RMB 16.31/12.61/15.93 billion. The target price has been raised to HKD 18.08. The firm is optimistic about the medium and long-term transformation prospects of electric vehicles across all of the company's brands.

The main points of view of Everbright Securities are as follows:

3Q24 performance significantly improved both year-on-year and quarter-on-quarter:

In the first three quarters of 2024, the company's total revenue increased by 36.0% year-on-year to RMB 167.68 billion, with net income attributable to the parent company rising by 358% year-on-year to RMB 13.05 billion (net income attributable to the parent company after deducting non-recurring gains and losses is RMB 6.13 billion). In 3Q24, total revenue grew by 20.5% year-on-year and 9.8% quarter-on-quarter to RMB 60.38 billion, while net income attributable to the parent company rose by 92% year-on-year to RMB 2.46 billion (after deducting non-recurring gains and losses, the net income is RMB 2.76 billion). The company's ASP per vehicle in 3Q24 (excluding Lynk & Co) increased by 2.8% quarter-on-quarter to RMB 0.111 million, with net profit per vehicle after deductions being less than RMB 0.006 million.

Structural cost reductions lead to improved profitability; zeekr posts its first profitable quarter:

In the first three quarters of 2024, the company's gross margin improved by 0.5 percentage points year-on-year to 15.3%, while in 3Q24, the gross margin increased by 0.1 percentage points year-on-year to 15.6%. In the first three quarters of 2024, the company's SG&A expense ratio decreased by 1.3 percentage points year-on-year to 11.6%; in 3Q24, the SG&A expense ratio fell by 2.3 percentage points year-on-year and 2.1 percentage points quarter-on-quarter to 10.3%. The reasons for the improvement in profitability include a) the company's resource integration achieving cost reductions and efficiency enhancements; b) zeekr achieved profitability for the first time in a single quarter, with a profit per vehicle of RMB 152 in 3Q24. Looking ahead, the company's emphasis on resource integration and platform global strategy is expected to contribute to greater profitability elasticity.

Lynk & Co plans to merge with zeekr to achieve further optimization of its equity structure, with internal restructuring accelerating.

In the "Taizhou Declaration" released in September 2024, the company clearly stated that merging and restructuring will be the main theme of the group's adjustments. Subsequent adjustments include the integration of Geometry into the Galaxy brand and the acquisition of Ningbo Passenger Vehicle. On November 14, the company announced the brand integration of zeekr and Lynk & Co, with specific equity adjustments including the listed company's stake in zeekr increasing to approximately 62.8%, and zeekr holding a 51% stake in Lynk & Co, while the remaining 49% stake will continue to be held by a wholly-owned subsidiary of Geely Auto.

The bank determines that, 1) after the merger, Lynk & Co will operate as a controlled subsidiary of the listed company (with an ownership ratio of about 81%). Considering Lynk & Co's forward-looking layout in europe and deeper cooperation with volvo ab unsponsored adr class b on the channel side, it is expected that Lynk & Co will likely turn around and contribute incremental growth to the listed company's financial statements in the future. 2) Both parties will adopt a relatively independent brand collaboration model while coordinating internal resources. a) On the brand side: Lynk & Co will focus on the mid-to-high-end market primarily with small to medium models, while zeekr will maintain a luxury positioning and focus on larger models. b) On the resource side: both parties will increase synergy in production and technology resources, while zeekr will also utilize Lynk & Co's brand channels for market penetration. In summary, the company has accumulated a solid foundation in technology and product areas, and will subsequently form a clearer product matrix through brand restructuring and focus, expecting to further enhance competitive advantages under intensified competition.