Volume & profit continued to be realized this year: Strong product cycle opened up domestic sales growth+overseas factory investment to enjoy industry dividends ① Exports: 24 years was a major export year. Geely had factories in Southeast Asia, Europe, and North America to seize export dividends. From January to September '24, exports totaled 0.314 million vehicles, an increase of 61.9% year-on-year. In 2025, the company expects to build a new vehicle factory with an annual production capacity of 0.075 million vehicles in Vietnam. The main brands are Geely and Lynk & Co, which will accelerate the global layout. ② Domestic sales: Beginning in August, a new round of products was launched, represented by the Galaxy E5, ZEEKR 7X, and Geely Star Wish. Among them, Galaxy E5's sales volume in the first month exceeded 1.3W. Steady monthly sales are expected to reach 1.5W, and gross margin climbed to 10% +. As the first popular and profitable model of the Galaxy brand, the success of the E5 proved that Geely had significant improvements in market demand control and platform-based cost reduction.

Why can 25-year fundamentals continue to exceed expectations? Galaxy began a hybrid year against Biao Longyi in terms of architecture, power systems, models, etc., and boosted profits from new energy sources to reverse losses. ① Early issues: Early Galaxy L6 & L7 were mainly developed based on the CMA architecture, and the power system was Thor 8848. The CMA architecture covers brands such as Lynk & Co, Geely, and Volvo, and has both fuel vehicles and hybrids, so the specificity of hybrid models is insufficient. ② Current changes: New architecture+power system upgrade+research institute integration triple resonance, the fundamental inflection point has been reached. 1) GEA architecture: It can meet various power forms such as pure electric and hybrid, and has a high degree of modularity and reduced development costs. Currently, the models currently on sale based on the GEA architecture are mainly Galaxy E5 and Geely Xingyuan. Both sales climbed to 1.5W+ within 2-3 months of launch. All new Galaxy brand cars were developed based on the GEA platform in '25, and the cost performance ratio was further highlighted due to scale effects. 2) Thor Hybrid Upgrade 1: Engine thermal efficiency increased to 46.5%, and the measured cruising range exceeded 2,390 km. Compared with BYD DM 5.0, Raytheon EM-i is leading in parameters such as thermal efficiency, battery life, fuel consumption at 100 kilometers of power loss, and operating condition efficiency. 3) Thor Hybrid Upgrade 2: The transmission changed from three gears to a single gear, which is more in line with commuting needs in the city. 4) Research Institute Integration: 24Q3 Geely platformly integrates the smart driving, cockpit, E/E architecture and back-end procurement and supply chain behind the Central Research Institute and various sub-brands. The procurement and supply chain are also all integrated under Geely, thus simplifying complexity and further reducing costs and increasing efficiency.

③ 25-year outlook: Starship 7, facelift L6 & L7 and many new hybrid models are being launched under the Galaxy brand, and the market share is expected to increase further. Considering that Geely's main increase is in the Galaxy brand next year, its price band is mainly in the 10-20W price range. In terms of space, total sales of 10-20W passenger cars remain stable, sales of fuel trucks are 8.1 million, and pure electric & plug-in hybrid have increased, squeezing fuel truck sales; in terms of pattern, autonomous fuel vehicles remain stable, and autonomous pure electric+plug-in hybrid will seize the share of joint venture oil vehicles. The company's hybrid products (Starship 7, modified L6 & L7, etc.) are compared to competitors: the same price range has a longer wheelbase and more space; the price for the same space is lower than that of joint venture oil trucks, thereby seizing market share.

Profit forecast: The company is about to enter a strong product cycle and continues to integrate internal resources, leading to an increase in profit margins. Based on the new model plan, we slightly adjusted the company's revenue for 2024-2026 to 2110.47 (original value 2162.89), 2577.44 (original value 2637.51), 3051.14 (original value 3114.02) billion yuan, and net profit to mother was 161.55 (original value 162.09), 121.93 (original value 121.75), and 147.00 (original value 145.40) billion yuan, respectively. The corresponding PE was 8.81X, 11.67X, and 9.68X, respectively, maintaining the “buy” rating.

Risk warning: The macroeconomic recovery falls short of expectations; the “price war” will continue as the supply of new models increases; the market acceptance of new models falls short of expectations, and the penetration rate of electrification falls short of expectations; risk of untimely updates of research report usage information.