20201214-招银国际-吉利汽车-00175.HK-Valuation_uplifts_with_a_series_of_good_news_6页_1mb

Geely (175 HK) Company Update Summary

Core Content

Geely, a leading Chinese automotive company, has received positive attention due to recent developments and performance improvements. The company's stock is currently rated BUY with a target price of HK$35.0, reflecting a potential upside of +59.0% from the previous target price of HK$19.1.

Main Points

Sales Performance

• Total sales in November 2020: 151,000 units, a +5% YoY increase.
• Lynk&Co sales in November 2020: 22,800 units, a +61% YoY increase.
• Lynk&Co sales in 2021E: Expected to exceed 200,000 units, with a +20% YoY growth.
• Geely's 2021E sales target: 1.45 million units, a +10% YoY increase.

Technological Advancements

• New A+ class sedan (Preface): Launched in November 2020, with 7,017 units sold, expected to become one of the top-selling models.
• SEA architecture (浩瀚架构): Released in October 2020, signaling Geely's leadership in the intelligent-EV market. It may be used in the future for Volvo X20.
• Collaboration with Daimler: To develop next-generation hybrid engines, showcasing Geely's commitment to technological innovation.

Market Sentiment and Strategic Moves

• A-share IPO approved on 28 Sep 2020: Expected to expand market coverage and improve valuation.
• M&A with Volvo: Likely to restart negotiations, further enhancing Geely's market position.
• Brand Stretching: Lynk&Co's rising sales indicate strong brand extension, with new models like Lynk&Co Zero Concept (launch expected in 2021E) and Lynk&Co 07 (based on SPA architecture) expected to boost sales further.

Earnings Forecast

• Revised 2021E earnings forecast: Raised to RMB9.9bn from RMB9.3bn, reflecting improved performance and contribution from Lynk&Co.
• EPS for 2021E: Expected at RMB1.01, up from RMB1.00.
• P/E ratio for 2021E: Revised to 30.5x, up from 17.0x, supporting the target price of HK$35.0.

Key Information

Financial Highlights (YE 31 Dec)

Shareholding and Performance

• Shareholding structure: Li Shu Fu holds 41.20% of shares.
• Share performance (12 months): +83.6% absolute, +69.6% relative.
• Market Cap (HK$ mn): 215,947.
• Avg 3 mths t/o (HK$ mn): 1,631.16.
• 52w High/Low (HK$): 24.45/9.79.

Earnings Revision

• Net profit for 2021E: Expected at RMB9.876bn, up from RMB9.291bn.
• EPS for 2021E: RMB1.01, up from RMB0.929.
• NPM for 2021E: 9.89%, up from 8.01%.

Financial Summary

• Net cash from operating activities (FY21E): RMB17,639mn.
• Net change in cash (FY21E): RMB6,502mn.
• Cash at the end (FY21E): RMB29,015mn.
• Total net assets (FY21E): RMB68,401mn.
• ROE (FY21E): 15%, up from 12.59%.

Key Ratios

• Gross profit margin: 17% to 18%.
• Net margin: 8% to 10%.
• ROE: 32% to 16%.
• ROA: 17% to 10%.
• Current ratio: 0.98 to 1.10.
• Quick ratio: 0.88 to 1.00.
• Cash ratio: 0.36 to 0.55.

Conclusion

Geely is leveraging its technological strength, brand extension through Lynk&Co, and strategic moves within the holding company to improve its market position and valuation. The company is expected to achieve double-digit sales growth in 2021E, with Lynk&Co playing a pivotal role. The updated earnings forecast and target price reflect the positive outlook, reinforcing the BUY rating.