Geely Automobile (175 HK) Company Update Summary
Core Content
This document provides an equity research update on Geely Automobile (175 HK), focusing on its financial performance, future projections, valuation, and investment ratings. The analysis is conducted by CMB International Global Markets, which maintains a BUY rating with a target price of HK$16.50.
Main Points
Financial Performance Overview
- Net Profit in 2H22E: Projected to rise 95% HoH to RMB 3.0bn, and 23% YoY to the same amount.
- FY23E Net Profit: Expected to increase 21% YoY to RMB 5.5bn, slightly above the previous forecast.
- NEV Sales Volume: To surge 74% YoY to 0.57mn units, which accounts for 37% of total projected sales volume.
- Total Sales Volume in FY22E: Reached 1.43mn units, with 0.98mn units from Geely, 0.15mn units from Geometry, 0.07mn units from Zeekr, 0.18mn units from Lynk & Co, and 0.06mn units from Livan.
Revenue and Profitability
- Revenue Growth: Projected to grow 39.5% HoH in 2H22E to RMB 81,143mn, driven by higher average selling prices from Zeekr and the "China Star" series.
- Gross Margin: Expected to widen from 14.6% in 1H22 to 15.5% in 2H22E, and further to 15.9% in FY23E due to economies of scale and potential raw material price drops.
- Operating Margin: Projected to increase slightly from 3.1% in FY22E to 3.5% in FY23E.
- Net Margin: Expected to rise from 3.5% in FY22E to 3.6% in FY23E.
Valuation and Investment Outlook
- SOTP Valuation: The total valuation is HK$165bn, with Zeekr valued at 2.5x FY23E core revenue (excluding battery sales and R&D services) and HK$109bn, and other businesses at 15x FY23E P/E.
- Target Price: HK$16.50, representing a +26.5% upside from the current price of HK$13.04.
- Key Risks: Lower-than-expected sales volume, particularly for NEVs, could impact the target price and rating.
Key Financial Projections (FY23E)
| Metric |
Projection (RMB mn) |
YoY Growth (%) |
| Revenue |
155,950 |
11.9 |
| Gross Profit |
24,863 |
15.2 |
| Operating Profit |
5,247 |
23.7 |
| Net Profit |
5,525 |
20.7 |
| Gross Margin |
15.9% |
-1.3 ppt |
| Operating Margin |
3.5% |
-0.5 ppt |
| Net Margin |
3.6% |
-0.6 ppt |
Stock Data
| Metric |
Value (HK$) |
| Market Cap |
130,654 mn |
| Average 3-month turnover |
886 mn |
| 52-week High/Low |
19.20 / 8.30 |
| Total Issued Shares |
10,019 mn |
Shareholding Structure
| Shareholder |
Ownership (%) |
| Li Shufu |
43.2% |
| Others |
56.8% |
Share Performance
| Period |
Absolute Return (%) |
Relative Return (%) |
| 1-month |
14.8 |
0.8 |
| 3-months |
44.7 |
-2.3 |
| 6-months |
-16.3 |
-26.1 |
Key Ratios
| Ratio |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Revenue Growth (%) |
-5.4 |
10.3 |
38.9 |
11.7 |
5.9 |
| Gross Margin (%) |
16.0 |
17.1 |
15.4 |
15.9 |
16.9 |
| Operating Margin (%) |
5.4 |
4.3 |
3.1 |
3.5 |
3.9 |
| Net Profit Margin (%) |
6.0 |
4.8 |
3.5 |
3.6 |
4.2 |
| Net Cash/Total Equity (x) |
0.2 |
0.3 |
0.3 |
0.3 |
0.4 |
| Current Ratio (x) |
1.2 |
1.1 |
1.1 |
1.2 |
1.3 |
Investment Rating
- BUY rating is maintained, with a target price of HK$16.50.
- CMBIGM Ratings:
- BUY: Potential return of over 15% over next 12 months.
- OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
- HOLD, SELL, and NOT RATED are other rating categories, but not applicable in this case.
Key Risks
- Lower-than-expected sales volume (especially NEVs) may affect profitability and valuation.
- Market volatility and economic conditions could influence the stock's performance.
Auditor
- GrantThornton is the auditor for the company.
Related Reports
- "Geely Automobile - PHEV could be a positive surprise in FY23" (6 Dec 2022)
Conclusion
Geely Automobile is projected to see strong growth in net profit and NEV sales volume in FY23E, supported by higher ASPs and economies of scale. The BUY rating remains in place with a target price of HK$16.50, but the company faces key risks related to sales performance and market conditions. The SOTP valuation highlights the company's strong fundamentals, with Zeekr being a significant driver of value.
