20260818-招银国际-吉利汽车-00175.HK-2Q26_in-line_export,_margin_traction_to_continue_5页_1mb

Geely Automobile (175 HK) Summary

Core Content and Key Insights

Geely Automobile (175 HK) is a leading Chinese automaker that has demonstrated strong financial performance and strategic positioning for future growth. The report maintains a BUY rating, highlighting the company's potential for significant returns over the next 12 months. The key focus areas include cost optimization, global expansion, and valuation.

Main Points

• 2Q26 Earnings Performance: Geely's revenue for 2Q26 was slightly lower than the prior forecast due to reduced income from R&D services, IP licensing, and collaborative manufacturing. However, the gross profit margin (GPM) improved by 0.9 ppts to 18.4%, aligning with expectations. Core net profit surged by 61% YoY to RMB5.1bn, or RMB0.1bn higher than the previous forecast, indicating strong operational performance and a core net profit per vehicle of RMB7,200.

• Cost Optimization Potential: Geely is well-positioned to continue driving cost reductions, leveraging restructuring, a broader model portfolio, and strategic partnerships. The report anticipates that GPM will widen sequentially in the second half of 2026 (2H26E), reflecting these efficiency gains.

• Global Expansion Strategy: Geely is expanding internationally at a rapid pace. The FY26E overseas sales volume forecast has been increased by 17% to 1.17mn units, with management targeting 2mn units within three years. International sales are expected to make up 2/3 of total sales volume in the long term. The company's partnership-oriented and multi-powertrain approach is viewed as a lower regulatory risk profile and more sustainable model compared to peers.

• Valuation: The target price is set at HK$27.00, with a P/E ratio now rolled over to 10x FY27E, down from 11x FY26E. The company's valuation is considered attractive, with a BUY rating maintained.

Financial Highlights

• Revenue Growth: Revenue is projected to grow steadily from FY24A (RMB275,910 mn) to FY26E (RMB398,665 mn), with YoY growth rates of 54%, 25%, and 15.5% for FY24A, FY25A, and FY26E respectively.

• Net Profit Growth: Net profit is expected to increase from FY24A (RMB16,852 mn) to FY26E (RMB21,515 mn), with YoY growth of 0.2%, 27.7%, and 18.8% for FY24A, FY25A, and FY26E respectively.

• Earnings Per Share (EPS): EPS is forecasted to rise from RMB1.67 in FY24A to RMB2.31 in FY27E, showing a positive trend in profitability.

• Profit Margins: Gross margin is expected to remain stable at 18.3% for FY26E and FY27E, while net margin is projected to increase from 5.4% in FY26E to 5.5% in FY27E, reflecting improved efficiency.

Valuation Metrics

Share Performance

Key Risks

• Lower-than-expected sales volume or GPM
• Sector-wide de-rating
• Regulatory and market-related risks in international expansion

Shareholding Structure

• Li Shufu (Founder): 41.6%
• Others: 58.4%

Market Data

• Market Cap: HK$202,538.5 mn
• Average 3-month Turnover: HK$915.4 mn
• 52-week High/Low: HK$24.98 / HK$15.13
• Total Issued Shares: 10,848.3 mn

Analyst Certification

• The analyst certifies that all views expressed reflect personal opinions and that compensation is not tied to the report's content.
• No trading in the covered stocks occurred within 30 days prior to the report's issue.
• No trading is planned within 3 business days after the report's issue.
• No direct financial interest in the companies mentioned.

CMBIGM Ratings

• BUY: Potential return of over 15% over the next 12 months
• HOLD: Potential return of +15% to -10% over the next 12 months
• SELL: Potential loss of over 10% over the next 12 months
• NOT RATED: Not rated by CMBIGM
• OUTPERFORM: Industry is expected to outperform the market
• MARKET-PERFORM: Industry is expected to perform in-line with the market
• UNDERPERFORM: Industry is expected to underperform the market

Important Disclosures

• This report is not tailored to individual investors.
• CMBIGM is not liable for any losses incurred from relying on the report.
• The report is for the use of intended recipients only and may not be reproduced or distributed without consent.
• In the U.S., the report is only for "major US institutional investors" and not for general distribution.
• In the U.K., the report is only for persons within the scope of the Financial Promotion Order.
• In Singapore, the report is distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser.