【行业研究报告】吉利汽车-Most businesses are trending up

21Mar2024
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
GeelyAutomobile(175HK)
Mostbusinessesaretrendingup
MaintainBUY.WeareoftheviewthatGeely’sFY23earningsqualitywasbetter
thanFY21-22.Webelievemostofitsbusinessesarepoisedtoenjoyhigher
profitsinFY24E.SomeinvestorsmayoverlookGeely’srecentassetsdisposal
toeaseitslingeringD&Aburdenbyleveragingitsparent’sresources.
2H23OPin-line,NPbeat.Geely’s2H23revenuewaslargelyinlinewhile
GPMwasabout0.8ppthigherthanourforecast,underscoringourprior
GPMwasabout0.8ppthigherthanourforecast,underscoringourprior
argumentthatGeelybrand’smarginscouldbemoreresilientthanexpected.
SG&Aexpenseswerehigherthanexpected,whichledtoanin-line
operatingprofitin2H23(2%lowerthanourestimates).Netprofitin2H23
beatourestimatesby18%onlowershare-basedpayment,taxexpenses
andhigherinterestincome.Zeekr’snetlossofRMB1.1bninFY23wasalso
betterthanourpriorforecastofRMB2bn.AlthoughweestimatetheIP
licensingandR&Dsupportservicestillaccountedforabout1/3ofGeely’s
FY23netprofit,webelieveitsearningsqualityhasimprovedcomparedwith
FY21-22,especiallyasGeelyexpensedR&DofRMB3.3bninFY23,71%
higherthanthatinFY22.
ProfitabilityofZeekrandequity-methodentitiestoimproveinFY24E.
Weareoftheviewthatmanagement’sguidanceofZeekr’sbreakevenunder
HKFRSinFY24Eisfeasible.WeslightlyreviseupourFY24Esalesvolume
by10,000unitsto0.22mnunits,givenitscurrentorderbacklog.Weproject
equityincomeinFY24Etosurge156%YoYtoRMB1.5bn,amidLynk&
Co’slosscut,Livan’sdisposalandProton’sfull-yearcontribution.Although
weprojectlowerGPMfortheGeelybrand(incl.GeometryandGalaxy)in
FY24E,webelievethefallcouldbelimited,givenhigherportionofexports.
AssetsdisposaltocutD&Aandfocusoncorebrands.Apartfrom
Livan’sdisposaltocutloss,Geelyhasalsoplannedtosellitsstakesin
AurobayinexchangeforsharesintheJVwithitsparentandRenault.Such
disposalcouldreduceGeely’sdepreciationandamortizationbymorethan
RMB1bneveryyear,onourestimates.WereviseupourFY24Enetprofit
by7%.
Valuation/Keyrisks.WevalueZeekrat1.3x(unchanged)ourrevised
FY24Ecorerevenue(excludingViridi’sbatterypacksalesandR&D
services),whichimpliesHK$80bnforZeekr’svaluation.WevalueGeely’s
allotherbusinessesexcludingZeekrat13x(unchanged)FY24EP/E
(detailsinFigure4).WemaintainourBUYratingandtargetpriceof
HK$14.00.Keyriskstoourratingandtargetpriceincludelowersales
volumeandGPM,especiallyforNEVs,thanweexpectandsectorde-rating.