GEELY AUTOMOBILE(175.HK)：2Q25 CORE EARNINGS IN LINE; VALUATION DISCOUNT SET TO NARROW WITH SCALE OVERTAKING NEV GIANT IN FORESEEABLE FUTURE

Core Viewpoint - Geely is positioned to challenge BYD's dominance in the NEV market, with expectations of revenue growth and improved profitability driven by domestic market share expansion and overseas growth initiatives [1][10]. Financial Performance - In 2Q25, Geely's revenue grew by 7.3% QoQ to RMB77.8 billion, while core net profit slightly decreased to RMB3.2 billion from RMB3.5 billion in 1Q25 [1][2]. - The gross margin improved by 1.3 percentage points QoQ to 17.1%, although it eroded by 0.7 percentage points YoY due to lower sales from higher-margin exports and increased marketing expenses [2][6]. - The company maintains a 2025 net profit forecast of RMB15 billion and raises the 2026 forecast by 13% to RMB20 billion, reflecting higher volume assumptions and positive margin outlook [1][6]. Market Strategy - Geely's management has outlined a comprehensive global expansion strategy, restructuring operations into five regional hubs to enhance local expertise while maintaining global coordination [3]. - The company aims to increase its domestic market share, having secured 11.44% of the NEV market in 1H25, and plans to launch several new models to fill product gaps in cost-sensitive segments [3][7]. - Geely's dual-track export strategy will include both ICE and NEV models, with a forecasted 50% YoY increase in overseas volume to 600,000 units in 2026 [8]. Technological Advancements - A major integration of Geely's intelligent driving units has been executed, consolidating teams to enhance technological capabilities and streamline resources [4][5]. - This consolidation is expected to reinforce Geely's leadership in autonomous driving technology and innovation [5]. Valuation - Geely's shares are currently trading at a significant discount, with a P/E ratio of 12x for 2025E and 9x for 2026E, compared to BYD's 18-20x [9]. - The target price has been raised to HK$32.00 based on a 15x 2026E P/E multiple, reflecting confidence in Geely's potential to close the valuation gap with BYD [10].