吉利汽车：Solid 1H24 earnings, better NEV outlook

Investment Rating - Maintain BUY rating with a target price of HK$14.00, implying a 77.7% upside from the current price of HK$7.88 [2][4]. Core Insights - Geely's 1H24 core earnings exceeded prior forecasts by 18%, driven by a lower R&D capitalization ratio and improved gross margins [2]. - The Galaxy E5 BEV, based on the GEA platform, is expected to drive sales volume and improve margins compared to previous models [2]. - Zeekr's introduction of hybrid models is anticipated to enhance competitiveness in the premium vehicle segment [2]. - The current valuation of Geely is considered attractive, with a projected net profit of RMB4.1 billion for 2H24 and a 12% increase in FY25E net profit to RMB8.7 billion [2][3]. Financial Performance - 1H24 revenue was RMB107.3 billion, slightly below forecasts, with a gross margin of 15.1%, which is 1 percentage point higher than estimates [2][7]. - The net profit for 1H24, excluding certain items, was approximately RMB4 billion, marking an 18% increase over forecasts [2]. - Revenue projections for FY24E have been raised from RMB227.5 billion to RMB227.6 billion, with net profit estimates increasing significantly from RMB7 billion to RMB14.7 billion [7][9]. Sales and Production Outlook - The order backlog for the Galaxy E5 BEV is estimated to exceed 25,000 units, supported by competitive pricing [2]. - Sales volume forecast for FY24E has been increased from 1.98 million units to 2.01 million units [2]. - Geely's total revenue is projected to grow at a CAGR of 27.0% for FY24E, followed by 9.3% and 7.3% for FY25E and FY26E, respectively [3][9]. Valuation Metrics - Zeekr is valued at 0.7x FY25E core revenue, translating to a valuation of approximately US$8.4 billion [2][8]. - Geely's other businesses are valued at a P/E of 12x for FY25E, reflecting a comprehensive valuation approach [2][8]. - The projected P/E ratio for FY24E is 5.0, significantly lower than historical averages, indicating potential undervaluation [9].