Summary of Geely Automobile Conference Call Company Overview - **Company**: Geely Automobile - **Industry**: Automobile Manufacturing Key Financial Results - **Net Profit**: Reported Rmb5,672 million for Q1 2025, a 264% increase YoY and 58% increase QoQ [2] - **Normalized Net Profit**: Approximately Rmb3.5 billion, up 126% YoY and 72% QoQ, excluding one-off foreign exchange gains [2] - **Operating Income**: Rmb6,604 million, up 443% YoY, with an operating margin reaching a new high of 9.1% [2] - **Gross Profit Margin (GPM)**: Remained flat YoY at 15.8% despite increased sales volume [3] - **Sales Volume**: Increased by 48% YoY to 704,000 units, but revenue only increased by 25% YoY, indicating a decline in average selling price (ASP) [3] ASP and Revenue Insights - **Blended ASP**: Rmb87,000, down 16% YoY, attributed to: - Declining export contribution from 21% in Q1 2024 to 14% in Q1 2025 - Lower contribution from Zeekr and Lynk brands by 3.6 percentage points YoY - Aggressive pricing strategy for newly launched Galaxy models [3] - **Net Profit per Car**: Rmb5,046, up 18% YoY and 44% QoQ, but still considered low within the industry [3] Strategic Outlook - **Product Launch**: Geely Galaxy launched the new Xingyao 8 model, priced approximately Rmb40,000 lower than BYD Han, targeting the same market segment [4] - **Market Dynamics**: Mass-market EVs are benefiting from trade-in incentives, but there is a risk of intense competition post-2026 when trade-in subsidies expire [4] - **Zeekr Privatization**: Remains a key focus for future developments [4] Valuation and Market Position - **Current Valuation**: Trading at 16x 2025E PE, with a price target of HK$15 based on a sum-of-the-parts (SOTP) valuation approach [5] - **Market Capitalization**: HK$193 billion (approximately US$24.7 billion) [6] - **Price Performance**: Current price as of May 14, 2025, is HK$19.14, with a 12-month rating of Neutral [6][28] Risks and Considerations - **Downside Risks**: - Potential slowdown in the Chinese auto industry - Intensifying competition within the industry - Uncertainty surrounding the Lynk & Co brand initiative [14] - **Upside Risks**: - Strong government stimulus policies to boost auto demand - Higher-than-expected sales volumes for Geely - Improved pricing environment [14] Financial Forecasts - **Revenue Projections**: Expected to grow from Rmb240,194 million in 2024 to Rmb295,096 million in 2025 [9] - **Net Earnings**: Projected to increase from Rmb16,632 million in 2024 to Rmb11,279 million in 2025 [9] - **EPS Estimates**: Expected to be Rmb1.12 for 2025, with a gradual increase in subsequent years [7] Conclusion Geely Automobile has shown significant growth in net profit and operating income, although challenges remain in terms of ASP and market competition. The company's strategic initiatives, including new product launches and potential privatization of Zeekr, will be crucial in navigating the evolving automotive landscape.