CICC released a research report stating that it maintains a 'outperform' rating on Geely Auto (00175), as the profitability of the new energy sector improves, raising the 2024/2025 net income by 3.3%/15.4% to 16 billion yuan/11 billion yuan. Considering the company's strong new car cycle and sector valuation improvement, the target price is raised by 37.4% to 18.6 Hong Kong dollars. The company's sales volume in October 2024 was 226,686 units, up 28% year-on-year and 12% month-on-month, with new energy vehicle sales at 108,722 units, up 75% year-on-year and 19% month-on-month.

CICC's main points are as follows:

With a strong new car cycle, the all-new generation of Raytheon super hybrid electric technology is driving the full renewal of the Silver Galaxy brand.

Thanks to the sales growth of new models like Silver Galaxy E5, Zeekr 7X, Xingyuan, and Lynk Z10, the total sales and electric vehicle sales in October hit historical highs. The monthly electric vehicle penetration rate further increased to 48%, with strong growth. Recently, the company introduced the all-new Raytheon EM super hybrid electric technology, including the fuel-efficient EM-i version and the energy-efficient EM-P version, with the EM-i single-gear system achieving only 2.62 liters per 100 kilometers, comparable to BYD's DM5.0 platform. The company plans to launch the new model Silver Galaxy Starship 7 with the EM-i system in November. The bank believes that Geely Starship 7 is expected to directly compete with and has high growth potential similar to BYD Song PLUS, and the bank is bullish on the strong new product cycle of Geely, which will drive the company's sales volume and market share growth.

Steady export sales with deep global layout.

From January to October 2024, cumulative export sales increased by 58% year-on-year to 0.347 million units. The export product matrix continues to expand, with Geely's main brand, Zeekr, and Lynk venturing into the markets of ASEAN, the Middle East, Africa, Mexico, and Central Asia. In addition, the company is accelerating brand operations and localizing supply chain management, broadening its presence in markets such as Southeast Asia and South Korea through cooperation with joint venture companies such as Proton and Renault South Korea, enhancing its core competitiveness in overseas markets. The bank believes that benefiting from the accumulation of its global layout, the company is expected to further open up overseas market space.

The new energy sector is gradually turning profitable, waiting for the elasticity of performance to be released.

Geely's main brand, the new generation PHEV product cycle is strong, driving the sales volume of the new energy business to boost. With the push of scale effects and cost reduction in the GEA architecture, the bank expects the new energy sector to gradually achieve profitability. In addition, export models have stronger profit capabilities than domestic sales. As export sales continue to grow, export business contributes steadily to performance. Looking ahead, the bank believes that as the company continuously strategically integrates brand resources and promotes cost reduction, it is expected to achieve performance elasticity.