Huachuang Securities: Maintaining Geely Auto (00175)'s “Strong Push” Rating Target Price of HK$27.01

The Zhitong Finance App learned that Huachuang Securities released a research report saying that according to Geely Auto (00175)'s recent sales volume and Krypton privatization adjustments, the company's 2025-27E net profit forecast was raised from 17.8 billion yuan, 24 billion yuan, and 27.2 billion yuan to 18.6 billion yuan, 26.3 billion yuan, and 316 billion yuan, corresponding to PE 8.8 times, 6.3 times, and 5.2 times PE. Referring to the company's historical valuation level, taking into account the company's fundamentals and overall industry trends, the company was given 10 times PE in 2026, corresponding to a target price of HK$27.01 and a space of 60%, maintaining a “strong” rating.

The main views of Huachuang Securities are as follows:

matters

On December 22, Geely Automobile issued an announcement announcing the formal completion of the privatization and merger of Geely Krypton. Geely Krypton became a wholly-owned subsidiary of Geely Automobile and was delisted from the New York Stock Exchange. Previously, the transaction consideration selection results were announced on December 9. 70.8% of Krypton shareholders chose shares, and Geely Auto allotted a total of 777.23 million shares; 29.2% of shareholders chose cash, and Geely Auto paid a total of 701 million US dollars in cash.

Extreme Krypton privatization increases profits, and strategic integration reduces costs and increases efficiency

After the privatization of Geely Krypton is completed, Geely's holdings in Jik Krypton and Lynk & Co increased from about 65% and 82% to 100%, which is expected to increase net profit by 2 to 3 billion yuan in 2026. At the same time, the privatization of Krypton has been completed to further enhance the integrated integration of the company's four major brands, Geely, Galaxy, Lynk & Krypton, which is expected to reduce costs and increase efficiency through synergy effects.

The popularity rate of new models is high, and 2026 is still in the strong new product cycle

Since the Geely Galaxy series of new energy vehicles entered a new product cycle last year, the company has continued to launch competitive new models this year, including Galaxy A7, Galaxy Starlight 8, Galaxy Starlight 6, Galaxy M9, Linker 10, Linker 900, and Extreme Krypton 9X. Benefiting from outstanding advantages in terms of cost performance, space, smart cabin, and power systems, the company's new models have a high sales rate. Relatively affordable models such as the Galaxy A7 and Galaxy Star 8 have sold more than 15,000 units and 10,000 units per month. At the same time, the company's high-end development is progressing smoothly. The three six-seater SUVs released this year — Galaxy M9 and Linker 900 Extreme Krypton 9X — are all flagship models of corresponding brands. The bank expects steady monthly sales to reach 10,000 +, 50,000 +, and 50,000 vehicles. Looking ahead to next year, it is expected that there will be 1-2 new models every quarter, and we are still in the midst of a strong new product cycle.

High sales increase combined with high-end increase, and profit is expected to rise sharply

In terms of sales, with the help of a variety of new models, the company continued to break through sales, achieving sales of 310,000 units in November, +24% year over year and +1.1% month over month. Following large-scale delivery of new models and Geely's overseas sales growth next year, the company's overall sales trend continues. The 2025-27E is expected to sell 3.06 million, 3.7 million, and 3.99 million units, +40%, +21%, and +8% compared with the same period last year. In terms of profit, the mid/high-end models represented by three six-seater SUVs have greatly enhanced the company's product structure, and higher ASP and higher gross margins are expected to lead to a significant increase in total net profit. The bank expects the company's 2025-27E net profit margin of 5.5%, 5.9%, and 6.4%, with net profit attributable to mother of 18.6 billion yuan, 26.3 billion yuan, and 30.6 billion yuan, of which the core net profit to mother is 15.1 billion yuan, 25.3 billion yuan, and 30.6 billion yuan, respectively (all taking into account the privatization of Krypton).

Undervalization+strong growth, Geely is one of the preferred targets for next year's vehicle beta repair market

Affected by expectations of a decline in the automobile subsidy policy, the overall performance of the vehicle market has been weak in the past six months. At present, expectations of policy decline have basically been reflected in vehicle industry valuations, and there is a possibility that valuation will be repaired next year. Among first-tier car companies, Geely had the highest sales and profit growth rate, while the corresponding 25-26 PE was only 8.8 or 6.3 times, significantly breaking through the lower valuation limits of the company and industry in recent years. The current pessimistic expectations of the industry suppress the company's valuation and diverge it from fundamentals. Instead, it is a better time to invest, and the bottom layout is recommended.

Risk warning: Industry sentiment is lower than expected, sales of new models are lower than expected, price competition intensity is higher than expected, etc.