Huachuang Securities released a research report stating that based on GEELY AUTO's (00175) recent sales performance and adjustments following the privatization of Zeekr, it has raised its net profit forecasts for 2025-27E to RMB 18.6 billion, RMB 26.3 billion, and RMB 31.6 billion (previously RMB 17.8 billion, RMB 24.0 billion, and RMB 27.2 billion), corresponding to P/E ratios of 8.8x, 6.3x, and 5.2x. Considering the company's historical valuation levels, fundamentals, and industry trends, Huachuang assigned a 10x P/E for 2026, setting a target price of HK$27.01, implying a 60% upside, and reiterated a "Strong Buy" rating.
Key Points: 1. **Completion of Zeekr Privatization**: On December 22, GEELY AUTO announced the formal completion of Zeekr's privatization and merger, making Zeekr a wholly-owned subsidiary and delisting it from the NYSE. Earlier, on December 9, the company disclosed that 70.8% of Zeekr shareholders opted for stock compensation, resulting in the issuance of 777.23 million shares, while 29.2% chose cash, totaling $701 million.
2. **Profit Boost and Synergies**: Post-privatization, GEELY AUTO's ownership in Zeekr and Lynk & Co increased from ~65% and 82% to 100%, potentially adding RMB 2-3 billion to 2026 net profit. The move also enhances integration across GEELY AUTO's four major brands (Geely, Galaxy, Lynk & Co, Zeekr), driving cost efficiencies.
3. **Strong Product Cycle**: Following the launch of the Galaxy series last year, GEELY AUTO introduced competitive models in 2024, including the Galaxy A7, Galaxy Xingyao 8, Galaxy Xingyao 6, Galaxy M9, Lynk & Co 10, Lynk & Co 900, and Zeekr 9X. Affordable models like the Galaxy A7 and Xingyao 8 achieved monthly sales peaks of 15,000 and 10,000 units, respectively. Premium models—Galaxy M9, Lynk & Co 900, and Zeekr 9X (all six-seat SUVs)—are expected to stabilize at 10,000+, 5,000+, and 5,000+ units monthly. The firm anticipates 1-2 new models per quarter in 2025, sustaining a robust product cycle.
4. **Volume Growth and Premiumization**: November sales hit 310,000 units (+24% YoY, +1.1% MoM), supported by new models. With overseas expansion and scaled deliveries, 2025-27E sales are projected at 3.06 million, 3.70 million, and 3.99 million units (+40%, +21%, +8% YoY). Premium models like the six-seat SUVs are expected to lift ASPs and margins, driving net profit growth. Net profit margins are forecast at 5.5%, 5.9%, and 6.4% for 2025-27E, with core net profits of RMB 15.1 billion, RMB 25.3 billion, and RMB 30.6 billion (post-Zeekr privatization).
5. **Undervaluation and Growth Potential**: Auto sector valuations have been depressed due to subsidy phase-out concerns, but GEELY AUTO's 2025-26E P/E of 8.8x and 6.3x is below historical lows. With leading sales/profit growth among peers, the current disconnect between valuation and fundamentals presents a buying opportunity.
**Risks**: Lower-than-expected industry demand, weak new model sales, or intensified price competition.
Comments