CICC: Maintains GEELY AUTO (00175) "outperform industry" rating, target price raised to 13.54 Hong Kong dollars.

CICC released a research report saying it maintains a "outperform industry" rating for GEELY AUTO (00175), with profit forecasts for 2024/2025 remaining unchanged. Due to the company's new car releases and the rebound in the Hong Kong stock valuation center, the target price has been raised by 32% to 13.54 Hong Kong dollars. The company recently released models such as the Galaxy E5, Jike 7X, and Lynk Z10, with sales and order situations exceeding the bank's expectations. At the same time, the bank is optimistic that the company's future sales are expected to benefit from the policy of trading in old cars for new ones, believing that a strong new product cycle is likely to bring growth certainty to the company's sales and profits. Key points of CICC: Multiple new energy vehicle models start a strong product cycle, with impressive sales and order performance. In early August 2024, the company released its first pure electric A-class SUV, the Galaxy E5, with strong competitiveness in the price range of 100,000-150,000 yuan. According to data from the China Passenger Car Association, the Galaxy E5 sold over ten thousand units in its first month. The Jike 7X was unveiled at the Chengdu Auto Show in the same month, showcasing outstanding smart driving capabilities and spaciousness. According to the Jike new car launch event, pre-sales of the Jike 7X started at the Chengdu Auto Show, and as of September 21st, the number of orders had exceeded 58,000 units. Lynk's first pure electric vehicle, the Z10, was unveiled in Europe in June 2024 and released in Hangzhou in September of the same year, targeting the global market. The bank believes that with the increase in production capacity, Geely's new car sales potential is expected to further unleash. The policy of trading in old cars for new ones intensifies demand, with a rapid increase in scrappage applications. In July 2024, the central government doubled the subsidies for trading in old cars for new ones, leading to a rapid increase in scrappage renewal volume. According to the Ministry of Commerce, from January to July 2024, the number of scrapped cars recycled nationwide reached 3.51 million, an increase of 37% year-on-year. In July/August 2024, the monthly subsidy application for scrappage was approximately 250,000/550,000 vehicles. Furthermore, local governments followed up by intensifying replacement subsidies, with an overall replacement subsidy ranging from 8,000 to 16,000 yuan per vehicle, slightly higher for new energy vehicles; combined with national and local subsidies, the subsidy amount for scrapping and replacing with new energy vehicles can reach 30,000-40,000 yuan per vehicle. The bank believes that intensifying the policy of trading in old cars for new ones is expected to stimulate replacement demand. Strong export sales performance, thick accumulation leading to globalization. In August 2024, GEELY AUTO's export sales increased by 98%/39% month-on-month to 45,045 units, and the cumulative export sales from January to August increased by 71% year-on-year to 275,000 units. According to the company's interim report, the company plans to use Volvo's channel resources to accelerate the development of the European market, and the Lynk joint venture company plans to export Lynk compact pure electric SUV in the second half of 2024 to explore new energy transformation in the global market. In addition, through cooperative joint ventures with companies such as Proton and Renault Korea, the company is expanding its presence in other markets such as Southeast Asia and Korea. The bank believes that the company, benefiting from its global layout, is expected to further open up overseas markets.