: Maintains "strong recommendation" rating on GEELY AUTO (00175) with a target price of 27.01 Hong Kong dollars.

Huachuang Securities released a research report stating that based on GEELY AUTO's recent sales volume and the adjustment of the privatization of Jike, the company's 2025-27E net profit attributable to the parent was raised from 17.8 billion, 24 billion, and 27.2 billion yuan to 18.6 billion, 26.3 billion, and 31.6 billion yuan, corresponding to PE ratios of 8.8 times, 6.3 times, and 5.2 times. Referring to the historical valuation levels of the company, and considering the company's fundamentals and industry trends, the company is given a 10 times PE ratio for 2026, corresponding to a target price of 27.01 Hong Kong dollars, with a 60% upside potential, maintaining a "strong buy" rating. The main points of Huachuang Securities are as follows: Events On December 22, GEELY AUTO announced the completion of the privatization and merger transaction of Jike, with Jike becoming a wholly-owned subsidiary of GEELY AUTO and delisted from the NYSE. Previously, on December 9, the results of the consideration for the transaction were announced, with 70.8% of Jike shareholders choosing shares, and GEELY AUTO issuing 777.23 million shares to them; 29.2% of shareholders chose cash, and GEELY AUTO paid 701 million US dollars in cash. Privatization of Jike increases profits, strategic integration synergies reduce costs and increase efficiency After the privatization of Jike, Geely's holdings in Jike and Lynk & Co increased from about 65% and 82% to 100%, which is expected to increase the net profit by 20-30 billion yuan in 2026. At the same time, the completion of the privatization of Jike further promotes the integration of Geely, Galaxy, Lynk & Co, and Jike, and is expected to achieve cost reductions and efficiency improvements through synergies. High popularity of new models, still in a strong new product cycle in 2026 Since last year, after the Geely Galaxy series of new energy vehicles entered a new product cycle, the company continues to launch competitive new models this year, including Galaxy A7, Galaxy Star 8, Galaxy Star 6, Galaxy M9, Lynk 10, Lynk 900, Jike 9X, etc. Benefiting from outstanding advantages in terms of cost-performance ratio, space, intelligent cockpit, power system, etc., the company's new models have a high popularity rate. Relatively affordable models such as Galaxy A7 and Galaxy Star 8 have achieved monthly sales of over 15,000 and 10,000 units respectively. At the same time, the company's high-end advancement is progressing smoothly. Three six-seat SUVs released this year-Galaxy M9, Lynk 900, Jike 9X are flagship models of their respective brands, with estimated monthly sales reaching over 10,000, 5,000, and 5,000 units respectively. Looking ahead to next year, it is expected that there will be 1-2 new models every quarter, still in a strong new product cycle. High sales growth combined with upscale enhancement, sales and profits are expected to increase significantly In terms of sales, with the assistance of multiple new models, the company's sales continue to break through. In November, sales reached 310,000 units, up 24% year-on-year and 1.1% month-on-month. Following the large-scale delivery of new models, as well as the growth in Geely's overseas sales next year, the trend of total sales increase for the company continues. It is expected that the sales volume for 2025-27E will be 3.06 million, 3.7 million, and 3.99 million units, with a year-on-year increase of 40%, 21%, and 8%. In terms of profits, the significant improvement in the company's product structure with middle-to-high-end/high-end models, represented by three six-seat SUVs, is expected to bring significant growth in net profit total amount with higher ASP and higher gross profit margins. The company's estimated net profit margins for 2025-27E are 5.5%, 5.9%, and 6.4%, with attributable net profits of 18.6 billion, 26.3 billion, and 31.6 billion yuan, of which the core attributable net profits are 15.1 billion, 25.3 billion, and 30.6 billion yuan respectively (all considering the privatization of Jike). Undervaluation + strong growth, Geely is one of the preferred targets for the repair market for the whole vehicle beta next year Affected by the expected decline in automobile subsidy policies, the performance of the entire vehicle market has been relatively weak in the past six months. Currently, the expectation of policy decline has been largely reflected in the valuation of the entire vehicle industry, and there is a possibility of valuation recovery next year. Among the first-tier car companies, Geely's sales and profit growth are at the forefront, with corresponding PE ratios for 2025-26 of only 8.8 and 6.3 times, significantly exceeding the lower limits of the company's and the industry's valuation in recent years. The industry's pessimistic expectations have suppressed the company's valuation, causing it to deviate from its fundamentals. Therefore, it is a good investment opportunity, and it is recommended to layout at the bottom. Risk warning: The industry's business climate is lower than expected, new model sales are lower than expected, and price competition intensity is higher than expected.