Maintain a "buy" rating on GEELY AUTO (00175) with a target price of HK$23.37

Orient released a research report predicting that GEELY AUTO (00175) will achieve a net profit attributable to shareholders of 17.041, 20.604, and 24.318 billion yuan respectively for the years 2025-2027. The report maintains a target price of 20.79 Chinese yuan and 23.37 Hong Kong dollars (1 Hong Kong dollar = 0.8898 Chinese yuan) and a PE average valuation of comparable companies of 11 times for the year 2026. The report also maintains a "buy" rating. Key points from Orient include: - The company's sales performance in January was slightly better than the industry's average expectations. - GEELY AUTO's total sales in January reached 270,200 units, an increase of 1.3% year-on-year. The automotive market in January was in a phase of policy transition, with new energy vehicle purchase tax subsidies declining and some provinces and cities implementing subsidies for trading in old vehicles, leading to cautious consumer sentiment. The China Passenger Car Association estimated that the narrow passenger car retail market in January was approximately 1.8 million units, a year-on-year increase of 0.3%, with new energy passenger cars expected to retail around 800,000 units, a year-on-year increase of approximately 7.5%. GEELY AUTO's overall sales performance in January was slightly better than industry expectations. - The combination of fuel and electricity has solidified the domestic sales foundation, while overseas sales have achieved significant growth. - In January, GEELY brand sales reached 217,400 units, a month-on-month increase of 25.8%. GEELY's strategy of combining fuel and electricity was effective in January, with sales of new energy vehicles reaching 124,300 units, a year-on-year increase of 2.6%, and sales of fuel vehicles reaching 145,900 units, a year-on-year increase of 0.2% and a month-on-month increase of 76.8%. Among them, GEELY Yuanjing sold 83,000 units; the Chinese constellation series sold 134,400 units, a year-on-year increase of 2.5% and a month-on-month increase of 86.5%. GEELY launched the Yuanjing V900 on January 20, a new flagship MPV with a price range of 269,800 to 329,800 yuan. In 2026, GEELY AUTO will launch approximately 10 models. The report believes that the improvement of the GEELY's product matrix and the gasoline vehicle layout will offset some of the impact of the decline in new energy subsidies, giving the company strong sales resilience. GEELY exported 60,500 units in January, a year-on-year increase of 121.2% and a month-on-month increase of 50.1%, indicating that the overseas layout achieved results in earlier periods. On January 15, the GEELY Fenrui 007 GT was sold in Europe, with a price range of 374,000 to 467,000 yuan, much higher than the domestic market. On January 23, the Geely Binyue EX2 model was launched in Indonesia, with the new car already in production at a local factory, and the Lynk & Co and GEELY brands have also entered the local market for coordinated development. The report believes that in the context of potential pressure on the overall vehicle sector, GEELY's improved new energy matrix, upward trend in high-end brands, consolidation of gasoline vehicles, and rapid expansion of overseas markets will remain key points for the company in 2026. - High-end transformation of the GEELY brand has achieved results, and the global AI 2.0 system has been launched. - In January, GEELY brand sales reached 23,900 units, an increase of 99.7% year-on-year; Lynk & Co brand sales reached 28,900 units. The high-end transformation of the GEELY brand has achieved results, with the GEELY X7 becoming the sales champion of SUVs above 500,000 units for two consecutive months, and the GEELY 009 becoming the sales champion of MPVs above 400,000 units for two consecutive years. GEELY's next heavyweight model, the GEELY X8, will be launched in the first half of the year, positioned lower than the X7 model and aiming to cover the full-size high-end SUV market. The GEELY X8 adopts a design language similar to the X7 and is expected to be equipped with a 6C super fast-charging large battery, the vast AI digital chassis, and a 48V active stabilizer bar. On January 6, GEELY unveiled the WAM World Behavior Model and the new generation of the vast G-ASD at CES 2026, with G-ASD making its debut in 16 models of the GEELY and Lynk & Co brands. Where regulations allow, GEELY will also launch high-speed L3 and low-speed L4 functions this year and achieve Robotaxi operations. The report believes that the high-end transformation of the GEELY brand has achieved results, and the strategic synergy and economies of scale after the integration of GEELY and Lynk & Co will gradually be realized. - Risk Warning: Risks of GEELY, Lynk & Co, and GEELY brand sales falling below expectations, and risks of cost control falling below expectations.