Geely Automobile Holdings Limited, a leading player in the automotive industry, has demonstrated robust sales performance with remarkable year-over-year growth. In addition, the company has recently made a series of significant announcements, including the formation of a joint venture and related transactions, demonstrating its proactive approach to expansion and strategic partnerships.
In the first six months of 2023, Geely Automobile Holdings Ltd. recorded a total sales volume of 137,897 units, a notable increase of 9% compared to the same period last year. This upward trend follows the Company's exceptional performance in May, when it achieved a total sales volume of 120,053 units, representing an impressive 35% year-on-year growth.
Building on this sales momentum, Geely Automobile Holdings Ltd. has announced the formation of a joint venture and a deemed disposal transaction. While specific details of the joint venture and related transactions are yet to be disclosed, these strategic moves underscore the company's commitment to exploring new avenues for growth and optimizing its business operations.
I. Geely Automobile Holdings Ltd's Overview
Geely Automobile Holdings Ltd, founded by Li Shufu in 1986, is a prominent automotive company headquartered in Hangzhou, China. As an investment holding company, Geely manages a diverse portfolio of automotive brands, including Lotus, London Electric Vehicle Company, Farizon Auto, RADAR AUTO, and Cao Cao Mobility. The company's CEO, Li Shufu, who also serves as the Chairman of Geely Holding Group, provides strategic leadership and direction. Geely Automobile Holdings Ltd. has a strong presence in the automotive market, driven by the vision and leadership of Li Shufu.
Li Shufu holds the largest stake in the company with 42.15%. Other major shareholders include The Vanguard Group, Inc. (2.098%), E Fund Management Co., Ltd. (0.7377%), and Norges Bank Investment Management (0.6328%). Over the years, Geely has achieved several key milestones, including the acquisition of Volvo Cars from Ford Motor Company in 2009, the introduction of its first electric vehicle, the 01, in 2017, and the acquisition of a 9.7% stake in Daimler AG in 2020.
II. Geely Automobile Holdings Ltd's Business Model and Products/Services
A. How Geely makes money
Geely Automobile Holdings Ltd. generates revenue from the sale of cars, parts, and related services. The company's primary source of income is from selling passenger cars, SUVs, and electric vehicles. Additionally, Geely generates revenue from the sale of parts and accessories, as well as through after-sales services such as maintenance and repair.
B. Main Products and Services
Source: Geely
Geely offers a diverse range of products and services through its various automotive brands:
Passenger Cars: Geely Auto, Lynk & Co, ZEEKR, Geometry, and Volvo Cars are among the prominent passenger car brands under Geely. These brands provide a wide selection of vehicles designed to meet different customer preferences and market segments.
SUVs: Geely Auto, Lynk & Co, and Volvo Cars offer a range of SUV models that cater to the growing demand for sport utility vehicles globally. These SUVs combine style, performance, and versatility to meet the needs of diverse customers.
Electric Vehicles (EVs): Geely is committed to electric mobility and has dedicated EV brands such as Geometry, ZEEKR, and Polestar. These brands focus on developing and promoting electric vehicles with cutting-edge technology, advanced features, and sustainable driving solutions.
Parts and Accessories: Geely provides a variety of parts and accessories for its vehicles, including tires, batteries, electronics, and other components. These products ensure quality and compatibility with Geely vehicles, meeting the needs of customers for replacements and enhancements.
After-sales Services: Geely offers comprehensive after-sales services, including maintenance, repair, and roadside assistance, to support customers throughout their ownership experience. These services help maintain the performance and reliability of Geely vehicles, ensuring customer satisfaction and loyalty.
In addition to its core automotive business, Geely is also involved in other businesses such as financial services, real estate development and tourism, contributing to the company's overall growth and diversification.
III. Geely Automobile Holdings Ltd's Financials, Growth, and Valuation Metrics
Image Source: Istock
A. Review of Geely Automobile Holdings Ltd's financial statements
Geely Automobile Holdings Ltd's financial statements paint a mixed picture of the company's performance. On the positive side, the company's market capitalization of HK$94.23 billion reflects a substantial valuation, indicating investors' confidence in the company's potential. In addition, with revenues of HK$160.76 billion, Geely has achieved a significant scale of operations.
However, there are some concerns that need to be addressed. The earnings per share (EPS) of 0.51 is relatively low, suggesting that the company's profitability may not be as robust as desired. The gross margin of 14.12% indicates that Geely faces challenges in maintaining a healthy profit margin on its products.
On the bright side, Geely's net profit margin of 3.46% is decent, though it could still be improved. The debt/equity ratio of 14.2% indicates that the company has a relatively low level of debt, which is generally positive from a financial stability perspective.
Looking at Geely's performance in the auto manufacturing segment, the revenue of CN¥147.96 billion is significant, and the gross profit of CN¥20.90 billion is commendable. However, it's important to note that the expenses, particularly general & administrative costs and sales & marketing expenses, are quite high, indicating possible inefficiencies that could be addressed to improve profitability.
In terms of future prospects, Geely's target of selling 1.65 million units in 2023 and doubling the share of new energy and electrified vehicle sales are ambitious but promising goals. Collaborations with well-established companies like Mercedes, Renault, and Aramco could provide Geely with valuable expertise, technology, and cost efficiencies in its supply chain, which may help achieve these targets.
B. Key financial ratios and metrics
Image Source: Istock
P/E (Price-to-Earnings) Ratio: Geely has a P/E ratio of 11.8x, which is higher than Nissan Motor and Hyundai Motor but comparable to Kia. This indicates that Geely's stock is relatively more expensive based on its earnings, but still within a reasonable range.
P/S (Price-to-Sales) Ratio: Geely has a P/S ratio of 0.7x, which is slightly higher than Nissan Motor, Hyundai Motor, and Kia. This suggests that Geely's stock is trading at a slightly higher premium relative to its sales.
P/B (Price-to-Book) Ratio: Geely has a P/B ratio of 1.0x, which is similar to Nissan Motor and Hyundai Motor but slightly lower than Kia. This implies that Geely's stock is trading at a fair value relative to its book value.
EV/EBITDA (Enterprise Value-to-EBITDA) Ratio: Geely has an EV/EBITDA ratio of 10.0x, which is lower than Nissan Motor, Hyundai Motor, and Kia. This suggests that Geely's stock may be undervalued compared to its industry peers on an EBITDA basis.
Based on the research, it appears that the fair value of the Geely stock with the symbol "175" is estimated to be HK$17.7. However, the current trading price is HK$9.37, which is below the fair value estimate, indicating a potential buying opportunity. It is trading significantly below its fair value by more than 20%.
IV. Geely Stock Performance Analysis
A. Geely Stock trading information
Geely Automobile Holdings Ltd is a publicly traded company that went public on March 28, 2009. Its stock is traded on the Hong Kong Stock Exchange under the ticker symbol 0175.HK. The company is based in China, and its stock is traded in Hong Kong Dollars (HKD). Geely's stock can be bought and sold during trading hours from 9:30 AM to 4:00 PM, with additional pre-market and after-market trading sessions.
Geely stock has undergone stock splits and has a history of paying dividends to its shareholders.
Geely Stock Splits:
On June 25, 2002, Geely implemented a 2-for-1 stock split. A stock split is a corporate action in which a company divides its existing shares into multiple shares, effectively lowering the share price. In this case, each shareholder received two shares for every one share they held before the split. Stock splits are often done to make shares more affordable to a broader range of investors and to increase liquidity in the market.
Geely Stock Dividends:
Geely has a consistent history of paying dividends to its shareholders. Dividends are payments made by a company to its shareholders as a portion of its profits. Here are some notable dividend payments:
- June 5, 2023: Geely paid a dividend of 0.21, which was an annual dividend. The yield was 2.21%.
- June 2, 2022: The company paid an annual dividend of 0.21, with a yield of 1.38%.
- May 28, 2021: Geely paid a dividend of 0.2, and the annual payout ratio was 36%. The yield stood at 1.01%.
The company has consistently paid dividends over the years, with varying amounts and payout ratios.
B. Geely Stock Price Performance since its IPO
Geely stock has experienced both highs and lows since it became available for trading. The highest price the stock reached was HKD 20.40 in January 2015, while the lowest price was HKD 2.22 during its initial public offering (IPO) in March 2009. As of July 11, 2023, the stock is trading at HKD 9.72. Geely's stock has shown some volatility, meaning that Geely stock price has changed quite a bit over time.
C. Geely Stock Price Forecast
When looking at Geely stock, it's important to consider what analysts are saying about it. Analysts provide recommendations and price targets based on their analysis. Geely has a consensus recommendation of "hold," which means there is neither a strong recommendation to buy nor a strong recommendation to sell. Some analysts believe that the stock could go up, with a target price of HKD 12.00, implying a potential upside of about 23.6%.
V. Risks and Opportunities
Geely Automobile Holdings Ltd faces several risks and challenges in the automotive industry. However, it also has competitive advantages and has opportunities for growth and expansion.
Competitive Analysis: Guangzhou Automobile Group (2238.HK) and Dongfeng Motor Group Co Ltd (489.HK)
Guangzhou Automobile Group (GAC)
Guangzhou Automobile Group is one of the major competitors of Geely Automobile Holdings Ltd. It has a strong presence in the Chinese automotive market and is known for its diverse range of vehicle offerings. Some key points to consider regarding GAC's competitive position and advantages:
Established Brand Recognition: GAC has been in the automotive industry for a long time and has built a strong brand reputation. Its well-known brands, such as Trumpchi, provide it with brand recognition and customer loyalty.
Extensive Distribution Network: GAC has a wide distribution network across China, allowing it to reach a large customer base. Its established presence in both urban and rural areas gives it an advantage in terms of market coverage and accessibility.
Technological Capabilities: GAC has invested in research and development, focusing on innovative technologies such as electric vehicles and autonomous driving. This positions the company to compete in the evolving market for advanced automotive technologies.
Dongfeng Motor Group Co Ltd
Dongfeng Motor Group is another major competitor in the Chinese automotive industry. It operates in various segments, including passenger vehicles, commercial vehicles, and new energy vehicles. Consider the following points regarding Dongfeng's competitive advantages:
Strong Industry Presence: Dongfeng has a long history in the automotive industry and is recognized as one of the leading automobile manufacturers in China. Its extensive product portfolio and market share contribute to its competitive position.
Diversified Product Offerings: Dongfeng offers a wide range of vehicles, including sedans, SUVs, electric vehicles, and commercial vehicles. This diversity allows the company to cater to different market segments and customer preferences.
Technology Partnerships: Dongfeng has established partnerships with international automakers, such as Nissan and Honda, which provide access to advanced technologies and enhance its product development capabilities.
Competitive Advantages of Geely
Image Source: Dreamtimes
Despite the strengths of Geely's competitors, the company has its own competitive advantages that set it apart. These include:
Product Innovation and Design: Geely has gained recognition for its focus on product innovation and appealing design. The company has introduced models with advanced features and technologies to meet evolving consumer preferences.
Strategic Partnerships and Acquisitions: Geely has pursued strategic partnerships and acquisitions to enhance its capabilities and expand its market reach. The acquisition of Volvo Cars and the collaboration with Volvo for the Lynk & Co brand have strengthened Geely's global presence and access to advanced technologies.
Strong Focus on Electric Vehicles: Geely has placed a strong emphasis on electric vehicles, with brands like Geometry and Polestar dedicated to EV development. This focus aligns with the growing demand for sustainable transportation solutions and positions Geely well in the evolving market.
Other Risks
Geely Automobile Holdings Ltd faces additional risks that can impact its performance:
Economic Conditions: The company's operations are influenced by macroeconomic factors, including changes in economic growth, consumer spending, and interest rates. Economic downturns can affect consumer demand for automobiles and impact Geely's sales and profitability.
Regulatory Environment: Geely operates in a highly regulated industry, and changes in regulations related to emissions standards, safety requirements, and trade policies can impact the company's operations and increase compliance costs.
Growth Opportunities
Source: Geely
Geely has several growth opportunities that can contribute to its future success:
Electric Vehicle Market: The global shift to electric vehicles represents a significant growth opportunity for Geely. The company's brands, such as Geometry and ZEEKR, are focused on electric vehicle development and can benefit from the growing demand for sustainable transportation solutions.
Expansion into New Markets: Geely has been expanding its presence beyond the Chinese market. It has established manufacturing facilities and distribution networks in other countries, including Europe, Southeast Asia, and the Middle East, tapping into new markets and diversifying its revenue streams.
Future Outlook and Expansion
Geely Automobile Holdings Ltd has a promising future outlook and expansion plans:
Technological advancements: Geely is investing in research and development to develop advanced technologies such as autonomous driving, connectivity, and alternative fuels. These technological advancements can drive the company's future growth and competitiveness.
Strategic Partnerships and Alliances: Geely continues to explore strategic partnerships and alliances with other companies in the automotive and technology sectors. Collaborations can enhance Geely's product offerings, access new markets, and accelerate innovation.
VI. Why Traders Should Consider Geely Stock
A. Reasons Why Traders Should Consider Geely Stock
Strong Financial Performance: Geely has demonstrated robust financials, with steady revenue growth and a consistent history of paying dividends. This stability can be appealing to traders seeking reliable returns.
Potential for Growth: Geely's collaborations with major companies like Mercedes, Renault, and Aramco indicate a commitment to innovation and expansion. With a sales target of 1.65 million units and a focus on new energy vehicles, there is significant growth potential for the company's stock.
Market Position: Geely is a prominent player in the automotive industry, particularly in the Chinese market. Its brand recognition, extensive distribution network, and diverse product portfolio can provide a competitive advantage.
Electric Vehicle (EV) Industry Boom: As the demand for electric vehicles continues to rise globally, Geely's emphasis on new energy vehicles aligns well with this growing trend, making it an attractive prospect for traders looking to capitalize on the EV market.
B. Key Resistance & Support Levels of Geely Stock
Geely stock appears to have a strong buy signal based on the technical analysis indicators. The moving averages analysis indicates a "Buy" action with 92% confidence, suggesting a positive trend in the stock's price. Additionally, the momentum oscillators and trend oscillators both show a 100% signal for a "Strong Buy" action, highlighting a favorable outlook for the stock's performance. The momentum oscillators indicate a strong momentum for a buy, while the trend oscillators suggest a robust uptrend. Moreover, the volatility analysis shows a 100% signal for a "Strong Buy" action, indicating relatively low price fluctuations and a stable market condition. The resistance level for Geely stock is at 10.12, while the support level is at 9.02.
C. Trading Strategy for Geely Stock
CFD (Contract for Difference) Trading
Contract for Difference (CFD) trading is a popular way to speculate on the price movements of stocks without actually owning the underlying asset. Here are some advantages of CFD trading with Geely stock:
Leveraged Trading: CFDs allow traders to access the stock market with a smaller initial investment. Since CFDs are leveraged products, traders can control a larger position with a fraction of the total trade value.
Flexibility: CFDs allow traders to take both long (buy) and short (sell) positions with CFDs. This means they can potentially profit from both rising and falling prices, offering more trading opportunities.
No Ownership: As CFDs are derivative products, traders do not own the actual shares of Geely. This means there is no need to worry about physical share ownership, such as dividends or voting rights.
Fast Execution: CFD trades are typically executed quickly, allowing traders to respond quickly to market movements.
Before engaging in CFD trading, traders should be aware of the risks involved, including leverage that amplifies losses, overnight financing charges and market volatility.
VII. Trade Geely Stock CFD with VSTAR
If you're interested in trading Geely stock as a Contract for Difference (CFD), VSTAR is a reputable online broker that offers trading opportunities on a wide range of assets, including stocks like Geely. Here are some advantages of choosing VSTAR for your trading needs:
Advantages of VSTAR
Low Minimum Deposit: VSTAR requires a minimum deposit of $50, making it accessible to traders with different budget levels.
Leverage: VSTAR offers leverage of up to 1:200, allowing traders to increase their trading positions with a smaller initial investment. However, it's important to note that higher leverage comes with increased risk, so it should be used judiciously.
Competitive Costs: VSTAR provides institutional-level pricing, ensuring competitive costs for traders. This can contribute to potentially lower trading fees and expenses.
Wide Range of Assets: VSTAR offers a diverse selection of assets, including forex, metals, commodities, stocks like Geely, and digital currencies. This allows traders to explore various market opportunities and diversify their portfolios.
Comprehensive Trading Tools: VSTAR offers a range of trading tools to help traders make informed decisions. These tools include charting software, technical indicators, economic calendars and real-time market data.
VIII. Conclusion
Geely Automobile Holdings Ltd is a prominent player in the automotive industry, with a strong market position and a diverse brand portfolio. The company's strategic focus on innovation, product design, and electric vehicles has contributed to its growth potential and market success. Geely faces competitive risks from players like Guangzhou Automobile Group and Dongfeng Motor Group, but also has competitive advantages such as product innovation, brand diversification, and strategic partnerships. The company's financial performance, growth prospects, and valuation metrics indicate promising opportunities for investors and traders.
In terms of stock performance, Geely stock offers potential for capital gains, supported by its growth potential and relatively low valuation. Traders can consider Geely stock as a trading opportunity, keeping an eye on key resistance and support levels. VSTAR, as a reputable online broker, provides advantages such as low minimum deposit, competitive costs, a wide range of assets, and comprehensive trading tools for traders interested in trading Geely stock as a CFD.
With the Chinese automotive market's growth and the increasing demand for electric vehicles, Geely Automobile Holdings Ltd is well-positioned to capitalize on market opportunities and further expand its market share. Investors and traders should carefully consider the risks, growth prospects, and competitive landscape while formulating their investment strategies.
