Geely Automobile:Ending 1H18on a solid note

Event

Geely reported June wholesale shipment data after the market close on 9July.Sales jumped 45% YoY to 128k units in June, ending 1H18total sales up 44%YoY.

Impact

Growth momentum continues in June: Geely shipped 128k vehicles inJune, up 45% YoY. The growth was mainly supported by the EmgrandGL (14k, +68% YoY), Emgrand GS (14k, +13%), Vision X3(10k, N.A.)and Vision S1(7k, N.A.). Restocking should also help – managementmentioned that they were pushing some inventories of the Vision (12k) andXindihao (20k, incl. 2k Emgrand EV) sedans into the channel in the company’sstrategy to smooth production ahead of the launch of the Binrui sedan. Salesof the Boyue (22k, +4%) remained steady. Shipments of the Lynk &Co 01were flat MoM at 9k units in June. Total sales were up 44% YoY to 767kunits in 1H18. This represents 49% of its full-year sales target of 1.58m units.

Geely is our preferred name on a multi-year basis: As detailed in ourrecent in-depth note (Near-term margin pressure, long-term winner, 14June),we like Geely on a multi-year basis as the best positioned domestic brand tosurvive global competition, leveraging its balanced growth strategies andimproved operating outlook. Synergies with the parent company give Geely anadvantage in expanding overseas. The ability to outperform the overall automarket and increased strength in new energy vehicles will underpin itsvaluation premium compared with its peers, in our view. That said, we expectto see margin contraction risk in the near term, mainly due to dilution fromentry-trim models.

Action and recommendation

We maintain our Outperform rating.