The Resilience of Geely: An In-depth Analysis

The Resilience of Geely: An In-depth Analysis

Geely, a Chinese automaker listed on the Hong Kong exchange, has recently caught the attention of Morgan Stanley analysts who resumed coverage of the company with an overweight rating. Despite facing challenges in a competitive market environment, Geely has shown resilience and is expected to weather macro and uncertainties.

One of the key factors contributing to Morgan Stanley's positive outlook on Geely is the company's positioning in the market. Geely is seen as a beneficiary of market consolidation, which has become increasingly important in the face of fierce competition in China's new energy vehicle market. Many automakers in China have been forced to cut prices and add features to survive, leading to a challenging environment for growth. Geely, however, has strategically positioned itself to take advantage of market trends by limiting exposure to regions like the EU and focusing on overseas expansion through subsidiaries like Lynk & Co and Zeekr.

Geely's commitment to new energy vehicles (NEVs) is another factor that sets it apart from its competitors. While the majority of Geely's cars are still traditional internal combustion engine vehicles, the company has raised the share of its new energy vehicles to 32% this year. This places Geely ahead of peers like Great Wall Motor, with a share of 23%. Furthermore, Geely's recent of the lithium iron phosphate “Aegis Short Blade Battery” demonstrates the company's commitment to in battery technology. The new battery not only passed above-industry standard tests without exploding but also has the to support secondhand with its 50-year lifespan.

Geely's financial performance has also been strong, with quarterly rising 56% year over year to 52.32 billion yuan ($7.2 billion). attributable to shareholders more than doubled from the year-ago period, highlighting the company's ability to generate profits even in challenging market conditions. The analysts at Morgan Stanley expect Geely to grow sales by 22% overall this year, despite a moderation in growth in the second half of the year. This growth outlook is supported by Geely's presence in the NEV market and its focus on long-term sustainability.

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Geely's resilience in the face of macro and industry uncertainties is commendable. The company's strategic positioning, commitment to new energy vehicles, and strong financial performance make it a promising investment opportunity. With a price target of HK$11.20 ($1.43), about 27% above where shares closed on Friday, Geely is poised for continued growth and in the automotive industry.

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