Morgan Stanley has resumed coverage of Hong Kong-listed Geely with an overweight rating on expectations the Chinese automaker can weather macro and sector uncertainties. Fierce competition in China’s new energy vehicle market, which includes battery and hybrid cars, has increasingly forced automakers to cut prices and add features if they want to survive. Many of the companies have launched overseas expansion strategies to tap into new sources of revenue, but rising trade tensions with the US and, more recently, the European Union, have created additional challenges. “We see Geely as a beneficiary of market consolidation,” Morgan Stanley Asia equity analyst Tim Hsiao and a team said in a June 25 report resuming coverage of the stock. “Geely has said it has limited exposure to the EU, with the exception of PHEV exports under Lynk & Co (which are currently unaffected by the tariff increase) and potential overseas expansion for Zeekr (which will start at a minimum level)” , the report said. said. PHEV is the abbreviation for plug-in hybrid electric vehicle. Hangzhou-based Geely entered the Chinese auto industry in 1997 and is known for acquiring Volvo in 2010. Geely has a host of other subsidiaries, including Polestar, Lynk & Co. and the electric car brand Zeekr, which launched in New York earlier this year. . Morgan Stanley’s analysis showed Geely rose from its longstanding fourth place last year to third in terms of market share in China, behind one of Volkswagen’s joint ventures in the country. BYD held the top spot, a position it has held since 2022, up from 13th in 2021, the analysis showed. In 2020, BYD launched the Blade battery, which many credit with fueling the company’s growth in electric vehicles. Geely announced Thursday that it had developed its own competitor, the lithium iron phosphate ‘Aegis Short Blade Battery’, which it claims has passed above-industry-standard testing without exploding. The company also claimed that the new battery can be used for 50 years, which can support second-hand sales. The company plans to initially use the battery in its own vehicles this year. The majority of Geely’s cars are still traditional combustion engine vehicles. But the company has increased the share of its new energy vehicles to 32% so far this year, more than peers like Great Wall Motor, whose share is 23%, Morgan Stanley analysts pointed out on Tuesday. Geely’s “presence in the [new energy vehicles] The market should bode well for its medium- and long-term presence in the domestic market, amid the trend towards NEV transition, and contribute to the longer-term sustainability of earnings,” the report said. The analysts expect Geely to grow overall revenue by 22% this year. Despite a moderation in growth in the second half of this year, Zeekr and other electric car brands typically publish monthly delivery figures around the end of each month. The rules do not require such frequent disclosures. Quarterly revenue rose 56% year on year to 52.32 billion yuan ($7.2 billion), the filing showed, closing 1.2% lower at HK$8.79 ($1.13) on Friday, ahead of the publication of the profit figures. Morgan Stanley analysts set a price target of HK$11.20 ($1.43) on Tuesday, about 27% higher than where the shares closed on Friday in the past 2-3 years due to investments in [new energy vehicles] and one-off non-cash expenses, we see good visibility into earnings growth, aided by increasing sales volume and potentially reduced losses in the NEV business,” the Morgan Stanley report said. “We believe the company’s profitability will enable it will enable us to navigate the current situation.” macroeconomic uncertainties,” the analysts said.
Join the consolidation of the Chinese EV industry with this stock: Morgan Stanley
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