A Long-Term Competitor, Maintain "Accumulate" 一个长期的竞争者，维持“收集”

股

票

研 [Table_Title] Company Report: Geely Automobile (00175 HK) Toliver Ma 马守彰

究 (852) 2509 5317 EquityResearch 公司报告：吉利汽车 (00175 HK) [email protected]

31 March 2020 [Table_Summary] A Long-Term Competitor, Maintain "Accumulate" 一个长期的竞争者，维持“收集”

 Geely Auto’s 2019 profit attributable to shareholders was down 34.8% [Table_Rank] 公 yoy to RMB8,190 million, below market and our expectations. Revenue Rating: Accumulate Maintained decreased by 8.6% as dragged by weak vehicle sales (-10.6% yoy). ASP 司 stayed flat despite sales mix improvement, which was offset by higher 评级：收集 (维持) 报 customer incentives. Gross margin dropped by 2.8 ppts yoy to 17.4%. In 告 terms of cost, R&D expense was up 56% and drove up administrative expenses. Share of profit from auto finance business doubled yoy but the 6[Table_Price-18m TP 目标价] : HK$12.82 CompanyReport Lynk & Co. JV profit was down 27%. The Board proposed final dividend of Revised from 原目标价: HK$16.50 HK$0.25 per share, which represents a payout ratio of 25.1% (vs. 2018: Share price 股价: HK$11.280 22.0%).

 A long-term competitor in the auto industry. We expect that Geely will benefit from the market consolidation and consumption upgrade in China. Its Stock performance leading position will extend into 2020 as propelled by its new model launches. 股价表现 These models will be mainly underpinned by its modular platform, which 30.0 should maintain relatively superior profitability. % of return 20.0  We have adjusted downwards shareholders’ profit in 2020 and 2021 by 20.6% and 19.2%, respectively, on lowered sales and margin. 10.0

证 0.0 券  告 We have reduced our TP to HK$12.82 on reduced earnings forecasts but maintain investment rating as "Accumulate". Our TP represents 9.3x (10.0)

研报 2019 PER and 8.1x 2020 PER. Similar to most OEMs, the current valuation is (20.0)

below the mean by about 1 S.D., which should reflect investor pessimism of (30.0) 究究

the industry. However, we believe there is a possibility of re-rating in the 报 (40.0) 研 future through the possibility of these two events: 1) new government policies Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 in 2Q20; or 2) more details regarding the merger with Volvo in 2020. 告 HSI Index GEELY AUTOMOBILE

券

EquityResearch Report  吉利汽车 2019 年股东利润同比下降 34.8%至人民币 81.9 亿元，低于市场和我们的预期。

证受汽车销售疲软（同比跌 10.6%）的拖累，收入下降 8.6%。尽管销售组合有所改善，但

被更高的客户激励所抵消，使得平均销售价格持平。毛利率同比下降 2.8 个百分点至 [Table_PriceChange] [Tab Change in Share Price 1 M 3 M 1 Y 17.4%。在成本方面，研发费用增加了 56%，导致管理费用增加。来自汽车金融业务的

股价变动 1 个月 3 个月 1 年 le_I 应占利润同比增长一倍，但领克合资公司利润下降了 27%。董事会建议派发末期股息每股 Abs. % (18.6) (26.4) (24.8) 汽 0.25 港元，相当于 25.1%的派息率（2018 年：22.0%）。绝对变动 % nfo1 Rel. % to HS Index 车 (7.3) (8.2) (4.6)  汽车行业的长期竞争者。我们预计吉利汽车将从中国的市场整合和消费升级中受益。在新相对恒指变动 % 及 Avg. Share price(HK$) ] 车型的带动下，其领先地位将在 2020 年延续。这些车型将主要以其模块化平台为基础， 12.4 13.9 13.6 平均股价（港元）零并能够保持相对较高的盈利能力。 Source: Bloomberg, Guotai Junan International. 部  我们将 2020 年至 2021 年的股东利润分别下调 20.6%及 19.2%以反映销售量和毛利率假件设的下调。行  由于下调盈利预测，我们下调目标价至 12.82 港元，但维持投资评级为“收集”。我们的业目标价相当于 9.3 倍 2019 年市盈率和 8.1 倍 2020 年市盈率。与大多数主机厂相似，公司

当前估值低于均值约 1 个标准差，这应反映出投资者对行业的悲观情绪。但我们认为未来其估值可能因以下两件事而获得重估：1）新的政府刺激政策将于 2020 年第 2 季度出台；

Automobiles & Components Sector AutomobilesComponents & 2）有关 2020 年与沃尔沃合并的更多细节。

Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE [Tab 年结Profit ] 收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 le_I 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%) 2018A 106,595 12,553 1.398 17.5 7.1 5.004 2.0 0.350 3.5 31.6 nfo2 2019A 97,401 8,190 0.902 (35.5) 11.2 5.938 1.7 0.250 2.5 16.5 中] 2020F 100,159 9,679 1.066 18.2 9.4 6.913 1.5 0.347 3.5 16.6 2021F 112,839 11,169 1.230 15.4 8.2 7.887 1.3 0.405 4.0 16.8 吉外 2022F 118,824 12,758 1.405 14.2 7.1 8.995 1.1 0.467 4.7 16.8 利运汽 [Table_BaseData]Shares in issue (m) 总股数 (m) 9,167.0 Major shareholder 大股东 Geely Holding 42.7% 输 Market cap. (HK$ m) 市值 (HK$ m) Free float (%) 自由流通比率 (%) 57.3 车

3 month average vol. 3 个月平均成交股数 (‘000) 57,810.1 FY20 Net gearing (%) FY20 净负债/股东资金 (%) net cash 52 Weeks high/low (HK$) 52 周高/低 (HK$) 19.140 / 10.000 FY20 Est. NAV (HK$) FY20 每股估值（港元） 13.6

Source: the Company, Guotai Junan International. Geely Automobile (00175 GeelyHK) Automobile

See the last page for disclaimer Page 1 of 9

[Table_PageHeader]Geely Automobile (00175 HK)

2019 RESULTS REVIEW

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Geely Auto’s (the "Company") 2019 profit attributable to shareholders was down 34.8% yoy to RMB8,190 million, below

market and our expectations. Key highlights are discussed below:

 Revenue decreased 8.6% yoy to RMB97,401 million, mainly dragged by volume decrease. During the year, vehicle

sales (excluding Lynk & Co.) decreased by 10.6% to 1,234,081 units. Despite sales of new models such as the Binyue,

March2020

Boyue and Xingyue being strong, performance was still was dragged by some of the older models. 2H19 sales improved 1 3 as the overall market environment was better after the change of emission standards in Jun. 2019.  Sales mix improved. Average ASP (excluding Lynk & Co.) was flat. Despite that product mix improved, it was offset by the higher customer incentives given.  Gross margin dropped. Gross margin dropped more than our expectation. In 2019, gross margin decreased 2.8 ppts yoy to 17.4%. We believe the effect of the implementation of China 6 emission standards continued in 3Q19, affecting its margin as a result.  Cost ratio increased. Administrative expense ratio rose by 1.7 ppts, mainly due to research and development costs increasing by 56.0% yoy.  Auto finance business continued to shine. Share of results of invested entities increased 49.3% yoy in 2019 as improvement was seen from its auto finance business, Genius AFC. Net profit from auto finance business increased more than double to RMB509 million in 2019 on strong auto finance penetration. Lynk & Co. brand recorded net profit of of

] 2 r a M t h g i R _ e l b a T [ RMB486 million, a yoy decline of 27%. Despite sales volume having increased for Lynk & Co. brand, we think the reduction in profit was mainly due to gross margin decrease as ASP should be reduced as the Lynk 02 and 03 (only started selling in 2H18) have lower selling price, and 2) more operating cost from the operations of the Zhengjiakou factory.  The Company recorded net finance income of RMB108 million in 2019, an increase of 36.7% yoy.  Net margin decreased 3.4 ppts accordingly as gross margin decreased and administrative expenses increased.  The Board proposed final dividend of HK$0.25 per share, which represents a payout ratio of 25.1% (vs. 2018: 22.0%) .

Table-1: Summary of 2019 Results of Geely Auto 2019 2018 YoY 2H19 1H19 HoH In RMB mn, except for per share item

Revenue 97,401 106,595 -8.6% 49,843 47,559 4.8% (00175 HK) COGS (80,485) (85,082) -5.4% (41,395) (39,090) 5.9% Gross profit 16,917 21,513 -21.4% 8,448 8,469 -0.3% Distribution and selling expenses (4,332) (4,523) -4.2% (2,076) (2,256) -8.0%

Administrative expenses (5,122) (3,777) 35.6% (2,667) (2,455) 8.7% 吉利汽车 Operating profit 8,687 14,450 -39.9% 4,929 3,758 31.2% Finance income / (costs), net 108 79 36.7% 59 49 22.1% Other income 1,225 1,237 -1.0% 612 613 -0.1% Share-based payments (5) (15) -62.6% (2) (3) -37.0% Share of results of Asso. and JV 664 445 49.3% 315 349 -9.6% EBT 9,636 14,959 -35.6% 4,872 4,765 2.2% Income tax (1,375) (2,285) -39.8% (657) (718) -8.4%

Profit for the period 8,261 12,674 -34.8% 4,214 4,047 4.1% Geely Automobile Profit for equity shareholders 8,190 12,553 -34.8% 4,180 4,009 4.3% Non-controlling interests 72 121 -40.8% 34 38 -9.1%

Basic EPS (RMB) 0.9019 1.3985 -35.5% 0.4580 0.4439 3.2% Diluted EPS (RMB) 0.9123 1.3711 -33.5% 0.4731 0.4392 7.7% Source: the Company, Guotai Junan International.

Table-2: Key Operating Data 2019 2018 YoY 2H19 1H19 HoH

Key Operating Data

Government subsidies 845 993 -14.8% 346 500 -30.8% Sale volume (unit) – Geely Brand 1,234,081 1,380,424 -10.6% 642,413 591,668 8.6% Sale volume (unit) – Lynk & Co. 127,479 120,414 5.9% 71,602 55,877 28.1% Domestic sales (units) 1,176,090 1,352,891 -13.1% 567,164 608,926 -6.9% Export sales(unit) 57,991 27,533 110.6% 19,372 38,619 -49.8% ASP(RMB/unit) (Exclude Lynk & Co.) 74,286 74,286 0.0% 77,587 76,021 2.1% Key Ratio ppts ppts

Gross profit margin (%) 17.4% 20.2% (2.8) 16.9% 17.8% (0.9) Operating profit margin(%) 8.9% 13.6% (4.6) 9.9% 7.9% 2.0 Net profit margin (%) 8.4% 11.8% (3.4) 8.4% 8.4% (0.0)

Distribution costs/ revenue(%) 4.4% 4.2% 0.2 4.2% 4.7% (0.6) Report Admin costs / revenue(%) 5.3% 3.5% 1.7 5.4% 5.2% 0.2 Effective tax rate(%) 14.3% 15.3% (1.0) 13.5% 15.1% (1.6)

Source: the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 2 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

SALES AND OUTLOOK

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We like Geely as a long-term competitor. Strategically, we like Geely’s bold expansion plan. The Company has invested in

many areas, stretching its reach to South East Asia through Proton and Europe through Lynk & Co. (launching models in 4Q20). Also, Geely is equipped with strong technology, initially through Volvo, but now already able to walk on its own, having developed the BMA and PMA platforms and will soon expect to see the SPA platform. After a year of adjustment, we believe that Geely will

get back to growth despite its conservative stance. We recap our investment thesis below:

March2020

3 1. Gain from market consolidation

Top brands to benefit from market consolidation. We noticed that market consolidation has already begun since 2015 and has sped up in recent years amid the downturn of the auto market. Within the self-owned segment, market share of the top 10 brands was up by 10.3 ppts in 2019 from 2017, and we expect such a trend to continue due to the slowdown in the market and more regulatory requirements. Stronger brands should be able to thrive despite a tougher environment given their stronger resources. We believe that such a trend is consistent to the overall tone of removing low-quality capacity and to support strong names. Geely Auto, having snapped top sales in the self-owned segments for three consecutive years, is expected to maintain such performance in the next few years. One key reason is that model cycles remain very strong for Geely. In 2020, six brand new models will be introduced among Geely’s various brands (see Table-3 for key model pipeline). This should give them a

] 2 r a M t h g i R _ e l b a T [

strong reason to remain at the top spot in the market. We expect the ICON which launched in late Feb. 2020 to be the strongest sales driver.

Figure-1: Increasing Shares from Top Self-Owned Brands Figure-2: Geely’s PV Market Share

Top 10 self-owned brands Others 7.0% 6.3% 6.4% 100% 6.0% 90% 24.6% 5.0% 34.9% 29.2% 80% 38.7% 38.3% 5.0% 70% 60% 4.0%

3.2% (00175 HK)

50% 40% 3.0% 2.4% 70.8% 75.4% 30% 61.3% 61.7% 65.1% 2.0%

20% 吉利汽车 10% 1.0% 0% 2015 2016 2017 2018 2019 0.0% 2015 2016 2017 2018 2019

Source: CPCA, Guotai Junan International. Source: the Company, CAAM, Guotai Junan International.

Note: Top 10 brands include Geely (include Lynk & Co and Geometry), Great Geely Automobile Wall Motor (include WEY), Chang’an, Baojun, BYD, Chery Auto, Roewe, Trumpchi SGMW and MG.

Table-3: Key Model Pipeline Brand name Model name / code Types of vehicles Expected launch date Model of upgrade Platform Icon SUV 1Q20 New BMA Geely Haoyue / VX11 Mid size SUV 2020 New NL Preface / FS11 Sedan 2020 New CMA Geometry Geometry C SUV 2020 New PMA 01 HEV Pro SUV 4Q19 New CMA Lynk & Co 05 SUV Coupe 1H20 New CMA 06 SUV 2020 New CMA Source: the Company, Autohome, Guotai Junan International.

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Company

See the last page for disclaimer Page 3 of 9

NBfXnWnUgZaY9PcM7NpNnNmOqQiNoOtPkPpPpN8OmNxPwMpMsONZpNqP [Table_PageHeader]Geely Automobile (00175 HK)

2. Benefit from consumption upgrade

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Noticeable consumption upgrade trend. Geely is gradually transforming to a leading brand through better product launch

since they first launched the Boyue in 2016. In the last two years (2018-2019), more products have been crafted under their modular platform (CMA/ BMA/ PMA) which has allowed them to develop new models efficiently in terms of both cost and time as more components can be shared. Along with their accurate market positioning, Geely’s newer models are normally able to be

priced above RMB100,000 and achieve reasonable sales performance. We argue that this product strategy will work well for

March2020

Geely to grow its market share. As we noticed that mid- and mid-to-high-end segments have been the fastest growing segments 3 since 2016. Vehicles with selling price above RMB120,000 are increasing (see Figure-3), especially the category within RMB120,000-RMB160,000 and RMB160,000-RMB250,000.

Figure-3: Market Share of Vehicles and Selling Price - Figure-4: Geely’s Weighted ASP - Consistent Uptrend Rising Market Share Above RMB120,000

Above RMB250k RMB160k to RMB250k RMB120k to RMB160k RMB80k to RMB120k RMB '000 Below RMB80k 110 100% 105 25% 20% 31% 28% 100 80%

95 ] 2 r a M t h g i R _ e l b a T [

60% 34% 90 34% 35% 37% 85 80 40% 16% 11% 13% 75 11% 20% 20% 70 18% 18% 15% 65 9% 11% 0% 6% 7% 60 2016 2017 2018 2019 2015 2016 2017 2018 2019 2020F

Source: CPCA, Guotai Junan International. Source: the Company, Autohome, Guotai Junan International. Note: ASP excludes Lynk & Co.

3. Relatively strong profitability (00175 HK)

Noticeable consumption upgrade trend. We also like Geely Auto due to its ability to expand without sacrificing too much on

profitability. In 2019, we expect that the overall market will experience a large decrease in margins due to the early 吉利汽车 implementation of the China 6th emission standard which caused huge destocking pressure mid-year 2019. Comparing among large OEMs, Geely Auto’s profitability is among the highest, with gross margin in 2019 just behind BAIC Motor as Beijing Benz is consolidated in the financial statements and has close to 30% gross margin due to its premium. In terms of shareholders’ return, ROE of Brilliance China, another OEM that is in the premium segment, was the highest, and Geely Auto closely followed as the second highest OEM. We are confident in an increase in gross margin over our forecast period as 1) ASP is expected to continue Geely Automobile to increase with new models likely to be priced within RMB100,000-RMB150,000, higher than current level; and 2) better cost control, benefiting again from the increase in utilization of its modular platform. Unit cost is expected to be lower when more units are produced. We expect that models produced by modular platforms will increase to 38% in 2020 (vs. 26% in 2019).

Figure-5: Geely’s Gross Margin - Among the Best in 2019 Figure-6: Geely’s ROE - Among the Best in 2019

% %

25.0 25.0 21.5 20.8 20.0 17.4 15.9 20.0 16.5 13.3 13.5 15.0 15.0 11.3 9.3 9.8 10.0 10.0 10.0 8.3 8.1

5.0 1.9 5.0

0.0 0.0

Geely

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Geely

Auto-H

Automobile

Guangzhou

Saic Motor-A

Baic Motor-H

Saic Motor-A

Baic Motor-H

BrillianceChina

Great Wall Mot-

BrillianceChina

Great Wall Mot- Dongfeng Motor-

Dongfeng Motor-

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International. Company Note: Geely Auto, Brilliance China and BAIC Motor are actual figure, others are Note: Geely Auto, Brilliance China and BAIC Motor are actual figure, others are forecast from Bloomberg consensus. forecast from Bloomberg consensus. See the last page for disclaimer Page 4 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

EARNINGS REVISIONS

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We roll forward our base year to 2020. We have adjusted downwards shareholders’ profit in 2020 and 2021 by 20.6% and

19.2%, respectively. Key assumptions are as follows:

Sales: We have reduced overall sales volume by 7.7% and 1.9% in 2020 to 2021, respectively. We are more conservative on the

growth of the Lynk & Co. brand. We believe that each new model will contribute less than our previous forecast as we believe that

March2020

1 competition from JV brands in that price segment will be challenging for self-owned brands. All in all, overall sales volume to grew 3 yoy by 3.3%/ 12.9%/ 3.7% in 2020 to 2022, respectively.

ASP and GP margin: We expect ASP to continue to grow if the strategy of upscaling remains unchanged. Therefore, we expected ASP to grow at a mild tone with support from constant upgrades of models. However, we noticed margin pressure, especially in 2020 due to the outbreak of the coronavirus that will need extra incentives to stimulate sales.

Operating cost: Increase in administrative expense ratio as R&D costs increased significantly in 2019.

Share of profit from JVs: Revised downwards on share of profit mainly due to a reduction in Lynk & Co. sales.

Table-4: Major Financial Data and Forecast Changes ] 2 r a M t h g i R _ e l b a T [

New Old Changes 2020F 2021F 2022F 2020F 2021F 2022F 2020F 2021F 2022F Vehicle sales (Units) Sales Volume 1,406,290 1,587,990 1,646,610 1,523,896 1,618,096 n.a (7.7%) (1.9%) n.a

Geely 1,244,290 1,374,990 1,419,810 1,307,896 1,360,096 n.a (4.9%) 1.1% n.a

Lynk & Co 162,000 213,000 226,800 216,000 258,000 n.a (25.0%) (17.4%) n.a

Financials (RMB mn) n.a n.a

Revenue 100,159 112,839 118,824 103,065 109,322 n.a (2.8%) 3.2% n.a

Gross Profit Margin 17.8% 18.4% 19.2% 19.74% 20.77% n.a (2.0)ppt (2.4)ppt n.a

Share of profit of JV 1,364 1,765 1,877 2,044 2,436 n.a (33.3%) (27.6%) n.a

Net Income (Loss) 9,679 11,169 12,758 12,197 13,819 n.a (20.6%) (19.2%) n.a

Basics EPS (RMB) 1.066 1.230 1.405 1.359 1.540 n.a (21.6%) (20.1%) n.a

Source: the Company, Guotai Junan International.

Table-5: Summary of Financial Forecasts

2018A 2019A 2020F 2021F 2022F (00175 HK) Sales volume (units) 1,500,838 1,361,560 1,406,290 1,587,990 1,646,610 yoy 20.4% -9.3% 3.3% 12.9% 3.7% Blended ASP - RMB/unit (Geely only) 74,362 74,422 75,910 77,429 78,977

yoy 1.0% 0.1% 2.0% 2.0% 2.0% 吉利汽车 Sales revenue (RMB mn) 106,595 97,401 100,159 112,839 118,824 yoy 14.9% -8.6% 2.8% 12.7% 5.3% Gross profit 21,513 16,917 17,791 20,727 22,759 yoy 19.6% -21.4% 5.2% 16.5% 9.8% Share of profit of JV 505 626 1,364 1,765 1,877 yoy 15953.6% 24.0% 118.0% 29.4% 6.4% Shareholders' profit 12,553 8,190 9,679 11,169 12,758

yoy 18.1% -34.8% 18.2% 15.4% 14.2% Geely Automobile Gross profit margin 20.2% 17.4% 17.8% 18.4% 19.2% Operating margin 13.6% 8.9% 10.1% 10.1% 11.1% Net profit margin 11.8% 8.4% 9.7% 9.9% 10.7% EPS 3-year CAGR 75.9% 15.9% -3.6% -4.2% 15.9% Source: the Company, Guotai Junan International.

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Company

See the last page for disclaimer Page 5 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

VALUATION

] 1 r a M t h g i R _ e l b a T [ Despite underperformed results in 2019, we remain confident on the growth outlook of Geely Auto. Model pipeline remains strong

with six brand new models to be launched in 2020, despite the outbreak of the coronavirus, and we expect new model competitiveness to allow the Company to grow in terms of market share and profit in our forecasted period. We have reduced our TP to HK$12.82 on reduced earnings forecast but maintained investment rating as "Accumulate". Our TP represents

9.3x 2019 PER and 8.1x 2020 PER. Similar to most OEMs, the current valuation is below the mean by about 1 S.D., which

March2020

should reflect investor pessimism of the industry. However, we believe that there is a chance of re-rating in the future by the 1 3 possibility of these two events: 1) new government policies to roll out in 2Q20; and 2) more details regarding the merger with Volvo in 2020.

Figure-7: PER of Geely Auto Figure-8: PER Range of Geely Auto

Forward P/E Avg (x) (x) Geely 30.0 +1 S.D. -1 S.D. 30.00 +2 S.D. -2 S.D. 24.07 25.0 25.00 20.01 20.0 20.00 16.94 16.34 14.51 15.0 12.67 12.90 12.64 15.00 12.37 15.75 11.70 10.67 13.43 ] 2 r a M t h g i R _ e l b a T [ 10.0 10.80 10.88 10.85 10.24 10.00 9.78 9.88 9.68 10.19 10.14 5.0 7.84 9.00 9.48 5.00 7.73 0.0 7.19 6.64 7.36 5.59 5.94 5.94 6.39 5.57 0.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Mar-11 Mar-12 Mar-13 Mar-14 Mar-16 Mar-18 Mar-19 Mar-20 Mar-15 Mar-17 YTD Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

(00175 HK)

吉利汽车 Geely Automobile

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See the last page for disclaimer Page 6 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

Table-6: Peers comparison Last price PE PB ROE(% D/Y(%) EV/EBITD

] 1 r a M t h g i R _ e l b a T [

Company Stock Code Currency 19A 20F 21F 22F 19A 20F 21F 22F 20) F 20F 20AF Dongfeng Motor-H 489 HK HKD 5.02 2.9 2.9 2.8 n.a. 0.3 0.3 0.2 n.a. 9.4 7.0 13.9

Geely Automobile 175 HK HKD 11.28 11.0 8.7 6.2 6.3 1.8 1.6 1.4 n.a. 17.8 3.0 5.0

Brilliance China 1114 HK HKD 6.21 4.1 4.2 3.7 3.5 0.8 0.7 0.6 0.5 18.8 5.5 28.0

Great Wall Mot-H 2333 HK HKD 4.79 9.2 8.7 7.5 7.3 0.7 0.7 0.7 n.a. 9.0 5.2 6.4

Qingling Motor-H 1122 HK HKD 1.51 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

March2020 Byd Co Ltd-H 1211 HK HKD 38.60 55.1 43.3 35.4 36.9 1.7 1.7 1.6 1.5 4.0 0.4 11.5 1 Guangzhou Auto-H 2238 HK HKD 7.66 9.3 7.6 6.6 n.a. 0.9 0.8 0.7 n.a. 11.8 5.2 14.1 3

Baic Motor-H 1958 HK HKD 2.94 5.2 6.3 4.9 4.0 0.4 0.4 0.4 0.4 8.2 6.8 0.5

Weichai Power-H 2338 HK HKD 12.06 9.2 9.0 8.5 7.5 1.9 1.7 1.5 1.3 19.3 4.2 3.9

Sinotruk Hk Ltd 3808 HK HKD 12.84 7.7 7.2 7.1 n.a. 1.2 1.0 0.9 n.a. 14.1 5.5 2.8

Simple Average 12.6 10.9 9.2 10.9 1.1 1.0 0.9 0.9 12.5 4.7 9.6 Weighted Average 18.6 15.3 12.8 11.3 1.3 1.2 1.1 0.6 11.9 3.8 9.2

Dongfeng Auto-A 600006 CH CNY 4.0 15.5 14.4 14.9 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Great Wall Mo-A 601633 CH CNY 9.0 18.7 16.4 13.3 11.4 1.5 1.4 1.3 n.a. 10.1 2.7 6.1

Faw Car Co Ltd-A 000800 CH CNY 8.8 270.7 n.a. n.a. n.a. 1.8 1.9 2.0 n.a. (3.7) n.a. n.a.

Saic Motor-A 600104 CH CNY 21.08 9.0 8.3 7.5 n.a. 1.0 0.9 0.9 n.a. 11.7 5.7 6.6

Chongqing Chan-A 000625 CH CNY 10.69 n.a. 15.9 11.6 n.a. 1.2 1.1 1.0 n.a. 9.2 1.6 4.9

Weichai Power-A 000338 CH CNY 12.05 10.5 9.7 9.0 8.3 2.1 1.8 1.6 1.4 18.2 4.1 4.0

] 2 r a M t h g i R _ e l b a T [ Beiqi Foton-A 600166 CH CNY 1.90 63.3 31.7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Anhui Jianghua-A 600418 CH CNY 4.87 81.2 58.7 36.1 34.8 0.7 0.7 0.7 0.7 2.7 1.4 3.4

Cnhtc Jinan T-A 000951 CH CNY 20.06 11.6 9.7 8.7 n.a. 2.0 1.7 1.5 n.a. 17.2 3.6 n.a.

Zhengzhou Yut-A 600066 CH CNY 13.05 12.8 11.8 10.9 n.a. 1.6 1.5 1.4 n.a. 11.9 4.1 9.2

Xiamen King Lo-A 600686 CH CNY 6.07 21.7 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Jiangling Moto-A 000550 CH CNY 11.86 69.3 16.6 20.1 25.2 1.0 0.9 0.9 0.9 5.2 2.1 n.a.

Yangzhou Yax-A 600213 CH CNY 7.20 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Zhongtong Bus-A 000957 CH CNY 7.00 50.0 20.0 14.3 n.a. 1.7 1.7 1.7 n.a. 11.8 n.a. n.a.

Simple Average 53.1 19.3 14.7 0.0 1.4 1.3 1.3 0.0 9.2 3.2 5.7 Weighted Average 29.1 14.3 10.8 6.7 1.5 1.4 1.3 0.5 11.1 2.7 4.3

Nissan Motor Co 7201 JP JPY 384.90 4.7 18.8 7.9 5.6 0.3 0.3 0.3 0.3 2.1 4.4 1.5

(00175 HK)

Toyota Motor 7203 JP JPY 6,797.00 10.4 8.4 8.5 8.0 1.0 0.9 0.9 0.8 10.1 3.5 11.6

Honda Motor Co 7267 JP JPY 2,541.00 7.3 7.6 7.2 6.3 0.5 0.5 0.5 0.5 7.0 4.6 7.4

Mazda Motor 7261 JP JPY 606.00 6.0 8.9 11.4 7.2 0.3 0.3 0.3 0.3 3.0 5.6 2.9

Mitsubishi Heavy 7011 JT JPY 2,819.50 9.3 9.1 8.5 8.6 0.7 0.6 0.6 0.6 7.3 5.3 5.3 吉利汽车

Fuji Heavy Indus 7270 JP JPY 2,180.00 11.3 9.7 8.6 7.9 1.0 1.0 0.9 0.9 11.0 6.6 2.6

Suzuki Motor 7269 JP JPY 2,800.00 7.1 8.6 8.5 7.4 0.9 0.9 0.8 0.7 9.6 2.8 3.1

Hino Motors Ltd 7205 JP JPY 588.00 6.1 8.2 7.5 6.5 0.6 0.6 0.6 0.5 7.2 4.8 4.5

Isuzu Motors 7202 JP JPY 745.10 5.0 6.4 6.1 5.6 0.6 0.6 0.5 0.5 8.8 5.1 3.7

Simple Average 7.5 9.5 8.3 7.0 0.7 0.6 0.6 0.6 7.4 4.8 4.7

Weighted Average 9.5 8.9 8.3 7.6 0.9 0.8 0.8 0.7 9.1 3.9 9.4 Geely Automobile

Hyundai Motor 005380 KS KRW 85,400.00 7.6 5.5 4.6 4.2 0.2 0.3 0.3 0.3 6.0 5.2 8.0

Ford Motor Co F US USD 5.19 519.0 26.6 6.6 6.6 0.6 0.6 0.6 0.6 7.5 11.6 1.4

Navistar Intl NAV US USD 18.10 8.1 7.6 6.5 5.1 n.a. n.a. n.a. n.a. (8.6) 0.0 5.2

Paccar Inc PCAR US USD 59.49 8.6 12.2 11.3 9.7 2.1 2.0 1.8 n.a. 16.5 4.4 6.5

Volkswagen Ag VOW GR EUR 115.80 4.4 6.4 4.7 4.1 0.5 0.5 0.4 0.4 10.0 6.0 1.5

Bayer Motoren Wk BMW GR EUR 44.58 6.0 7.1 5.3 5.1 0.5 0.5 0.5 0.4 8.8 6.3 4.7

Daimler Ag DAI GR EUR 26.75 12.0 7.3 5.3 4.1 0.5 0.4 0.4 0.4 8.7 6.3 2.5

Man Se MAN GR EUR 39.98 8.3 n.a. n.a. n.a. 1.0 n.a. n.a. n.a. n.a. n.a. n.a.

Renault Sa RNO FP EUR 17.13 n.a. 5.0 3.0 2.0 0.1 0.1 0.1 0.1 4.6 7.5 0.7

Volvo Ab-B VOLVB SS SEK 112.30 6.4 10.8 9.4 8.3 1.6 1.6 1.5 1.5 17.2 6.7 4.6

General Motors C GM US USD 14.62 4.2 7.8 5.4 4.6 3.1 3.6 3.4 n.a. 52.6 0.0 4.7

Tata Steel Ltd TATA IN INR 258.45 2.9 8.8 5.6 4.3 0.5 0.4 0.4 0.4 7.1 4.0 5.8 Simple Average 49.1 9.0 5.8 5.0 0.9 0.9 0.9 0.5 12.0 5.8 3.9

Weighted Average 51.3 9.0 5.8 5.1 0.8 0.7 0.7 0.5 10.2 6.5 3.2

Global Simple Average 30.6 13.1 9.9 5.3 1.1 1.1 1.0 0.5 11.2 4.6 6.4 Report

Global Weighted 26.6 10.1 8.2 7.2 0.9 0.9 0.8 0.6 10.0 4.7 6.9 Source:Average the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 7 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

Financial Statements and Ratios

[Table_IncomeStatement] Income Statement [Table_BalanceSheet] ] 1 Balancer a SheetM t h g i R _ e l b a T [

Year end 31 Dec (RMB m) 2018A 2019A 2020F 2021F 2022F Year end 31 Dec (RMB m) 2018A 2019A 2020F 2021F 2022F

Total Revenue 106,595 97,401 100,159 112,839 118,824 PPE 23,423 27,070 28,214 29,458 30,560 Cost of sales (85,082) (80,485) (82,368) (92,112) (96,065) Intangible assets 14,993 17,598 22,173 27,443 32,975 Gross profit 21,513 16,917 17,791 20,727 22,759 Interest in associates and JV 6,322 8,837 9,206 9,675 10,252 Prepaid land lease payment 3,268 3,231 3,554 3,909 4,300 Distribution expenses (4,523) (4,332) (4,455) (5,019) (5,285) Deferred tax assets 643 866 967 1,082 1,214

Others 26 312 312 312 312 March2020 Administration expenses (3,777) (5,122) (4,408) (5,450) (5,485) Total Non-current Assets 48,676 57,914 64,425 71,880 79,613 1 Operating Profit 13,213 7,462 8,928 10,258 11,989 3

Share of results of Asso. and JV 445 664 1,370 1,759 1,890 Cash & Cash Equivalents 15,737 19,281 19,521 22,804 25,866 Other income 1,237 1,408 1,183 1,173 1,158 Pledged deposit 19 40 44 47 51 Finance costs, net 79 108 (29) (17) 32 Inventories 4,097 4,821 4,420 4,800 4,873 Share-based payment (15) (5) (10) (8) (9) Trade and other receivables 22,865 25,845 25,045 28,215 29,712 Profit Before Tax 14,959 9,636 11,442 13,165 15,060 Prepaid land lease payment 67 0 0 0 0 Others 0 27 30 33 37 Income Tax (2,285) (1,375) (1,690) (1,911) (2,206) Total Current Assets 42,785 50,014 49,059 55,899 60,538 profit After Tax 12,674 8,261 9,752 11,254 12,855 Total Assets 91,461 107,928 113,484 127,779 140,151 Non-controlling Interest (121) (72) (73) (84) (97) Shareholders' Profit / Loss 12,553 8,190 9,679 11,169 12,758 Trade payables 41,438 47,873 45,700 51,107 53,300 Bank borrowing 1,375 0 0 0 0 Basic EPS 1.398 0.902 1.066 1.230 1.405 Other liabilities 947 653 765 877 997 Diluted EPS 1.398 0.902 1.066 1.230 1.405 Total Current Liabilities 43,760 48,526 46,466 51,984 54,297 Dividend per share (RMB) 0.350 0.250 0.347 0.405 0.467 LT borrowing 0 2,089 1,649 1,236 824

] 2 r a M t h g i R _ e l b a T [

Bond payables 2,048 2,060 2,100 2,100 2,100 Deferred tax liabilities 278 301 625 991 1,414 Others [Table_CashFlowStatement] Cash Flow Statement Total Non-current Liabilities 2,326 4,477 4,400 4,354 4,364

Year end 31 Dec (RMB m) 2018A 2019A 2020F 2021F 2022F Total Liabilities 46,086 53,003 50,865 56,338 58,662 EBT 14,959 9,636 11,442 13,165 15,060 Depreciation and amortization 2,413 3,733 2,298 2,899 3,118 Total Shareholders' Equity 44,944 54,436 62,056 70,794 80,746 Finance cost 114 128 265 255 246 Minority Interest 431 489 562 646 743 Interest income (193) (236) (236) (239) (279) Total Equity 45,375 54,924 62,619 71,441 81,489 Changes in working capital (619) 1,977 (972) 1,856 624 BPS(RMB) 5.004 5.938 6.913 7.887 8.995

Share of results of associates (445) (664) (1,370) (1,759) (1,890) Exchange gain/(losses) 226 (9) 45 62 0 Financial Ratios Income taxes paid (2,621) (1,949) (1,690) (1,911) (2,206) Change of other operating Items 91 (79) 4 (9) (20) 2018A 2019A 2020F 2021F 2022F Cash from Operating Activities 13,925 12,538 9,786 14,318 14,655 Profitability (00175 HK) Gross profit margin (%) 20.2 17.4 17.8 18.4 19.2 Net investments in PPE (2,208) (2,864) (2,536) (2,700) (2,618) EBITDAR (%) 15.7 9.6 13.8 14.3 15.3 Net change of prepaid land lease (179) (96) (323) (355) (391) EBIT Margin (%) 14.0 9.6 11.5 11.7 12.7 Net change of intangible assets (5,027) (4,606) (4,575) (5,270) (5,532) Net profit margin (%) 11.8 8.4 9.7 9.9 10.7

Net change of pledged deposit 17 (21) (3) (3) (4) ROE (%) 31.6 16.5 16.6 16.8 16.8 吉利汽车 Interest income 193 236 236 239 279 ROA (%) 13.7 7.6 8.5 8.7 9.1 Net investments in Asso. and JV (1,073) (1,851) (1,480) (1,184) (947) Others (3,042) (1,589) 1,826 1,277 1,086 Growth Cash from Investing Activities (11,319) (10,791) (6,857) (7,998) (8,128) Sales volume growth (%) 20.4 -9.3 3.3 12.9 3.7 Revenue growth (%) 14.9 -8.6 2.8 12.7 5.3 Net change of LT bank loan 1,927 4,101 (412) (412) (412) EPS (%) 17.5 -35.5 18.2 15.4 14.2 Issuance of senior notes - 0 0 0 0 BPS (%) 30.3 21.0 14.0 14.1 14.1

Issuance of shares 36 639 0 0 0 Geely Automobile Interest paid (73) (124) (265) (255) (246) Liquidity and solvency Dividend paid (2,161) (2,806) (2,058) (2,432) (2,806) Gearing ratio (%) net cash net cash net cash net cash net cash Others (35) (48) 0 0 0 Cash ratio 0.3 0.4 0.4 0.5 0.6 Cash from Financing Activities (306) 1,763 (2,735) (3,099) (3,465) Quick ratio 0.9 0.9 1.0 1.1 1.2 Current ratio 1.1 1.0 1.1 1.2 1.3 Net Changes in Cash 2,300 3,510 195 3,221 3,062 Other adjustment 23 34 45 62 0 Efficiency Cash at Beg of Year 13,415 15,737 19,281 19,521 22,804 Inventory turnover 21 22 23 24 24 Cash at End of Year 15,737 19,281 19,521 22,804 25,866 Days receivable 96 91 91 91 91 Days payable 191 203 203 203 203 Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 8 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

Company[Table_CompanyRatingDefinition] Rating Definition

The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [

Time Horizon: 6 to 18 months

Rating Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable.

Accumulate 收集 Relative Performance is 5% to 15%; March2020

or the fundamental outlook of the company or sector is favorable. 1 Neutral 中性 Relative Performance is -5% to 5%; 3 or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;

] 2 r a M t h g i R _ e l b a T [ or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable.

[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ]

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (01638 HK),GUOTAI JUNAN I (01788 HK),BANK OF GANSU (02139 HK),JINSHANG BANK (02558 HK),ZHONGLIANG HLDG (02772 HK),BINHAI INVESTMENT (02886 HK),HAITIAN ANTENNA (08227 HK),Guotai Junan and its group

companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (00175 HK) (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research

Report. 吉利汽车 (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER Geely Automobile

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).

Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.

Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.

This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject

Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.

27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793

Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 9 of 9