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]

9 January 2019 [Table_Summary] Laying Solid Foundation, Valuation Attractive 奠定坚实的基础，估值有吸引力

 Geely sales in 2018 was reached 1,500,838 units, up 20.3% yoy. Full-year 公 Rating:[Table_Rank ] Buy sales was below our expectation and management guidance as growth in Maintained 司 Dec. 2018 was disappointing. We believe that Lynk & Co's potential was

dragged by engine shortages but the Company is all set for 2019. Further, 报 评级： 买入 (维持) sales will gradually shift to models produced on new platforms, such as the 告 BMA platform. 6[Table_Price-18m TP 目标价] : HK$14.70 CompanyReport  Geely has a diversified portfolio and strong strategy plan for Revised from 原目标价: HK$22.80 sustainable growth. In our view, the weakened growth rate of Geely does Share price 股价: HK$10.220 not negatively affect its position in the market in our view, but a mere adjustment of earnings expectation. We believe that Geely will continue to be

a strong market player in China. This is because Geely is on a distinguished Stock performance path from other self-owned brands. 股价表现  We have reduced our profit forecasts by 10.2%/ 23.0%/ 17.6% to RMB [Table_QuotePic] 12,628 million/ RMB 13,593 million/ RMB 16,989 million for 2018 to 2020, 20.0 % of return 10.0 respectively.

0.0

 Valuation continued to drop in 2019 as the slowdown in sales in recent (10.0) 证 months and conservative management guidance triggered lower growth (20.0) 券 告 expectations, reducing the premium for Geely. We remain confident for the (30.0) (40.0) 研 报 Company to maintain growth in the next few years, despite it being slower.

(50.0)

Nonetheless, we expect market position to continue to strengthen upon

究 究

industry consolidation. Valuation has dropped below the long-term historical (60.0)

报 mean, trading at 12M forward 6.6x PER. We reiterate "Buy" rating for (70.0) 研 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19

Geely Auto, but revise downwards TP to HK$14.70 on earnings 告 HSI Index GEELY AUTOMOBILE

券 revisions, representing 8.5x 2019 PER and 6.8x 2020 PER.

EquityResearch Report

 证 2018 年吉利汽车销量为 1.5 百万辆，同比增长 20.3％。销售是低于我们的预期和管理层

指引，因 2018 年 12 月的增长令人失望。我们认为领克的潜力受到发动机短缺的拖累，但 [Table_PriceChange] [Tab Change in Share Price 1 M 3 M 1 Y 年公司将会充分准备。此外，销售将逐渐转向新平台上生产的车型，如 平台。

2019 BMA 股价变动 1 个月 3 个月 1 年 le_I Abs. % (28.6) (27.7) (63.2) 汽  吉利汽车拥有多元化的投资组合和强大的可持续发展战略计划。我们认为吉利汽车的疲弱 绝对变动 % nfo1 增长率并未对它在市场中的地位产生负面影响，而只是盈利预期的调整。我们相信吉利汽 Rel. % to HS Index 车 (27.9) (26.5) (46.9) 车将继续成为中国强大的市场参与者之一。这是因为吉利汽车走在一条与其他自主品牌截 相对恒指变动 % 及 Avg. Share price(HK$) ] 13.4 14.4 19.3 然不同的道路上。 平均股价（港元） 零 Source: Bloomberg, Guotai Junan International. 部  我们将 2018 年至 2020 年的盈利预测分别下调 10.2％/ 23.0％/ 17.6％至人民币 12,628 / 13,593 / 16,989 百万元。 件 行  由于最近几个月的销售放缓以及保守的管理层指引引发了较低的增长预期并降低了吉利 的溢价，估值在 年继续下降。尽管速度放缓，我们仍对公司未来几年的增长保持信 业 2019

心。尽管如此，我们预计在行业整合中公司的市场地位将继续增强。估值已跌破长期历史 均值，12 个月预测估值为 6.6 倍市盈率。我们重申对吉利汽车的“买入”评级，但在盈利

修正后下调目标价至 14.70 港元，相当于 8.5 倍 2019 年市盈率和 6.8 倍 2020 年市盈率。 Automobiles & Components Sector AutomobilesComponents &

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) (%) (%) 2016A 53,722 5,112 0.580 125.7 15.8 2.776 3.3 0.120 1.3 23.3 nfo2 2017A 92,761 10,634 1.198 106.6 7.1 3.908 2.2 0.290 3.4 36.1 中] 2018F 107,114 12,628 1.414 18.0 6.4 5.031 1.8 0.361 4.0 31.8 2019F 97,696 13,593 1.522 7.6 5.9 6.265 1.4 0.392 4.4 26.9 吉外 2020F 113,180 16,989 1.902 25.0 4.7 7.858 1.1 0.495 5.5 26.9 利运 汽 [Table_BaseData]Shares in issue (m) 总股数 (m) 8,972.9 Major shareholder 大股东 Geely Holding 42.7% 输 Market cap. (HK$ m) 市值 (HK$ m) 91,703.0 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) 55,452.4 FY19 Net gearing (%) FY19 净负债/股东资金 (%) Net Cash 52 Weeks high/low (HK$) 52 周高/低 (HK$) 28.450 / 10.080 FY19 Est. NAV (HK$) FY19 每股估值（港元） 18.4

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)

SALES AND OUTLOOK

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

Geely Auto ("Geely" or the "Company") suffered a major setback in Dec. 2018 but aims for steady development in the

future. Geely recorded the lowest sales volume since Jul. 2017 in Dec. 2018, with only 93,333 units delivered. This represents yoy decrease of 39.2%, the first decline in 4 years. This was unexpected especially in Dec. which is normally a month to boost volume for automakers. The weak sales in December dragged full-year sales to only 1,508,838 units in 2018, missing our

previous expectation and management guidance. Despite that, Geely Auto still had decent 20.3% yoy improvement in 2018,

January2019

leading their market share in the PV market which continued to rise since 2015 and strengthened their market position. Currently, 9 Geely is the third largest automaker in China, lagging behind General Motors and Volkswagen. The management set guidance of 1.51 million units of sales in 2019, which is more conservative than our 2019 forecast. We believe that the Company is taking this chance to revamp its product portfolio, and to lay a stronger foundation for future opportunities and development. There are several points to take away from Geely’s sales.

Figure-1: Geely’s Sales Volume and Growth Figure-2: Geely’s PV Market Share

2016 2017 Units 2018 2017 growth PV market share 200,000 2018 growth 200% 7.0% 6.6%

6.0% 150% ] 2 r a M t h g i R _ e l b a T [ 150,000 5.0% 5.0% 100% 4.0% 100,000 3.2% 50% 3.0% 2.4%

50,000 2.0% 0% 1.0% - -50%

0.0%

Jul

Oct

Apr Jun

Jan 2015 2016 2017 2018

Mar

Feb

Aug Nov Dec Sep May Source: the Company, Guotai Junan International. Source: the Company, CAAM, Guotai Junan International.

(00175 HK) I. Lynk & Co’s potential was dragged by engine shortages but the Company is all set for 2019

One major factor that contributed to the disappointment is that Lynk & Co. failed to ramp up due to the shortages of their 2.0T 吉利汽车 engine. The 2.0T engine is produced in Luqiao factory, which is also used to produce the Volvo XC40. This largely limited sales growth as a more powerful engines are more sought after options for most Lynk vehicle buyers. We believe next year will be Lynk’s year, as the new engine facility will commence production in 1Q19, which will unleash Lynk’s potential. It is in our view that

demand for the Lynk 01 is still very strong, with about 80% of sales coming from the Pro version (MSRP RMB 180,000). In Geely Automobile addition, it is noted that a considerable amount of new customers are switching from major JV brands, indicating initial success of making a presence in the mid-to-high range. In terms of channel, there are currently 200 dealers and about 110 new additions in operation in the coming year.

Figure-3: Lynk & Co. Sales Volume Figure-4: Sales Mix in Lynk & Co.

Units 10% 16,000 9% 14,000 8% 7% 12,000 6% 10,000 5% 8,000 4% 6,000 3% 4,000 2% 2,000 1% 0%

0 Report

Jul-18

Jul-18

Apr-18 Oct-18

Jan-18 Jun-18

Mar-18 Feb-18

Oct-18

Apr-18

Aug-18 Sep-18 Nov-18 Dec-18

Jun-18 Jan-18

May-18

Mar-18

Feb-18

Dec-17 Nov-18 Dec-18

Aug-18 Sep-18 May-18

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

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

II. Newer models of Geely brand lack sustainability

] 1 r a M t h g i R _ e l b a T [ Excluding sales of Lynk & Co., sales of Geely brand decreased 40.4% yoy in Dec. 2018, but still recorded yoy improvement of

11.3% in 2018. The improvement was mainly from the full-year effect of several Vision models, including the X1, X3 and S1, which added 132,690 units of sales in 2018. However, there are a number of dragging factors. 1) We noticed the decline in the lower-end "Vision" series was more obvious and prevalent, which reflected the stiffer competition in the lower-end market (the

vision models are marketed as lower-end models with the X1 starting from only RMB39,900 and the S1 entry price of January2019

RMB69,900). The intense competition in the lower-end segment and weakened purchasing power in lower-tier cities negatively 9 impacted demand for the "Vision" series; and 2) sales of key models, the Vision SUV/ Emgrand GS/ New Emgrand/ Boyue, had a combined sales accounting for 47.9% of total sales, recording decreased sales of 4.9%/ 5.8%/ 5.4%/ 10.2% in 2018, respectively, due to aging reasons; and 3) a large model line up (18 models offered in 2018), with new models potentially cannibalizing old models.

Figure-5: Geely Brand (Excluding Lynk & Co.) Sales Figure-6: Sales Growth of Major Models of Geely Brand Growth

60% 40.0% 49% 29.3% 45% 30.0% 50% 38% 20.0% 34% 10.0%

40% ] 2 r a M t h g i R _ e l b a T [ 29% 0.0% 30% 19% -10.0% 19% -4.9% -5.4% 16% -20.0% -6.7% -5.8% -10.2% 20% -30.0% 10% 1% -40.0% -50.0% -39.2% 0% -9% -8% -60.0% -70.0%

-10% -61.2%

Jul-18

Apr-18 Oct-18

Jan-18 Jun-18

NL3

Feb-18 Mar-18

Nov-18 Dec-18

Aug-18 Sep-18

-20% May-18 Vision

-30% -40.4%

Vision X1 Vision SUV

-40%

EmgrandGL

EmgrandGS NewEmgrand -50% LG-1/Kingkong 2

Source: the Company, Guotai Junan International. Source: the Company, CPCA, CAAM, Guotai Junan International. (00175 HK)

III. New platform to provide stronger models

Despite sales growth having slowed significantly in the second half of 2018, we still see some positives in it which could shed 吉利汽车 light for Geely’s future growth. The two models, Binyue (SUV) and Binrui (sedan), crafted from the BMA platform are ramping up quickly. In particular, the Binyue reached 13,222 units of sales in just the second month of introduction, while Binrui recorded 10,278 units of sales in only 4 months. The ramp up speed has been much faster than the previous key models (Boyue,

Emgrand GS/ GL). The BMA is a more advanced platform similar to CMA, and will be able to develop 7-10 models in our view. Geely Automobile We believe Geely Auto will be gradually shifting to produce cars from these modular platforms due to the better efficiency. At the same time, we expect the Company to slowly retire or reduce reliance on models from old platforms that are less profitable, especially the Vision series. We believe Geely has the capability of putting out newer and more competitive models as there are still several modular platforms that have not started production yet. This includes the AMA, DMA and PMA platforms.

Table-1: Geely Auto’s Platforms Platform Development Vehicle Type Models KC Self-develop B segment Borui FE Self-develop A segment Emgrand / Vision NL Self-develop SUV Boyue / Vision SUV CV Self-develop MPV MPV CMA Co-develop with Volvo A / A+ segment and SUV Lynk 01-03 / Borui CE BMA Co-develop with Volvo A0 / A segment Binrui / Binyue AMA Co-develop with Volvo NEV n.a.

DMA Co-develop with Volvo B segment n.a.

PMA Co-develop with Volvo Pure electric, A0 / A / A+ n.a. Report

Source: the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 3 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

Geely has a diversified portfolio and strong strategy plan for sustainable growth. In our view, the weakened growth rate

of Geely does not negatively impact its position in the market in our view, but a mere adjustment] 1 r a ofM earningst h g expectation.i R _ e l Web a T [

believe Geely will continue to be a strong market player in China. This is because Geely is on a distinguished path from other self-owned brands.

1) With the cooperation with Volvo, the CMA platform is recognized in the auto industry, enabling Geely to pursue a

multi-branding strategy. This is comparable to most incumbent international brands such as Volkswagen and GM.

January2019

9 2) There are also emerging opportunities from auto financing and licensing, which would increase significantly with sales growth.

Auto finance: Geely has 80% interest in its auto finance joint venture with BNP, Genius AFC. The penetration rate of auto finance in China is still much lower than international markets, and Genius AFC is also much lower than the average in China (2017: 14% vs China: about 40%). The auto finance business grew significantly in 1H18 and should maintain strong growth for the next few years.

Licensing fees: There is a new licensing agreement in support of the development of the Proton. The licensing fee

amounts to RMB 1.34 billion over five years, including Boyue and another two models ] yet2 tor bea M announced.t h g i R This_ e alsol b a T [

shows the potential opportunity in the Southeast Asia market.

Figure-7: Geely’s Strategy Layout

Vision and Plans Vision

• 200 million units of sales by 2020 • To roll out 10 models by 2020 • “Blue Geely Initiatives” – 90% sales from new energy + electrified • To have 4 factories of size of Zheng Jia Kou by 2020 vehicle (“NEEV”) • To expand to Europe and US in 2020

• 5 new models in next year from its Geely brand Ongoing Project (00175 HK)

Name Type Remarks • Taizhou Binhai (台州滨海) - a 4-cylinder engine project with 嘉际 MPV Geely first MPV model capacity of 360,000 units. Production to commence in 1Q19. • Guizhou (贵州) – a 3-cylinder engine project with capacity of VF12 MPV Geely second MPV model

360,000 units. Production to commence in 1Q19. 吉利汽车 FY11 SUV Coupe design with PHEV option • Meishan (梅山) DMA project – 3 models to develop with the first to SX12 SUV Second SUV model from BMA be 7-seat SUV. Expect completion date to be 4Q19.

GE11 Sedan Pure electric vehicle • Chengdu (成都) project – BMA platform Geely Automobile

NEEV Emerging opportunities

Vision Vision • NEEV sales account for 90% of total vehicle sales by 2020, with • Auto finance JV with BNP – Genius AFC 65% from PHEV, HEV or MHEV and 35% from EV. • Licencing fees of RMB 1.34 billion to be collected from parent • New energy strategy “Geely Intelligent Power” with promise to launch 30 new energy models by 2020. company for licencing 3 models from Geely brand to support

development of Proton. • Set the tone through the introduction of its 48V technology

• Battery sourced from CATL, SDI and Hengyuan New Energy • NEV credit Report

Source: the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 4 of 9 [Table_PageHeader]Geely Automobile (00175 HK)

EARNINGS REVISIONS

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

We have reduced our profit forecast by 10.2%/ 23.0%/ 17.6% to RMB 12,628 million/ RMB 13,593 million/ RMB 16,989

million for 2018 to 2020, respectively. Despite flat vehicle sales growth, our forecast shows that shareholders’ profit will grow yoy by 7.6% and 20.6% in 2019 and 2020. Below are key assumption changes.

Sales: We have reduced our sales forecast on Geely as management guidance for 2019 has provided a much more January2019

conservative outlook. We estimate vehicle sales in 2019 to grow by 2.7% yoy, which is above management guidance. We believe 9 it is also an opportunity for the Company to adjust its product portfolio by slowly retiring older models. In regards to the Lynk & Co. brand, we have also reduced our forecasts mainly for 2018 to 2020. However, it will still increase significantly from 120,414 units in 2018 to 342,000 units in 2019, offsetting most of the decrease in the Geely brand.

Figure-8: Geely and Lynk & Co Sales Figure-9: Overall Vehicle Sales and Growth

Units Units Sales Sales growth (LHS) Geely Lynk & Co 2,000,000 2,000,000 62.7% 70.0% 1,800,000 50.2% 60.0% 1,600,000 50.0% 1,500,000 1,400,000 40.0%

] 2 r a M t h g i R _ e l b a T [ 1,200,000 22.1% 20.4% 30.0% 14.7% 12.3% 1,000,000 1,000,000 13.7% 20.0% 800,000 1.3% 2.7% 10.0% 600,000 -24.0% 0.0% 500,000 400,000 -10.0% 200,000 -20.0% 0 -30.0%

0

2012 2013 2014 2015 2016 2017

2018F 2019F 2020F 2011

2019F 2020F

2018F

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

ASP and GP margin: We have also reduced margin expectation on lower efficiency due to lower sales volume. (00175 HK)

Share of profit from JVs: The reduction is mainly from the reduced sales expectation of the Lynk & Co. models.

吉利汽车 Table-2: Major Financial Data and Forecast Changes New Old Changes 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F Vehicle sales (Units) 1,500,838 1,541,092 1,729,992 1,659,532 2,026,612 2,106,612 -9.6% -24.0% -17.9% Sales Volume 1,380,424 1,199,092 1,322,992 1,459,980 1,537,612 1,563,612 -5.4% -22.0% -15.4% Geely 120,414 342,000 407,000 199,552 489,000 543,000 -39.7% -30.1% -25.0% Lynk & Co Financials (RMB mn) Geely Automobile

Revenue 107,114 97,696 113,180 113,288 125,277 133,765 -5.4% -22.0% -15.4%

20.1% 20.9% 21.6% 20.80% 21.60% 22.30% (0.67)ppt (0.7)ppt (0.7)ppt Gross Profit Margin 798 2,328 3,512 1,098 3,022 4,394 -27.3% -23.0% -20.1% Share of profit of JV 12,628 13,593 16,989 14,067 17,646 20,616 -10.2% -23.0% -17.6% Net Income (Loss) 1.414 1.522 1.902 1.575 1.976 2.308 -10.2% -23.0% -17.6% Basics EPS (RMB) Source: the Company, Guotai Junan International.

Table-3: Summary of Financial Forecasts 2016 2017 2018F 2019F 2020F Sales volume (units) 765,970 1,246,426 1,500,838 1,541,092 1,729,992 yoy 50.2% 62.7% 20.4% 2.7% 12.3% Blended ASP - RMB/unit (Geely only) 70,135 74,782 77,595 81,475 85,549 yoy 22.0% 6.6% 5.5% 5.0% 5.0% Sales revenue (RMB mn) 53,722 92,761 107,114 97,696 113,180 yoy 78.3% 72.7% 15.5% -8.8% 15.8% Gross profit 9,842 17,981 21,564 20,411 24,499 yoy 79.9% 82.7% 19.9% -5.3% 20.0% Share of profit of JV -40 3 798 2,328 3,512

yoy -136.6% -107.9% 25295.8% 191.7% 50.9%

Shareholders' profit 5,112 10,634 12,628 13,593 16,989 yoy 126.2% 108.0% 18.8% 7.6% 25.0%

Gross profit margin 18.3% 19.4% 20.1% 20.9% 21.6% Report Operating margin 11.0% 13.2% 14.0% 15.0% 15.7% Net profit margin 9.5% 11.5% 11.8% 13.9% 15.0% EPS 3-year CAGR 22.2% 94.6% 76.6% 38.0% 16.7%

Source: the Company, Guotai Junan International. 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 [ Valuation has continued to drop into 2019 as the slowdown in sales in recent months and conservative management guidance

triggered lower growth expectation, reducing the premium for Geely. We remain confident for the Company to maintain growth in the next few years, despite it being slower. Nonetheless, we expect market position to continue to strengthen upon industry consolidation. Valuation has dropped below the long-term historical mean, trading at 12M forward 6.6x PER. We reiterate "Buy"

rating for Geely Auto, but revise downwards TP to HK$14.70 on earnings revision, representing 8.5x 2019 PER and 6.8x January2019

2020 PER. 9

Figure-10: PER of Geely Auto Figure-11: PER Range of Geely Auto

Fo rward P/E Avg +1 S.D. 30.0 (x) (x) Geely 30.00 -1 S.D. +2 S.D. -2 S.D. 25.0 24.07 25.00 20.0 20.01

20.00 16.94 16.34 15.0 12.67 12.90 15.00 12.37 12.64 15.75 10.0 10.67 10.86 13.43 10.88 10.85 8.06 5.0 10.00 9.78 9.88 9.68 10.19 7.84 6.06 9.00 ] 2 r a M t h g 9.48i R _ e l b a T [ 0.0 5.00 7.19 7.36 6.64 6.39 5.59 5.94 5.94 5.57

0.00

Ja n- 11

Ja n-17

Ja n-12 Ja n-15 Ja n-16 Ja n-19 Ja n- 13 Ja n- 18 Ja n-14 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD

Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.

(00175 HK)

吉利汽车 Geely Automobile

Report

Company

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

Table-4: Peers comparison Last price PE PB ROE(%) D/Y(%) EV/E

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

Company Stock Code Currency 17A 18F 19F 20F 17A 18F 19F 20F 18F 18F BITD18F Dongfeng Motor-H 489 HK HKD 7.29 3.9 3.9 3.9 3.8 0.5 0.5 0.4 0.4 11.2 5.0 10.1A

Geely Automobile 175 HK HKD 10.22 7.4 6.1 5.6 5.0 2.2 1.8 1.4 1.1 29.8 4.7 3.1

Brilliance China 1114 HK HKD 6.08 6.1 4.2 3.5 3.1 1.0 0.8 0.7 0.6 21.2 3.2 n.a.

Great Wall Mot-H 2333 HK HKD 4.31 6.8 6.6 6.3 5.8 0.7 0.6 0.6 0.6 10.2 5.1 4.6

Qingling Motor-H 1122 HK HKD 1.95 8.4 8.1 7.7 7.1 0.5 0.6 0.5 0.5 7.0 10.6 n.a.

Byd Co Ltd-H 1211 HK HKD 48.60 30.0 36.3 26.6 22.9 2.2 2.0 1.9 1.7 7.4 0.4 11.0 January2019

Guangzhou Auto-H 2238 HK HKD 7.35 5.3 5.3 4.8 4.4 0.9 0.8 0.7 0.7 16.0 6.5 7.7 9

Baic Motor-H 1958 HK HKD 4.26 12.3 5.4 4.4 3.8 0.7 0.6 0.6 0.5 13.3 7.9 0.9

Weichai Power-H 2338 HK HKD 8.69 8.9 8.1 8.4 8.6 1.6 1.5 1.4 1.3 17.0 5.2 3.4

Sinotruk Hk Ltd 3808 HK HKD 10.90 8.7 7.0 7.2 7.3 1.1 1.1 1.0 0.9 14.7 6.5 2.3

Simple Average 9.8 9.1 7.8 7.2 1.1 1.0 0.9 0.8 14.8 5.5 5.4 Weighted Average 12.6 13.2 10.7 9.5 1.4 1.3 1.1 1.0 15.0 4.3 6.3

Dongfeng Auto-A 600006 CH CNY 3.8 37.7 11.8 10.0 n.a. 1.1 n.a. n.a. n.a. n.a. n.a. n.a.

Great Wall Mo-A 601633 CH CNY 5.7 10.3 9.4 8.4 7.6 1.1 1.0 0.9 0.8 11.4 3.5 4.6

Faw Car Co Ltd-A 000800 CH CNY 7.1 41.1 n.a. n.a. n.a. 1.4 1.4 1.4 1.3 2.9 n.a. n.a.

Saic Motor-A 600104 CH CNY 24.30 8.2 7.7 7.2 6.6 1.3 1.1 1.0 0.9 15.6 8.6 4.6

Chongqing Chan-A 000625 CH CNY 7.17 4.8 13.0 9.5 9.2 0.7 0.7 0.7 0.6 7.2 2.5 3.8

Weichai Power-A 000338 CH CNY 7.66 9.0 8.1 8.0 7.7 1.7 1.5 1.3 1.1 17.5 5.1 3.2

] 2 r a M t h g i R _ e l b a T [ Beiqi Foton-A 600166 CH CNY 1.81 90.5 36.2 30.2 n.a. 0.6 n.a. n.a. n.a. n.a. n.a. n.a.

Anhui Jianghua-A 600418 CH CNY 5.00 21.7 17.1 13.1 11.5 0.7 0.7 0.6 0.6 1.9 1.9 4.6

Cnhtc Jinan T-A 000951 CH CNY 11.29 8.4 8.8 7.6 6.5 1.3 1.2 1.2 1.1 15.0 5.8 n.a.

Zhengzhou Yut-A 600066 CH CNY 12.50 8.9 10.4 9.7 9.2 1.9 1.7 1.5 1.4 13.8 4.7 7.3

Xiamen King Lo-A 600686 CH CNY 7.20 9.1 10.5 9.7 8.7 1.2 1.0 1.0 0.9 7.2 n.a. n.a.

Jiangling Moto-A 000550 CH CNY 14.80 18.5 30.1 24.2 34.2 1.0 1.1 1.1 1.1 3.5 1.8 0.8

Yangzhou Yax-A 600213 CH CNY 6.40 33.7 n.a. n.a. n.a. 8.1 n.a. n.a. n.a. n.a. n.a. n.a.

Zhongtong Bus-A 000957 CH CNY 4.85 15.2 5.3 4.8 n.a. 1.0 n.a. n.a. n.a. n.a. n.a. n.a.

Simple Average 23.2 14.8 12.5 11.2 1.7 1.1 1.1 1.0 9.6 4.2 4.1 Weighted Average 16.6 11.9 10.2 8.3 1.3 1.1 1.0 0.9 10.6 3.3 3.4

Nissan Motor Co 7201 JP JPY 895.00 5.4 4.7 6.7 6.2 0.7 0.6 0.6 0.6 9.4 6.3 2.4

(00175 HK)

Toyota Motor 7203 JP JPY 6,626.00 10.9 7.9 8.1 7.7 1.1 1.0 1.0 0.9 12.3 3.5 10.7

Honda Motor Co 7267 JP JPY 3,084.00 9.0 5.2 7.5 7.2 0.8 0.7 0.6 0.6 8.9 3.7 7.7

Mazda Motor 7261 JP JPY 1,172.50 7.5 6.4 12.5 8.3 0.7 0.6 0.6 0.6 5.1 3.0 4.0

Mitsubishi Heavy 7011 JT JPY 4,015.00 15.4 19.1 16.9 13.0 0.8 0.7 0.8 0.8 4.3 3.2 6.6 吉利汽车

Fuji Heavy Indus 7270 JP JPY 2,355.50 6.4 8.2 10.2 6.9 1.2 1.2 1.1 1.0 11.1 6.1 2.9

Suzuki Motor 7269 JP JPY 5,639.00 15.6 11.5 10.5 10.2 2.2 1.9 1.7 1.5 17.6 1.4 4.6

Hino Motors Ltd 7205 JP JPY 1,057.00 12.3 11.8 10.6 9.1 1.3 1.2 1.1 1.0 11.1 2.8 5.6

Isuzu Motors 7202 JP JPY 1,576.00 13.2 11.7 9.9 9.1 1.5 1.3 1.2 1.1 12.7 2.5 5.7

Simple Average 10.6 9.6 10.3 8.6 1.1 1.0 1.0 0.9 10.3 3.6 5.6

Weighted Average 10.3 7.9 8.6 7.8 1.1 1.0 0.9 0.9 11.4 3.7 8.3 Geely Automobile

Hyundai Motor 005380 KS KRW 119,500.00 8.0 11.8 8.2 7.1 0.4 0.5 0.4 0.4 5.1 3.7 9.2

Ford Motor Co F US USD 8.29 4.3 6.3 6.4 5.6 0.9 0.9 0.8 0.7 11.0 6.7 2.0

Navistar Intl NAV US USD 29.15 91.1 8.5 8.0 9.3 n.a. n.a. n.a. n.a. (8.7) 0.0 6.5

Paccar Inc PCAR US USD 58.96 12.4 9.6 9.5 10.7 2.6 2.2 2.0 1.8 22.5 4.2 8.9

Volkswagen Ag VOW GR EUR 142.10 6.3 5.8 5.0 4.8 0.7 0.6 0.6 0.5 11.6 4.7 1.3

Bayer Motoren Wk BMW GR EUR 72.06 5.5 6.9 6.7 6.5 0.9 0.8 0.8 0.7 11.8 5.5 4.9

Daimler Ag DAI GR EUR 47.38 4.8 6.3 5.7 5.7 0.8 0.7 0.7 0.6 12.6 7.4 2.0

Man Se MAN GR EUR 90.30 42.7 25.4 26.8 19.1 2.2 n.a. n.a. n.a. n.a. 1.1 13.8

Renault Sa RNO FP EUR 55.47 2.9 3.9 3.7 3.6 0.5 0.4 0.4 0.4 11.4 7.0 1.9

Volvo Ab-B VOLVB SS SEK 119.05 11.5 8.4 8.3 8.8 2.3 1.9 1.7 1.6 21.8 5.5 4.5

General Motors C GM US USD 21.00 15.1 8.1 7.2 5.9 1.1 1.0 0.9 0.8 13.7 2.8 5.1

Tata Steel Ltd TATA IN INR 492.90 n.a. 3.8 5.8 6.0 1.3 1.0 0.8 0.7 15.1 2.0 5.5 Simple Average 17.5 8.4 8.1 7.4 1.2 1.0 0.9 0.8 12.2 4.4 5.1

Weighted Average 8.5 7.5 7.0 6.6 1.1 0.9 0.8 0.7 12.6 5.4 3.9

Global Simple Average 15.3 10.8 9.5 8.6 1.4 1.1 1.0 0.9 12.2 4.7 4.9 Report

Global Weighted 10.0 8.4 8.1 7.5 1.1 1.0 0.9 0.8 12.3 4.5 5.9 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) 2016A 2017A 2018F 2019F 2020F Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Total Revenue 53,722 92,761 107,114 97,696 113,180 PPE 10,650 14,053 18,628 24,693 32,733 Cost of sales (43,880) (74,779) (85,550) (77,285) (88,681) Intangible assets 6,462 10,552 14,087 17,311 21,045 Gross profit 9,842 17,981 21,564 20,411 24,499 Interest in associates and JV 1,002 4,805 5,640 8,004 11,554 Prepaid land lease payment 2,003 2,124 1,657 1,738 1,836 Distribution expenses (2,503) (4,056) (4,285) (3,908) (4,527) Deferred tax assets 188 401 590 794 1,049

Administration expenses (2,560) (2,923) (3,213) (3,005) (3,438) Others 29 38 38 38 38 January2019 Total Non-current Assets 20,334 31,973 40,640 52,578 68,254

Operating Profit 4,779 11,003 14,066 13,499 16,534 9

Share of results of Asso. and JV (9) 42 835 2,364 3,549 Cash & Cash Equivalents 15,045 13,415 16,773 15,619 16,221 Other income 1,506 1,792 978 1,204 1,254 Pledged deposit 39 36 39 42 45 Finance costs, net (30) (35) (13) 12 (6) Inventories 3,066 6,027 5,250 4,788 5,547 Share-based payment (42) (28) (35) (31) (33) Trade and other receivables 29,041 33,478 36,097 32,923 38,141 Profit Before Tax 6,204 12,774 15,832 17,047 21,298 Prepaid land lease payment 43 48 42 45 47 Others 15 4 5 5 6 Income Tax (1,034) (2,039) (3,152) (3,394) (4,241) Total Current Assets 47,249 53,008 58,206 53,422 60,007 profit After Tax 5,170 10,735 12,679 13,653 17,057 Total Assets 67,583 84,981 98,846 105,999 128,261 Non-controlling Interest (58) (102) (52) (59) (68) Shareholders' Profit / Loss 5,112 10,634 12,628 13,593 16,989 Trade payables 39,779 47,533 49,944 45,118 51,772 Bank borrowing 174 1,296 1,426 1,569 1,726 Basic EPS 0.580 1.198 1.414 1.522 1.902 Other liabilities 677 1,073 1,274 1,372 1,714 Diluted EPS 0.580 1.198 1.414 1.522 1.902 Total Current Liabilities 40,630 49,902 52,644 48,059 55,211 Dividend per share (RMB) 0.120 0.290 0.361 0.392 0.495 Senior notes 2,068 0 0 0 0

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

Deferred tax liabilities 198 268 872 1,522 2,335 Total Non-current Liabilities 2,266 268 872 1,522 2,335

[Table_CashFlowStatement] Cash Flow Statement Total Liabilities 42,897 50,170 53,516 49,581 57,546

Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Total Shareholders' Equity 24,437 34,467 44,935 55,964 70,192 EBT 6,204 12,774 15,832 17,047 21,298 Minority Interest 249 344 395 455 523 Depreciation and amortization 1,654 1,938 1,910 2,291 2,702 Total Equity 24,686 34,811 45,330 56,418 70,715 Finance cost 116 162 13 (12) 6 BPS(RMB) 2.776 3.908 5.031 6.265 7.858

Interest income (85) (127) (127) (159) (148) Changes in working capital 1,538 (510) 570 (1,190) 676 Financial Ratios

Share of results of associates 9 (42) (835) (2,364) (3,549) Exchange gain/(losses) (230) (4) 32 30 30 2016A 2017A 2018F 2019F 2020F Income taxes paid (754) (1,759) (3,152) (3,394) (4,241) Profitability Change of other operating Items (114) (438) 144 31 239 Gross profit margin (%) 18.3 19.4 20.1 20.9 21.6 Cash from Operating Activities 8,338 11,994 14,386 12,280 17,012 EBITDAR (%) 14.1 15.3 16.6 19.8 21.2

(00175 HK)

EBIT Margin (%) 11.0 13.2 14.8 17.5 18.9 Net investments in PPE (410) (3,396) (6,125) (5,008) (6,510) Net profit margin (%) 9.5 11.5 11.8 13.9 15.0 Net change of prepaid land lease (103) (240) 467 (81) (98) ROE (%) 23.3 36.1 31.8 26.9 26.9 Net change of intangible assets (2,643) (3,950) (3,535) (3,224) (3,735) ROA (%) 7.6 12.5 12.8 12.8 13.2

Net change of pledged deposit 1 3 (3) (3) (3) 吉利汽车 Interest income 85 127 127 159 148 Growth Net investments in Asso. and JV 1,110 (3,750) 0 0 0 Sales volume growth (%) 50.2 62.7 20.4 2.7 12.3 Others (599) (706) (1,928) (2,898) (3,632) Revenue growth (%) 78.3 72.7 15.5 -8.8 15.8 Cash from Investing Activities (2,557) (11,911) (10,997) (11,055) (13,830) EPS (%) 125.7 106.7 18.0 7.6 25.0 BPS (%) 25.1 41.0 30.2 24.5 25.3 Net change of LT bank loan 163 1,122 130 143 157 Issuance of senior notes 0 (2,034) 1,980 0 0 Liquidity and solvency

Issuance of shares 273 314 0 0 0 Gearing ratio (%) net cash net cash net cash net cash net cash Geely Automobile Interest paid (105) (127) (13) 12 (6) Cash ratio 0.4 0.3 0.3 0.3 0.3 Dividend paid (281) (960) (2,160) (2,565) (2,761) Quick ratio 1.1 0.9 1.0 1.0 1.0 Others (21) 0 0 0 0 Current ratio 1.2 1.1 1.1 1.1 1.1 Cash from Financing Activities 29 (1,685) (63) (2,410) (2,610) Efficiency Net Changes in Cash 5,810 (1,602) 3,327 (1,185) 572 Inventory turnover 25 20 20 20 20 Other adjustment 69 (29) 32 30 30 Days receivable 149 123 123 123 123 Cash at Beg of Year 9,167 15,045 13,415 16,773 15,619 Days payable 249 213 213 213 213 Cash at End of Year 15,045 13,415 16,773 15,619 16,221

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%;

or the fundamental outlook of the company or sector is favorable.

January2019

Neutral 中性 Relative Performance is -5% to 5%; 9 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),BINHAI INVESTMENT (02886 HK),VALUE A SHARE (03095 HK),CSOP MSCI (03149 HK),CAM SCSMALLCAP (03157 HK),HAITIANTIAN (08227 HK),CSOP MSCI-R (CNY) (83149 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 (00175 HK) Report. (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 吉利汽车 Report. (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.

Geely Automobile DISCLAIMER

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.

Report

© 2019 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 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