FY2017 Results in Line, Maintain “Buy” 2017财年业绩符合预期，维持“买入”

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]

22 March 2018 [Table_Summary] FY2017 Results in line, Maintain “Buy” 2017财年业绩符合预期，维持“买入”

 Geely Auto’s 2017 net profit was up 108.0% yoy to RMB 10,634 million. 公 Rating:[Table_Rank ] Buy Excluding the one-off gain from the disposal of a subsidiary, underlying Maintained 司 earnings was RMB 10,071 million, aligning with market consensus and our

报 consensus. In 2017, top-line revenue increased 72.7% yoy to RMB 92,761 评级：买入 (维持) million due to an increase in vehicle sales of 62.1% yoy and increased 告 blended ASP by 6.6% on the improved sales mix. Gross margin was up 1.1 6[Table_Price-18m TP目标价] : HK$32.10

CompanyReport ppts to 19.4%. Operating margin expanded 2.2 ppts as distribution costs and Revised from 原目标价: HK$34.54 administration costs have been well controlled, seeing per revenue ratio drop yoy by 0.3 ppts and 1.6 ppts, respectively. Net margin improved 1.9 ppts to Share price 股价: HK$25.800

11.5%.

 We forecast shareholders’ profit to increase 31.3% / 29.1% / 21.2% in Stock performance 2018 to 2020, respectively. The strong growth reflects our optimism on the 股价表现 Company, with the support of both Geely and Lynk & Co. brand. We forecast [Table_QuotePic] vehicle sales to increase 36.7% yoy in 2018, more aggressive than the 180.0 % of return management's guidance. 160.0

140.0

 We see Geely Auto continuing to strengthen in the self-owned market and 120.0

证

able to expand to other segments through Lynk & Co with cooperation with 100.0 告券 80.0 Volvo and the parent company. We reiterate our “Buy” rating for Geely 60.0 研报 Auto, but slightly revise downwards TP to HK$32.10, representing 17.0x

40.0

2018 PER and 13.2x 2019 PER. Our valuation is above both its long-term

究究 20.0

average and sector PER. However, given Geely Auto’s leading position in the

报 self-owned market and its aggressive growth outlook, we believe the 0.0 研

(20.0)

告 premium is well justified. Mar-17 Jun-17 Sep-17 Dec-17 Mar-18

券 Series1 Geely Automobile

EquityResearch Report  吉利汽车 2017 年股东净利润同比上升 108.0％至人民币 106.34 亿元。扣除处置子公司一证次性收益，核心盈利为人民币 100.71 亿元，符合市场及我们预期。2017 年，收入同比增 [Table_PriceChange]

Change in Share Price 1 M 3 M 1 Y [Tab 长 72.7%至人民币 927.6 亿元，主要是由于汽车销售同比增长 62.1% 以及销售结构改善股价变动 1 个月 3 个月 1 年

使得综合平均售价增长 6.6%。毛利率提升 1.1 个百分点至 19.4%。营业利润率扩大 2.2 le_I Abs. % 8.6 1.2 127.9 汽个百分点，因分销成本和管理费用得到较好控制，占收入百分比分别同比降低 0.3 个百分绝对变动 % nfo1 Rel. % to HS Index 车点和 1.6 个百分点。净利润率提升 1.9 个百分点至 11.5%。 8.7 (5.8) 100.2 相对恒指变动 % 及 Avg. Share price(HK$) ]  我们预测 2018-2020 年股东净利分别增长 31.3% / 29.1% / 21.2%。有吉利和领克品牌的 25.5 25.2 20.5 平均股价（港元）零支持，强劲的增长反映我们对公司乐观的态度。我们预测汽车销量在年同比增长 2018 Source: Bloomberg, Guotai Junan International. 部 36.7%，较管理层的指引更为激进。

件  我们看到吉利汽车继续巩固在自主品牌市场的地位，及能够通过领克品牌与沃尔沃和母公行司的合作，并扩大至其他细分市场。我们重申吉利汽车的“买入”评级，但将目标价下调至业 32.10 港元，相当于 17.0 倍 2018 年市盈率和 13.2 倍 2019 年市盈率。我们的估值高于其长期平均值和行业市盈率。然而，鉴于吉利汽车在自主品牌的领先地位及其积极的增长前

景，我们认为该溢价是合理的。 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 39.8 2.776 8.3 0.120 0.5 23.3 nfo2 2017A 92,761 10,634 1.198 106.6 17.4 3.908 5.3 0.290 1.4 36.1 中] 2018F 115,304 13,654 1.529 27.6 13.7 5.146 4.1 0.390 1.9 34.0 2019F 131,489 17,582 1.968 28.7 10.6 6.803 3.1 0.508 2.4 32.9 吉外 2020F 146,789 21,380 2.394 21.6 8.7 8.797 2.4 0.623 3.0 30.7 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) 231,500.8 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) 57,885.5 FY18 Net gearing (%) FY18 净负债/股东资金 (%) Net Cash 52 Weeks high/low (HK$) 52 周高/低 (HK$) 29.800 / 10.080 FY18 Est. NAV (HK$) FY18 每股估值（港元） 34.5

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

See the last page for disclaimer Page 1 of 8

[Table_PageHeader]Geely Automobile (00175 HK)

FY2017 Results Review

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

Geely Auto’s (“the Company”) 2017 net profit was up 108.0% yoy to RMB 10,634 million. Excluding the one-off gain of the

disposal of a subsidiary, underlying earnings was RMB 10,071 million, aligning with market consensus and our consensus. In 2017, top-line revenue increased 72.7% yoy to RMB 92,761 million due to 1) an increase in vehicle sales of 62.1% yoy thanks to strong sales from key models (Boyue, Emgrand GS, Emgrand GL and Vision SUV), which contributed 55.2% of total sales (vs.

32.5% in 2016) and 2) an increase in blended ASP by 6.6% on improved sales mix, also due to the strong sales from key models.

March2018

Cost of goods sold increased less than revenue growth on efficiency gain through economies of scale, as a result, gross margin 2 2 was up 1.1 ppts to 19.4%. Operating margin expanded 2.2 ppts to 13.2%, reaching a historical high, as distribution costs and administration costs have been well controlled, seeing per revenue ratio drop yoy by 0.3 ppts and 1.6 ppts, respectively. Net margin improved 1.9 ppts to 11.5%. The Company proposed dividend of HKD 0.29 per share, represents a payout ratio of 20.3%, higher than 18.8% in 2016.

Table-1: Summary of 2017 Results of Geely Auto 2017 2016 YoY 2H17 1H17 HoH Revenue 92,761 53,722 72.7% 53,337 39,424 35.3% COGS (74,779) (43,880) 70.4% (42,910) (31,870) 34.6% Gross profit 17,981 9,842 82.7% 10,427 7,554 38.0% Distribution and selling expenses (4,056) (2,503) 62.1% (2,318) (1,737) 33.4% Administrative expenses (2,923) (2,560) 14.2% (1,742) (1,181) 47.6% Operating profit 12,232 5,910 107.0% 7,596 4,636 63.8%

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

Finance costs, net (35) (30) 17.0% (26) (9) 180.2% Other income 1,229 1,131 8.6% 568 661 -14.2% Share-based payments (28) (42) -34.3% (14) (14) -2.3% Share of results of Asso. and JV 42 (9) -588.5% 7 36 -81.0% Gain on disposal of subsidiaries / JV 563 376 49.7% - - n.a. EBT 12,774 6,204 105.9% 7,464 5,310 40.6% Income tax (2,039) (1,034) 97.2% (1,115) (923) 20.8% Profit for the period 10,735 5,170 107.6% 6,349 4,386 44.7% Profit for equity shareholders 10,634 5,112 108.0% 6,290 4,344 44.8% Non-controlling interests 102 58 75.9% 59 43 37.4%

Underlying profit (before disposal gain) 10,071 4,737 112.6% 6,290 4,344 44.8%

Basic EPS (RMB) 1.1980 0.5796 106.7% 0.7103 0.4877 45.6% Diluted EPS (RMB) 1.1614 0.5733 102.6% 0.6846 0.4768 43.6% Source: the Company, Guotai Junan International.

(00175 HK) Table-2: Key Operating Data 2017 2016 YoY 2H17 1H17 HoH Key Operating Data Government subsidies 905 802 12.8% 405 501 -19.2% Sale volume (unit) 1,241,104 765,851 62.1% 710,477 530,627 33.9% 吉利汽车 Domestic sales (units) 1,216,058 744,072 63.4% 689,277 526,781 30.8% Export sales(unit) 25,046 21,779 15.0% 21,200 3,846 451.2% ASP(RMB/unit) 73,550 68,993 6.6% 75,072 73,077 2.7% Inventory 6,027 3,066 96.6% n.a. n.a. n.a. Account Receivable 33,478 29,041 15.3% n.a. n.a. n.a. Account Payable 47,533 39,779 19.5% n.a. n.a. n.a.

Key Ratio ppts ppts Geely Automobile Gross profit margin (%) 19.4% 18.3% 1.1 19.5% 19.2% 0.4 Operating profit margin(%) 13.2% 11.0% 2.2 14.2% 11.8% 2.5 Net profit margin (%) 11.5% 9.5% 1.9 11.8% 11.0% 0.8 Distribution costs/Revenue(%) 4.4% 4.7% (0.3) 4.3% 4.4% (0.1) Admin costs/Revenue(%) 3.2% 4.8% (1.6) 3.3% 3.0% 0.3 Effective tax rate(%) 16.0% 16.7% (0.7) 14.9% 17.4% (2.4) Source: the Company, Guotai Junan International.

Figure-1: Geely’s Monthly Sales Volume Figure-2: Geely’s Gross Margin

2016 2017 Units 2018 2017 growth 22.0% 180,000 2018 growth 180% 21.0% 21.5% 160,000 160% 140,000 140% 20.8% 20.0% 120,000 120% 20.0% 100,000 100% 19.0% 19.4% 80,000 80% 18.0% 60,000 60% 18.3%

18.2% 18.2% Report

40,000 40% 17.0% 20,000 20% - 0%

16.0%

Jul

Company

Apr

Oct

Jan Jun

Feb Mar Sep

Aug 2014 2015 2016 2017 2018F 2019F 2020F

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

See the last page for disclaimer Page 2 of 8 [Table_PageHeader]Geely Automobile (00175 HK)

Outlook – Model Refinement and More Lynk Models

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

We see the Company’s product cycle continuing and new models will help maintain strong sales. In 2018, we should see

another model year for Geely Auto and its new brand Lynk & Co. Firstly, key models Emgrand GS, Boyue and Vision SUV will all undergo a facelift, upgrading its specifications and configurations. Since being launch in 2016, these key models, especially the

Boyue and Emgrand GS, continue to climb to new highs, reaching sales of 30,000 units and 20,000 units, respectively, in Feb. March2018

2018. We expect that vehicle sales for these flagship models will keep up in 2018 to support growth. Secondly, we would also 2 pay close attention to two new models which are the Borui GT and an all new sporty SUV (reportedly built under the NL platform). 2 The name and style could vary from our estimation (compiled from various sources), but we are positive about these two new models as we believe the sporty element in the design will be well received in the current market trend of young and sporty. Thirdly, the other two Lynk models (02 and 03) will also be other key models to watch for this year. Despite the 03 being a smaller SUV and the 02 being a sedan, which is expected to compete in the most competitive price range (RMB 100,000 to RMB 150,000) segment, we are again positive about the product itself, given its high price to performance ratio. We believe that it will capture market share in the segment despite an overall shrinking trend.

Table-3: Model Pipeline 2018 Model Launch date Mode of upgrade Vehicle Types Displacement Internal Combustion

Lynk 02 1H18 New Compact SUV 1.5T

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

Lynk 03 2018 New Sedan 1.5T Emgrand GL 2018 Facelift Sedan 1.4T Emgrand GS 2018 Facelift Compact SUV 1.4T Boyue 1H18 Facelift Compact SUV 2.0L/1.8T Vision SUV 2018 Facelift Compact SUV 1.3T/1.4T/1.8L New MPV 2H18 New MPV unknow Borui GT 2018 New Sedan 1.5T / 1.5L PHEV Sporty SUV 2Q18 New SUV 1.5T New Energy Vehicle

Emgrand GSe400 2Q18 New SUV - EV n.a. Emgrand EV450 1Q18 Facelift Sedan - EV n.a.

Emgrand GL PHEV 2Q18 New Sedan - PHEV 1.5T Lynk 01 2018 New SUV - PHEV 1.5L Source: the Company, Guotai Junan International.

More NEVs expected in 2018. Driven by tightening regulation on NEVs, Geely Auto will roll out more NEVs in 2018, being the (00175 HK) key trend as per the management’s statement during results briefing. Regarding its own Geely brand, the Company will first roll it

its upgraded Emgrand EV sedan (EV450). This version has significantly improved from the prior EV300 model, most noticeably 吉利汽车 its battery density, energy consumption, weight and driving range. As a result of the improvement, it will actually benefit the updated NEV subsidy scheme, which has been effective since Feb. 2018. The new EV450 will receive the top subsidy of RMB 50,000 from the government as its driving range is 400km and it comes with a high quality battery pack which will also boost the subsidy level by 10% (see table-3 for subsidy breakdown). Besides, the Emgrand GS and Lynk 01 will also introduce a NEV

version during 2018, to suit customers who prefer SUVs. Geely Auto sources its battery packs mainly from CATL (宁德时代), the Geely Automobile largest battery pack supplier (both NCM and LiFePo4) in China, therefore we are positive for Geely Auto to scale up its NEV operation along with strong battery quality to benefit from the adjusted subsidy scheme, and should be well-aligned with Geely Auto’s NEV strategy.

Table-4: Model Pipeline 2018

Emgrand EV450

Basic information

Segment A MSRP (RMB) Not disclosed yet Mass (kg) 1,595 Battery capacity (kWh) 52.0 Battery density (Wh/kg) 142.0 Battery type NCM (三元锂电池) Driving range (km) 400 Energy consumption (kw hours per 100 km) 52

2018 subsidy policy Amount (RMB) Central government 60,500 Standard subsidy 50,000 As R≥400, therefore entitle RMB50,000 subsidy

Battery density factor 1.1 Battery density between 140-160Wh/kg, therefore factor of 1.1 Report

y= (0.0108 x m +2.5); y= 19.7; over 25% better than requirement , therefore factor of Energy consumption factor 1.1 1.1

Local government 30,25060,500 50% maximum of central grant Company  Subsidy receive will be higher than 2017 due to upgrade subsidy plan and Total 90,750 product specs. Source: the Company, Guotai Junan International. See the last page for disclaimer Page 3 of 8 [Table_PageHeader]Geely Automobile (00175 HK)

Earnings Revisions

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

We have roll forward our base year to 2018 and fine-tuned our major assumptions. Shareholders’ profit is forecasted to

increase 28.4% / 28.8% / 21.6% in 2018 to 2020, respectively.

Sales: We expect sales growth of Lynk & Co. to continue to be higher than the Geely brand due to low base and more favorable

position in the trend of consumption upgrade. We expect sales of Lynk & Co to escalate in 2019 after all three Lynk models (01 /

March2018

02 / 03) fully ramp up, which we expect is able to achieve the 500,000 units of sales a year earlier than the management’s 2 2 expectation. On the other hand, we also expect the Geely brand to achieve its 2 million target as soon as 2019, and stabilize in 2020. Our 2018 forecast of 1.76 million units is well above management guidance of 1.58 million units, but we believe our forecast is achievable, as Geely Auto has a very competitive product line up and its market share is growing despite the shrinking A-segment market and the slowing auto market.

Figure-3: China SUV Sales by Segment Figure-4: Geely’s PV Market Share

A0 A B 5.5% 80% 5.0% 68% 70% 65% 4.5% 57% 57% 60% 56%

] 2 r a M t h g i R _ e l b a T [ 4.0% 50% 3.5% 40% 28% 3.0% 30% 25% 21% 22% 20% 17% 17% 2.5% 20% 14% 14% 15%

10% 2.0%

16 17

16 16 17 17

16 16 17 17 17 16 16 17

16 16 17 17

- -

- - - -

------

- - -

0% -

Jul Jul

Apr Apr

Oct Oct

Jan Jun Jan Jun

Feb Mar Feb Mar

Aug Sep Sep Aug

Dec Nov Dec Nov May 2013 2014 2015 2016 2017 May

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

ASP and GP margin: We expect that the ASP for Geely brand will continue to increase but at a much slower pace than the prior (00175 HK) year. As the four key models (Boyue, Emgrand GS, Emgrand GL, Vision SUV) sales has fully ramped up, we expect that further increase in the blended ASP will also be limited. Further, premium models will be launched under the Lynk & Co brand which are marketed to focus in the mid-to-high range sector with ASP above RMB 150,000. GP margin will be improving at a milder pace, 吉利汽车 mainly gaining from better cost saving measures.

Table-5: Major Financial Data and Forecast Changes New Old Changes 2018F 2019F 2020F 2018F 2019F 2020F 2018F 2019F 2020F Vehicle sales (Units) Sales Volume 1,704,652 2,102,856 2,258,856 1,751,617 2,002,142 n.a. -2.7% 5.0% n.a. Geely Automobile Geely 1,485,967 1,613,856 1,715,856 1,506,117 1,560,142 n.a. -1.3% 3.4% n.a. Lynk & Co 218,685 489,000 543,000 245,500 442,000 n.a. -10.9% 10.6% n.a. Financials (RMB mn)

Revenue 115,304 131,489 146,789 139,833 168,055 n.a. -17.5% -21.8% n.a. Gross Profit Margin 20.0% 20.8% 21.5% 20.9% 21.8% n.a. (0.88)ppt (1.0)ppt n.a. Share of profit of JV 1,197 3,022 4,394 1,700 3,597 n.a. n.a. n.a. n.a.

Net Income (Loss) 13,654 17,582 21,380 15,035 20,421 n.a. -9.2% -13.9% n.a. Basics EPS (RMB) 1.529 1.968 2.394 1.705 2.315 n.a. -10.3% -15.0% n.a. Source: the Company, Guotai Junan International.

Table-6: Summary of Financial Forecast 2016 2017 2018F 2019F 2020F Sales volume (units) 765,851 1,247,116 1,704,652 2,102,856 2,258,856 yoy 50.1% 62.8% 36.7% 23.4% 7.4% Blended ASP - RMB/unit (Geely only) 70,146 74,740 77,595 81,475 85,549 yoy 22.0% 6.6% 5.5% 5.0% 5.0% Sales revenue (RMB mn) 53,722 92,761 115,304 131,489 146,789 yoy 78.3% 72.7% 24.3% 14.0% 11.6%

Gross profit 9,842 17,981 23,085 27,327 31,614 yoy 79.9% 82.7% 28.4% 18.4% 15.7%

Share of profit of JV -40 3 1,197 3,022 4,394 Report

yoy -136.6% -107.9% 37997.5% 152.4% 45.4% Shareholders' profit 5,112 10,634 13,654 17,582 21,380 yoy 126.2% 108.0% 28.4% 28.8% 21.6%

Gross profit margin 18.3% 19.4% 20.0% 20.8% 21.5%

Operating margin 11.0% 13.2% 13.8% 14.4% 15.2% Company Net profit margin 9.5% 11.5% 11.8% 13.4% 14.6% EPS 3-year CAGR 22.2% 94.6% 81.2% 50.3% 26.0% Source: the Company, Guotai Junan International. See the last page for disclaimer Page 4 of 8 [Table_PageHeader]Geely Automobile (00175 HK)

Valuation

] 1 r a M t h g i R _ e l b a T [ Despite that growth of Geely Auto is slowing down due to a higher base and intensifying auto market in China, we believe the strong product cycle and the strategy that the Company is pursuing is achievable. We see Geely continuing to strengthen in the self-owned market and able to expand to other segments through Lynk & Co with cooperation with Volvo and the parent company. We reiterate our “Buy” rating for Geely Auto, but slightly revise downwards TP to HK$32.10, representing 17.0x 2018

PER and 13.2x 2019 PER. Our valuation is above both its long-term average and sector PER. However, given Geely Auto’s March2018

leading position in the self-owned market and its aggressive growth outlook, we believe the premium is well justified. 2 2

Figure-5: PER Band of Geely Auto Figure-6: PER Range of Geely Auto

Forward P/E Avg (x) Geely 30.0 (x) 30.00 +1 S.D. -1 S.D. 24.07 +2 S.D. -2 S.D. 25.0 25.00 20.01 20.0 20.00 16.94 16.34

15.0 12.67 12.90 15.00 12.37 12.64 15.75 13.43 10.67 13.58 10.0 10.95 10.88 10.00 9.78 9.88 9.68 10.19 11.48

] 2 r a 7.84M t h g i R _ e l b a T [

5.0 9.48 5.00 9.00 7.19 6.64 6.39 0.0 5.59 5.94 5.94

0.00

10 12 13 14 16 17 18 11 15

------

2010 2011 2012 2013 2014 2015 2016 2017 2018

Mar Mar Mar Mar Mar Mar Mar Mar Mar 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 5 of 8 [Table_PageHeader]Geely Automobile (00175 HK)

Table-7: 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 9.78 5.0 4.8 4.7 n.a. 0.6 0.6 0.5 n.a. 11.5 3.7 15.8A Dongfeng Motor-H 489 HK HKD

25.80 18.8 13.6 10.6 10.6 5.7 4.3 3.3 2.7 34.0 2.3 6.8 Geely Automobile 175 HK HKD 18.92 15.7 10.2 7.9 7.2 2.7 2.2 1.8 n.a. 24.7 1.5 n.a. Brilliance China 1114 HK HKD 8.75 12.6 8.3 7.2 6.7 1.3 1.2 1.0 0.9 15.1 4.3 6.5 Great Wall Mot-H 2333 HK HKD 2.56 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Qingling Motor-H 1122 HK HKD March2018 Byd Co Ltd-H 1211 HK HKD 73.80 39.3 25.6 20.2 14.4 2.9 2.7 2.4 1.9 12.5 0.9 10.2 2 16.90 8.6 7.2 6.4 7.1 1.6 1.4 1.2 n.a. 20.4 4.6 11.7 2 Guangzhou Auto-H 2238 HK HKD 10.30 17.7 9.1 7.3 n.a. 1.5 1.3 1.2 n.a. 16.4 4.5 1.5 Baic Motor-H 1958 HK HKD 8.49 8.8 9.4 9.6 n.a. 1.5 1.4 1.3 n.a. 14.5 5.0 4.4 Weichai Power-H 2338 HK HKD 9.68 7.8 8.0 7.9 8.6 1.0 0.9 0.8 n.a. 10.9 4.7 1.8 Sinotruk Hk Ltd 3808 HK HKD Simple Average 14.9 10.7 9.1 9.1 2.1 1.8 1.5 1.8 17.8 3.5 7.3 Weighted Average 17.9 12.5 10.3 7.6 2.7 2.2 1.8 1.0 19.9 3.0 7.6

5.2 18.9 12.3 11.9 n.a. 1.4 1.3 1.2 n.a. 10.1 n.a. n.a. Dongfeng Auto-A 600006 CH CNY 12.0 19.9 13.6 12.1 n.a. 2.2 1.9 1.7 n.a. 15.1 2.5 6.3 Great Wall Mo-A 601633 CH CNY 10.4 n.a. n.a. n.a. n.a. 2.1 2.0 2.0 n.a. 4.4 0.0 n.a. Faw Car Co Ltd-A 000800 CH CNY 36.18 12.1 10.9 10.1 n.a. 2.0 1.8 1.7 n.a. 16.6 5.9 6.4 Saic Motor-A 600104 CH CNY 11.93 6.9 6.4 6.0 n.a. 1.2 1.1 0.9 n.a. 17.3 5.6 5.3 Chongqing Chan-A 000625 CH CNY Weichai Power-A 000338 CH CNY 8.13 10.5 10.7 10.9 n.a. 1.8 1.7 1.6 n.a. 14.7 4.2 4.1

] 2 r a M t h g i R _ e l b a T [ 2.59 21.6 17.9 43.2 n.a. 0.9 0.9 0.9 n.a. 1.9 n.a. n.a. Beiqi Foton-A 600166 CH CNY 7.97 34.7 19.9 14.7 25.3 1.1 1.0 1.0 1.0 5.9 1.9 7.7 Anhui Jianghua-A 600418 CH CNY 15.55 12.7 11.8 9.1 n.a. 1.8 1.5 1.4 n.a. 16.9 3.2 n.a. Cnhtc Jinan T-A 000951 CH CNY 22.88 13.9 12.0 11.5 n.a. 3.3 2.8 2.4 n.a. 21.3 3.9 7.2 Zhengzhou Yut-A 600066 CH CNY 13.55 21.7 16.0 11.3 n.a. 2.1 1.9 1.9 n.a. 13.2 0.4 n.a. Xiamen King Lo-A 600686 CH CNY 19.29 12.9 10.8 11.5 n.a. 1.3 1.3 1.2 n.a. 10.2 3.8 0.6 Jiangling Moto-A 000550 CH CNY 11.41 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Yangzhou Yax-A 600213 CH CNY 10.51 12.1 9.5 9.6 n.a. n.a. n.a. n.a. n.a. 14.1 2.9 n.a. Zhongtong Bus-A 000957 CH CNY

Simple Average 16.9 12.9 13.8 25.3 1.8 1.6 1.5 1.0 12.3 3.1 5.4 Weighted Average 14.6 11.4 11.7 1.1 1.9 1.7 1.6 0.0 14.3 3.1 4.6

1,119.50 6.7 6.2 7.5 7.0 0.9 0.8 0.7 0.7 10.1 4.9 11.6

Nissan Motor Co 7201 JP JPY (00175 HK)

6,853.00 11.3 8.7 9.5 8.8 1.2 1.1 1.0 0.9 10.6 3.2 12.0 Toyota Motor 7203 JP JPY 3,642.00 10.6 6.9 8.8 8.0 0.9 0.8 0.7 0.7 9.1 3.2 7.5 Honda Motor Co 7267 JP JPY 1,420.50 9.1 7.9 7.8 6.9 0.8 0.8 0.7 0.7 9.7 2.9 3.4 Mazda Motor 7261 JP JPY 4,025.00 15.4 15.9 13.7 12.0 0.8 0.7 0.7 0.7 5.4 3.1 6.0 吉利汽车 Mitsubishi Heavy 7011 JT JPY 3,616.00 9.9 13.2 9.3 8.7 1.9 1.8 1.6 1.4 17.8 4.2 3.4 Fuji Heavy Indus 7270 JP JPY 5,660.00 15.6 12.1 11.4 10.8 2.2 1.9 1.7 1.5 15.6 1.3 4.3 Suzuki Motor 7269 JP JPY 1,374.00 15.9 14.5 11.9 10.5 1.7 1.6 1.4 1.3 12.6 2.5 6.0 Hino Motors Ltd 7205 JP JPY 1,633.00 13.7 11.4 10.4 9.7 1.6 1.4 1.3 1.2 12.7 2.5 5.5 Isuzu Motors 7202 JP JPY Simple Average 12.0 10.8 10.0 9.2 1.3 1.2 1.1 1.0 11.5 3.1 6.6

Weighted Average 11.1 9.0 9.4 8.7 1.2 1.1 1.0 0.9 10.9 3.3 9.7 Geely Automobile

154,500.00 10.3 8.5 7.7 7.1 0.5 0.6 0.5 0.5 6.9 3.0 8.9 Hyundai Motor 005380 KS KRW 10.99 5.8 7.1 7.3 7.0 1.3 1.1 0.9 0.9 13.2 5.5 2.8 Ford Motor Co F US USD 33.81 105.7 16.5 10.7 10.4 n.a. n.a. n.a. n.a. (7.7) 0.0 7.6 Navistar Intl NAV US USD 66.29 13.9 12.2 11.9 12.5 2.9 2.5 2.2 1.9 19.9 3.6 9.8 Paccar Inc PCAR US USD 162.60 7.2 6.1 5.8 6.0 0.8 0.7 0.6 0.6 11.8 3.8 2.2 Volkswagen Ag VOW GR EUR 85.94 6.6 7.8 7.5 7.5 1.1 1.0 0.9 0.9 13.0 4.7 2.1 Bayer Motoren Wk BMW GR EUR 68.51 7.0 7.3 7.2 7.1 1.1 1.0 1.0 0.9 15.2 5.4 2.6 Daimler Ag DAI GR EUR 95.65 45.2 36.5 27.6 38.0 2.3 2.3 2.2 2.1 6.5 3.2 9.4 Man Se MAN GR EUR 95.29 5.0 6.0 5.8 5.8 0.8 0.7 0.7 0.8 13.9 4.1 3.2 Renault Sa RNO FP EUR 152.05 14.7 12.8 12.3 11.8 2.9 2.5 2.4 2.1 20.3 3.4 6.0 Volvo Ab-B VOLVB SS SEK 28.04 20.2 7.5 6.5 5.5 1.5 1.3 1.1 1.1 21.5 2.1 4.0 General Motors C GM US USD Tata Steel Ltd TATA IN INR 588.80 n.a. 9.5 8.1 7.6 1.6 1.4 1.2 1.1 16.0 1.6 5.9 Simple Average 22.0 11.5 9.9 10.5 1.5 1.4 1.3 1.2 12.5 3.4 5.4

Weighted Average 10.1 9.0 8.3 8.6 1.3 1.2 1.1 1.0 13.6 4.2 4.0

Global Simple Average 16.5 11.7 10.9 15.0 1.8 1.6 1.4 1.3 14.2 3.3 6.0 Report

Global Weighted 11.7 9.6 9.2 8.1 1.5 1.3 1.2 0.9 13.5 3.7 6.6 Source:Average the Company, Guotai Junan International.

Company

See the last page for disclaimer Page 6 of 8 [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 92,761 115,304 131,489 146,789 PPE 10,650 14,053 15,439 16,104 16,613 Cost of sales (43,880) (74,779) (92,219) (104,162) (115,175) Intangible assets 6,462 10,552 14,357 18,696 23,540 Gross profit 9,842 17,981 23,085 27,327 31,614 Interest in associates and JV 1,002 4,805 6,040 9,097 13,528 Prepaid land lease payment 2,003 2,124 1,667 1,790 1,929 Distribution expenses (2,503) (4,056) (4,612) (5,260) (5,872) Deferred tax assets 188 401 606 869 1,189

Others 29 38 38 38 38 March2018 Administration expenses (2,560) (2,923) (3,459) (4,044) (4,459) Total Non-current Assets 20,334 31,973 38,146 46,593 56,836 2 Operating Profit 4,779 11,003 15,014 18,024 21,284 2

Share of results of Asso. and JV (9) 42 1,235 3,058 4,431 Cash & Cash Equivalents 15,045 13,415 19,751 28,127 37,683 Other income 1,506 1,792 911 936 986 Pledged deposit 39 36 39 42 45 Finance costs, net (30) (35) (12) 42 113 Inventories 3,066 6,027 5,651 6,445 7,195 Share-based payment (42) (28) (35) (31) (33) Trade and other receivables 29,041 33,478 38,856 44,311 49,467 Profit Before Tax 6,204 12,774 17,113 22,027 26,781 Prepaid land lease payment 43 48 43 46 49 Others 15 4 5 5 6 Income Tax (1,034) (2,039) (3,407) (4,386) (5,333) Total Current Assets 47,249 53,008 64,345 78,975 94,444 profit After Tax 5,170 10,735 13,705 17,641 21,448 Total Assets 67,583 84,981 102,492 125,569 151,281 Non-controlling Interest (58) (102) (52) (59) (68) Shareholders' Profit / Loss 5,112 10,634 13,654 17,582 21,380 Trade payables 39,779 47,533 53,837 60,809 67,238 Bank borrowing 174 1,296 0 0 0 Basic EPS 0.580 1.198 1.529 1.968 2.394 Other liabilities 677 1,073 1,378 1,774 2,157 Diluted EPS 0.580 1.198 1.529 1.968 2.394 Total Current Liabilities 40,630 49,902 55,215 62,583 69,396 Dividend per share (RMB) 0.120 0.290 0.390 0.508 0.623 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 198 268 921 1,761 2,783 Total Non-current Liabilities 2,266 268 921 1,761 2,783

[Table_CashFlowStatement] Cash Flow Statement Total Liabilities 42,897 50,170 56,135 64,344 72,179

Year end 31 Dec (RMB m) 2016A 2017A 2018F 2019F 2020F Total Shareholders' Equity 24,437 34,467 45,961 60,770 78,579 EBT 6,204 12,774 17,113 22,027 26,781 Minority Interest 249 344 395 455 523 Depreciation and amortization 1,654 1,938 2,932 3,277 3,618 Total Equity 24,686 34,811 46,356 61,224 79,102 Finance cost 116 162 12 (42) (113) BPS(RMB) 2.776 3.908 5.146 6.803 8.797

Interest income (85) (127) (127) (187) (266) Changes in working capital 1,538 (510) 1,302 725 523 Financial Ratios

Share of results of associates 9 (42) (1,235) (3,058) (4,431) Exchange gain/(losses) (230) (4) 40 62 88 2016A 2017A 2018F 2019F 2020F Income taxes paid (754) (1,759) (3,407) (4,386) (5,333) Profitability Change of other operating Items (114) (438) (1,194) 126 56 Gross profit margin (%) 18.3 19.4 20.0 20.8 21.5 Cash from Operating Activities 8,338 11,994 15,435 18,545 20,923 EBITDAR (%) 14.1 15.3 17.4 19.2 20.7 (00175 HK) EBIT Margin (%) 11.0 13.2 14.9 16.7 18.2 Net investments in PPE (410) (3,396) (6,125) (5,008) (6,510) Net profit margin (%) 9.5 11.5 11.8 13.4 14.6 Net change of prepaid land lease (103) (240) 457 (123) (139) ROE (%) 23.3 36.1 34.0 32.9 30.7 Net change of intangible assets (2,643) (3,950) (3,805) (4,339) (4,844) ROA (%) 7.6 12.5 13.3 14.0 14.1

Net change of pledged deposit 1 3 (3) (3) (3) 吉利汽车 Interest income 85 127 127 187 266 Growth Net investments in Asso. and JV 1,110 (3,750) 0 0 0 Sales volume growth (%) 50.1 62.8 36.7 23.4 7.4 Others (599) (706) 303 1,643 3,075 Revenue growth (%) 78.3 72.7 24.3 14.0 11.6 Cash from Investing Activities (2,557) (11,911) (9,046) (7,643) (8,155) EPS (%) 125.7 106.7 27.6 28.7 21.6 BPS (%) 25.1 41.0 33.2 32.1 29.2 Net change of LT bank loan 163 1,122 130 143 157 Issuance of senior notes 0 (2,034) 1,950 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) (12) 42 113 Interest cover ratio 196.3 347.17 1,361.71 n.a. n.a. Dividend paid (281) (960) (2,160) (2,773) (3,571) Cash ratio 0.4 0.3 0.4 0.4 0.5 Others (21) 0 0 0 0 Quick ratio 1.1 0.9 1.1 1.2 1.3 Cash from Financing Activities 29 (1,685) (92) (2,589) (3,301) Current ratio 1.2 1.1 1.2 1.3 1.4

Net Changes in Cash 5,810 (1,602) 6,297 8,313 9,467 Efficiency Other adjustment 69 (29) 40 62 88 Inventory turnover 25 20 20 20 20 Cash at Beg of Year 9,167 15,045 13,415 19,751 28,127 Days receivable 149 123 123 123 123 Cash at End of Year 15,045 13,415 19,751 28,127 37,683 Days payable 249 213 213 213 213

Source: the Company, Guotai Junan International.

Report

Company

See the last page for disclaimer Page 7 of 8 [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%; March2018

or the fundamental outlook of the company or sector is favorable. 2 Neutral 中性 Relative Performance is -5% to 5%; 2 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 GREENLAND BROAD (01253 HK),GUOTAI JUNAN I (01788 HK),BINHAI INVESTMENT (02886 HK),GFI MSCI A I (03156 HK),CAM SCSMALLCAP (03157 HK),ZHENRO PPT (06158 HK),LINK HOLDINGS (08237 HK),GFI MSCI A I-R (CNY) (83156

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 (00175 HK) this Research 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

Website: www.gtja.com.hk

Company

See the last page for disclaimer Page 8 of 8