Key takeaways
Geely’s VP, Daniel Dai, attended CICC’s 2H17 Investment StrategyConference last week, our key takeaways are asfollows：
► May sales still healthy; 1H17 GPM >19%. Geely’s inventory has remained ~30 days over recent months, and itsMay sales were still healthy, so there is no need to worry too much. Geely’s 1H17sales might be 520,000~530,000 units, with GPM ~19%, and its profitability maybeat expectations. It will not offer official discounts, since its SUV modelsare still in short supply, and its ATcapacity pressure could be relieved in July~August.
► New technology brand-iNTEC could guarantee Geely’s future. Recently launched technology brand, iNTEC, is the main driver of thesustainable growth in Geely’s future products. The company has built up optimizedincentives and development platforms for its technical employees, and asincreasing the number of technical talents to join its team. This high level of competiveness could see Geely developmore products.
► LYNK & Co to become Geely’s new sales driver. LYNK & Co 01 will be launched in 4Q17, followed by 2~3 new LYNKmodels in 2018. Geely will gradually launch the 10 LYNK models it has developedto become the main driver of its 2mn sales target in 2020. As LYNK shares a CMAplatform with Volvo, the costs will be allocated and largely saved, which willhelp spur LYNK’s GPM to be higher than that of Geely over the medium/long term.
Recommendation
We are upbeat on the medium/long term momentum and enhancedprofitability from Geely’s and LYNK’s new models. We maintain our BUY rating and target price of HK$20, implying 13.5x 2018e P/E.
Risks
Profitability of new models misses expectations.
