CICC: Maintaining Geely Auto (00175) Outperforms the Industry Rating Target Price of HK$30

The Zhitong Finance App learned that CICC released a research report stating that it will keep Geely Auto (00175)'s profit forecast unchanged for 2026 and 2027. The current stock price corresponds to 2026/2027 7.9 times/6.3 times P/E. Maintaining an outperforming industry rating and a target price of HK$30.00, corresponding to 12.6 times/10.1 times 2026/2027 P/E, with 60.7% upside.

CICC's main views are as follows:

2Q26 results are in line with market expectations

The company announced 1H26 results: 1H26 achieved revenue of 173.6 billion yuan, +16% year over year; net profit to mother was 9.091 billion yuan, -2% year over year. Among them, 2Q26 revenue was +15%/+7% month-on-month to 89.82 billion yuan, and net profit to mother was +36%/+18% month-on-month to 4.92 billion yuan. The 2Q26 results were in line with market expectations.

Extreme Krypton drives product structure upgrades, and overseas business performance is strong

The company's sales performance was steady, with 2Q26 passenger car sales volume +1% to 714,000 units; by brand, Geely Yinhe/Linker and Extreme Krypton sales volume was -3%/-23%/+105% year over year to 281,000 units/63,000 units/101,000 units. The volume of new high-end Krypton models drove product structure upgrades, driving average bicycle revenue of +16,000 yuan to 126,000 yuan year-on-year. Export performance in 2Q26 was strong, with sales volume +188%/+34% year over month to 271,000 units. The share of 2Q26 export sales increased further to 38%, mainly driven by exports from ASEAN, Latin America and other places.

Gross margin has increased steadily, and the growth rate of core net profit is considerable

1h26 gross margin was +1.5ppt to 17.9% year over year, of which 2q26 gross margin was +1.3ppt/0.9ppt to 18.4% month-on-month. The increase in gross margin was mainly driven by high-end models and exports. On the cost side, the cost rate remained stable during the company period, and the sales and management expense ratio was -0.2pp/+0.7ppt to 13.0% compared to the same period last month. On this basis, 2Q26 bike's profit was +60%/+12% year over month to 7,200 yuan, and has been improving continuously for many quarters. Meanwhile, the company's core net profit continued to rise, to +62%/+12% YoY in 2Q26 to 5.12 billion yuan. As high-end models such as the Extreme Krypton 8X/9X accelerate their entry overseas, the bank's profitability is expected to continue to increase.

Global overseas layout, asset-light high-end expansion of two-wheel drive

Geely continues to advance its global layout, acquiring 34% of Ford's Spanish plant shares for 221 million euros, and plans to start production of two new energy models at the Valencia plant, comprehensively supporting Geely's strong growth potential in overseas markets. At the same time, Geely authorized Volvo to operate Lynk & Co's European business and reuse Volvo channels. The bank believes that the cooperation model will help Geely lay out the global market in an asset-light manner and further open up room for growth.

Risk warning: risk of trade friction; increased market competition; new energy business development falls short of expectations.