Tuesday, Jefferies maintained a Buy rating on Geely Automotive Holdings Ltd. (175:HK) (OTC: GELYF (OTC:GELYF)), with a steady price target of HK$11.20. The firm's outlook followed an analyst call where Geely revealed an updated sales target for 2024, raising its goal from 1.9 million units to 2 million. This adjustment includes an increase in expected export sales, up from 300,000 units to 380,000.
During the call, the company outlined several reasons for the anticipated growth. Notably, Geely anticipates improved margins in the upcoming quarters. This optimism is based on a combination of factors including the benefits of scale, an enhanced product mix, and a rise in export sales which are expected to contribute to the company's profitability.
The firm also highlighted Geely's strategic branding efforts. The company is positioning its Lynk &Co brand to stand out distinctly from its Zeekr lineup. This differentiation is part of Geely's broader strategy to carve out specific market segments for its various brands.
Geely's confidence in its overseas expansion strategy was also a focal point of the discussion. The company's increased sales target, particularly in the exports category, reflects its commitment to growing its footprint in international markets. This strategy is aligned with Geely's long-term growth objectives and market positioning.
The reiterated Buy rating and price target reflect Jefferies' positive view on Geely's future performance, underpinned by the company's strategic initiatives and sales targets. The firm's analysis suggests confidence in Geely's ability to achieve its revised goals and improve its market standing through 2024.
In other recent news, Chinese electric vehicle (EV) brand Zeekr has seen a significant rise in sales in Russia, contributing to China's growing dominance in Russia's EV market. The company, owned by Geely, has sold more than 8,000 cars since June last year, despite lacking official representation in Russia. These developments coincide with a 350% surge in EV sales in Russia, with Chinese brands representing more than half of these sales.
In contrast, Canada is considering implementing import tariffs on Chinese-made EVs due to concerns about challenges faced by the domestic auto industry. Deputy Prime Minister Chrystia Freeland announced a 30-day consultation period for public feedback on the matter. This comes after the U.S. President and the European Commission decided to implement tariff hikes on various Chinese imports, including EVs.
Meanwhile, Volvo (OTC:VLVLY) Cars, also majority-owned by Geely, has initiated a shift in the production of its EVs from China to Belgium. This strategic move is in anticipation of the European Union's potential tariffs on Beijing-subsidized imports. On a similar note, Slovakia received the European Union's approval to provide Volvo Car's EV plant with state aid amounting to €267 million ($289 million), expected to boost the production capacity of the facility to approximately 250,000 electric cars per year.
InvestingPro Insights
Geely Automotive Holdings Ltd. (OTC: GELYF) is demonstrating financial strength and potential for growth, as highlighted by key metrics from InvestingPro. With a market capitalization of $10.9 billion and a healthy price-to-earnings ratio of 13.2, Geely is positioned as a prominent player in the Automobiles industry. The company's valuation implies a strong free cash flow yield, which is a positive indicator for investors. Additionally, Geely stands out for maintaining dividend payments for 20 consecutive years, reflecting its commitment to shareholder returns.
Despite concerns about weak gross profit margins, which currently stand at 15.06%, the company's revenue growth is impressive, with a 29.95% increase over the last twelve months as of Q1 2024. This growth is further emphasized by a substantial quarterly revenue growth of 56.14% in Q1 2024. Analysts predict that Geely will be profitable this year, supported by a profitable track record over the last twelve months and a high return over the last decade.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available, including insights on Geely's cash position, revenue valuation multiples, and more. To explore these valuable insights, visit: https://www.investing.com/pro/GELYF. Moreover, by using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking even more expert financial analysis and tips.
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