2023-06-05 00:08:56 ET
Summary
- Geely Auto, part of Zhejiang Geely Holding Group, has significantly increased its battery electric vehicle (BEV) sales from April 2021 to April 2023.
- The company sold 84,782 BEVs from January 2023 to April 2023, with BEVs making up the majority of their new energy vehicle sales.
- Geely Auto's valuation is within a reasonable range, making the stock a hold for investors.
Introduction
Through Zhejiang Geely Holding Group (“ZGH”), entrepreneur Eric Li Shufu has interests in many OEMs. ZGH describes their ownership and management interests as follows:
Headquartered in Hangzhou, Geely Holding today owns and manages a number of brands: Geely Auto, Lynk & Co, ZEEKR, Geometry, Volvo Cars, Polestar, Lotus, London Electric Vehicle Company, Farizon Auto, RADAR AUTO, and Cao Cao Mobility.
Geely Automobile (OTCPK:GELYY) (OTCPK:GELYF) is the main company in the group and it includes Lynk & Co, Geometry, Livan, and Zeekr. In addition to interests in the above brands, ZGH has a relationship with Mercedes-Benz Group (MBGAF) and they have upped their Aston Martin (AML.L) interest to 17%.
ZGH says the future is electric for automakers and they continue committing themselves to a pure electric future. My thesis is that entrepreneur Li Shufu is helping push battery electric vehicles (“BEVs”) forward across many different companies including Geely Auto. This comes at a time when many other auto companies talk a great deal about electrification but tend to be quiescent in terms of sales in this area.
At the time of this writing, RMB 100 is equivalent to $14.11.
The Numbers
Per the ZGH media center , 2022 sales of electrified and clean alternative fuel passenger and commercial vehicles nearly doubled year on year to more than 675,000 units which was 29% of the group’s sales:
Geely Holding Group Brands (ZGH media center)
Including Zeekr, Livan and Lynk, it is staggering how far Geely Auto has moved forward with BEVs from April 2021 to April 2022 to April 2023:
Geely BEV Sales (Author’s spreadsheet)
As we see above, Geely Auto sold 84,782 BEVs from January 2023 to April 2023. BEVs were the overwhelming majority of their new energy vehicle (“NEV”) sales during this time (NEVs include plug-in hybrids). Regarding the numbers above, Geely Auto’s April sales volume announcement on HKEXnews explains that all the unit sales for Livan and Lynk are captured in their reports despite the fact that they only own 50%. I don’t think this makes a big difference on the BEV side at this time but that could change moving forward::
While the total sales volume does not correlate directly to the revenue the Group recognises during a particular period as it includes all sales volume of the Group’s 50%-owned LYNK & CO’s joint venture and 50%-owned Livan’s joint venture on a 100% consolidated basis, the board of directors of the Company believes it is more indicative of the underlying demand of the Group’s vehicles.
It isn’t just Geely Auto where we see BEVs as a high percentage of all vehicles. Other companies in entrepreneur Shufu’s sphere are also doing well in that regard:
Geely Auto 18% (57,675/322,453) for 1Q23 per the April 2023 report
Volvo Car 18% (30,000/163,000) per the 1Q23 report
Mercedes 10% (51,639/503,483) per the 1Q23 report
The CPCA reports on NEVs which include plug-in hybrids. Their April 2023 Retail Sales Ranking Express report shows that Geely has nearly 5% of the NEV market in China with sales of almost 90 thousand for the first four months of the year:
Geely Auto NEVs (CPCA April 2023 Retail Sales Ranking Express)
Zeekr
Zeekr is the premium BEV brand of Geely Auto and ZGH and their numbers are included in the consolidated Geely Auto numbers above. Zeekr is doing very well with unit deliveries of more than 32 thousand from January to May per CnEVPost :
Like Tesla ( TSLA ), Zeekr has a direct selling model:
Zeekr Direct Sales (Geely Auto April 2023 report)
Electrification Cooperation
One of the ways Geely Auto is pushing forward their electrification efforts is by cooperating with Changan such that the two companies can better leverage their combined size. A May 2023 article by Phate Zhang of CnEVPost points out that Changan was third and Geely Auto was fourth in 1Q23 sales in China. This part of the article was key:
In the field of new energy, the two sides will cooperate on battery cells, charging technology, battery swap technology, new energy vehicle (NEV) product safety, and new energy industry layout.
Valuation
The 2022 annual report shows 2021 profit for shareholders, gross profit and revenue were RMB 4,847 million, RMB 17,412 million and RMB 101,611 million, respectively. In 2022 these went up to RMB 5,260 million, RMB 20,896 million and RMB 147,965 million, respectively. Zeekr is not contributing in terms of profit for shareholders but the brand has a considerable valuation. As such, I don’t think it is terribly unreasonable for Geely Auto as a whole to sell for a high P/E ratio; a range of 15 to 20x profit for shareholders or RMB 79 to RMB 105 billion is not out of the question. This comes out to about $11 to $15 billion.
The share capital section of the 2022 annual report shows 10,056,973,786 shares. We get a market cap of $12.3 billion based on the June 2nd $1.22 share price of GELYF. The market cap is within an understandable valuation range and I think the stock is a hold.
Disclaimer: Any material in this article should not be relied on as a formal investment recommendation. Never buy a stock without doing your own thorough research.
For further details see:
Entrepreneur Eric Li Shufu Is Pushing Geely Auto Forward With BEVs