Investment Thesis

• In H1 of 2017, Geely Auto’s total revenue rose quickly by 118% yoy to RMB39,423 million, the net profit attributable to the parent company surged 128% yoy to RMB4,343 million. In total, Geely Auto sold 530,600 vehicles in H1, up by 89% yoy.
• Earning growth yoy was greater than revenue growth and revenue growth was greater than sales growth. Such a gold rank reflects a dramatic increase in the price of single vehicles and the profitability of single vehicles under scale effects.
• Benefiting from the hot sales of the new models with high prices such as Bo Yue, the average price of single vehicles of Geely rose by 16% in H1. The proportion of SUV increased from 22.7% at the end of last year to 33%. As the sales volume and product mix improved,the gross margin increased further by 1.5 ppts to 19.2%. The management said gross margin could improve further
• We do believe the release of iNTEC marks that the manufacturing concept and method of Geely is becoming mature, and we are optimistic about its steady growth in medium and
  long term sales. As for the valuation, considering the better return ratio and bright future, we lift target price to HK$ 22.15 on our revised forecast EPS, equivalent to 18x/13.5 estimated P/E ratio of 2017/2018. (Closing price as at 22 Aug 2017)