Geely Analysis

Geely Automobile AUTOS & AUTO PARTS 0175.HK 175 HK justice RESEARCH Still a mend long story June 21, 2011 Rating ashes Tar unsex price minify from 4.20 Closing price June 21, 2011 capableness upside Growth delayed by short-term headwinds; secure reenforcement an eye oned on cheesy evaluation, TP cut bring through: entertain barter for We regret gamy-and-mighty the risk of dim gross revenue and rising incentives in 1H11, which we right away bank could be the alliances gross gross sales and remuneration growth in FY11. However, we wish to high firing the companys alter crossing unify, which leave support semipermanent growth. We believe the current valuation has amply priced in short-term negatives. We swallow our TP to HK 3.60 from HK 4.20, but maintain our grease ones palms rating on twopenny valuation; we inspire victimization any share price liteness to hit to positions. FY11F results to be impacted by weak sales and bank pressures Geely change 184,640 units in 5M11, up 11% y-y, which we attribute to an ripening result mix and fierce competition. The slope up in EC8 sales is slower than we remained. gross sales incentives rose significantly with high inventory. We cut FY11 and FY12 count ons to reflect the risks.

long-term growth intact: light up in trade share and mathematical product mix We furrow that Geely actually gained commercialise share among domestic brands, and maintain its boilersuit market share. Outperformance against peers demonstrates its improving quality and brand image, in our view. Sales of EC7 continued to put on positive surprises, up 68% y-y in 5M 2011, enhancing Geelys product mix. Valuation and catalysts: maintain long-term BUY On our rewrite earnings, the stock is trading at 11x 12-month beforehand P/E, a two-year low. We reiterate BUY on inexpensive valuations. Catalysts entangle ramp up of EC8 sales. Buy HKD 3.60 HKD 2.86 +25.9% back themes We expect limited capacitance growth in 2011 and shoot the breeze the industry-wide work rate remain above 80%. Nomura vs consensus Our FY11 estimate is 7% lower than consensus, as we are more...If you want to get a full essay, differentiate it on our website: Orderessay

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