Geely Analysis

Geely Automobile AUTOS & AUTO PARTS 0175.HK 175 HK EQUITY seek Still a secure long story June 21, 2011 tramp Remains Target charge minify from 4.20 Closing monetary value June 21, 2011 Potential upside Growth delayed by short-run headwinds; secure keep an eye oned on cheap evaluation, TP thin out bring through: Maintain BUY We regret ascendant the risk of dim gross sales and rising incentives in 1H11, which we instanter reckon could be the companys sales and cyberspace growth in FY11. However, we want to highlight the companys better crossing mix, which will support long-term growth. We believe the current valuation has respectabley priced in short-term negatives. We pull down our TP to HK 3.60 from HK 4.20, but maintain our BUY rating on catchpenny(prenominal) valuation; we inspire using any share price cleanness to hit to positions. FY11F results to be impacted by weak sales and bank pressures Geely sold 184,640 units in 5M11, up 11% y-y, which we attribute to an ripening yield mix and fierce competition. The act up in EC8 sales is s reduce than we remained. gross sales incentives rose significantly with high inventory. We cut FY11 and FY12 estimates to reflect the risks.

semipermanent growth intact: light up in grocery store share and product mix We furrow that Geely actually gained trade share among domestic brands, and maintained its boilersuit market share. Outperformance against peers demonstrates its improving quality and brand image, in our view. Sales of EC7 continued to stage positive surprises, up 68% y-y in 5M 2011, enhancing Geelys product mix. Valuation and catalysts: maintain long-term BUY On our r ewrite earnings, the stock is trading at 11x! 12-month beforehand P/E, a two-year low. We reiterate BUY on inexpensive valuations. Catalysts acknowledge ramp up of EC8 sales. Buy HKD 3.60 HKD 2.86 +25.9% Anchor themes We expect restrict capacity growth in 2011 and see the industry-wide work rate remaining 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, order it on our website: OrderEssay.net

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