Nomura: Maintain Geely Automobile (0175. HK) Buy rating with a target price of HK$23.9

Nomura issued a report on the bank, saying that although supply chain bottlenecks still pose short-term challenges to automobile production, Geely Automobile (0175.HK) sales rose by 17% month-on-month last month, which means that production output continues to gradually improve. Management set an aggressive target of 1.65 million units for this year, representing a 24% year-on-year increase, 3.7% higher than the bank's original target of 1.59 million units set by Geely this year. This is, of course, a dynamic goal, assuming that the supply of spare parts is no longer deteriorating and is no longer affected by the production disruptions caused by the COVID-19 pandemic.

The bank pointed out that Geely's 2022 production recovery is expected to be important and is expected to help alleviate the ongoing pressure on raw material costs, while upgrading its product portfolio and launching more new expensive models will help alleviate the pressure on gross margins.

Considering the dilution of 2% equity from the issuance of new shares to further acquire Zeekr's interests, the bank cut Geely's earnings per share from 4% to 6% from 2021 to 2023. Local leading brands such as Geely, which have a strong eviction product line, can benefit from the rising penetration of electric vehicles in the mainland. Nomura valued Geely's electric vehicle business separately from its traditional diesel vehicle business, lowering Geely's price target from HK$27.7 to HK$23.9, maintaining a "buy" rating.