On March 23, 2022, Geely Automobile (00175.HK) released its fiscal year 2021 report.
In 2021, Geely Automobile will gradually get rid of the epidemic and supply chain impact, and various indicators will be quickly repaired. Revenue growth increased by 10.3% year-on-year to RMB101.6 billion; gross profit increased by 18.2% year-on-year to RMB1,741 million; profit attributable to shareholders net of share payments increased by 9.4% year-on-year to RMB6.06 billion; overall cash flow improved, with total cash level reaching RMB28 billion, the highest level in history, and net cash reaching RMB20.8 billion.
The company's operating conditions are stable, thanks to the improvement of product value and technical level to ensure that the long-term basic orientation is good, and the diversified profit structure provides a solid guarantee for the high-quality development of the enterprise. Benefiting from continued good performance, Geely Automobile's proposed final dividend for the year was HK$0.21, up 5% from 2020.
Funds are optimistic about the company's performance expectations, and the company's stock price has risen by nearly 8% in 2 days. Geely Automobile's system construction continues to improve, the pace of internationalization is accelerating, and the logic of authorizing sustainable and high gross profit revenue models with technology feedback services is being verified.
01
Product power to drive sales volume, brand power continues to improve
Geely Automobile's revenue mainly comes from automobile production and sales, so sales volume constitutes an important part of the company's valuation system.
In the past two years, due to the impact of the global epidemic and the macro environment, there has been a shortage of goods and raised prices in the supply chain of new energy vehicles. In 2020H2, although Geely Automobile sales increased sequentially, after excluding the depreciation scale effect, the marginal gross profit of bicycles was affected by a decline. However, by adhering to the high-quality development strategy, Geely Automobile sales began to increase rapidly in 2021.
The new product cycle is opened, the product force has attracted market attention, which in turn has made the sales volume rise rapidly, the brand reputation has been further improved, and the overall sales situation of Geely Automobile's new energy vehicles is rapidly opening, and the "basic disk" is more stable. In 2021, Geely Automobile sold 1.328 million units, ranking first in domestic brand passenger car sales. Among them, new energy models entered the fast lane, with sales of 100,100 vehicles, an increase of 47% year-on-year.
Geometric cars are showing "geometric" growth, with sales of 55,320 units in 2021, an increase of 145.3% year-on-year, and an A-class market share of 7.43%, and it is expected that the overall sales volume will reach 160,000 units in 2022, and the market potential is worth looking forward to.
The flagship SUV of the "China Star" series, the Star Yue L, was launched in 2021H2, causing a strong response in the market, with an average monthly sales volume of more than 10,000. In January this year, the Star Etsu L sold 11,492 units, with a total sales volume of nearly 65,000 units in the first half of the year. The "China Star" series of models has brought breakthrough progress to Geely's products to high-end price points, high-end values and high-end images.
Extreme Kr 001 benefits from Geely Group's rich experience and technical reserves in car manufacturing, such as the first "boarding" of Haohan Architecture (SEA), which has high standards in mechanical design, control and chassis performance. Since deliveries in October 2021, the overall number of krypton 001 deliveries has remained steady, with a total of 12,453 units delivered in four months, which is a considerable delivery figure for a newly released model. At present, Extreme Kr has successfully completed the Pre-A round of financing, with a valuation of 9 billion US dollars, and introduced ecological partners to jointly promote the ecological layout of the field of intelligent pure electricity.
It is worth mentioning that in 2021, Geely Automobile's overseas sales performance was excellent, and in 2021, its sales in the Philippines increased by nearly 2 times year-on-year, and Binyue maintained the first annual sales volume in the Philippines and Kuwait respectively; Xingyue sales ranked first in the Saudi Coupe C-class SUV segment; in Costa Rica, South America, Geely Automobile's sales ranked first among Chinese brands.
It is expected that by 2022, Geely Automobile's new energy vehicles will continue to accelerate their release. In January 2022, Geely Automobile sold 146,380 units. Among them, Geely Automobile (including geometry) sold 122,833 units; the world's new high-end brand Lynk & Co Automobile sold 18,334 units in January; Extreme Kr Intelligent Technology delivered 3,530 units in January; and Ruilan Automobile sold 1,683 units. In the field of new energy models (including Geely, Extreme Krypton, Geometry, and Ruilan), sales in January were 17,928 units, of which pure electric models increased by about 641% year-on-year, a record high.
02
Intelligent manufacturing system capabilities, driving competitiveness upward breakthroughs
Another important support for Geely Automobile's valuation is the acceleration of intelligent technology level and automobile ecological construction.
"Software-defined cars" have become the consensus of the market, and automobile intelligence and ecological construction will become the "winners and losers" of the track. Geely Holdings is the only car company in the TOP10 of China's R&D investment in 2021, with a cumulative R&D investment of more than 140 billion yuan in the past decade, more than 20,000 design and R&D personnel, and 26,000 innovative patents. Since 2021H2, the R&D system related to intelligent driving has been adjusted, and the new system construction and resource integration between volvo and ZenseAct will gradually promote the rapid improvement of the group's intelligent technology level.
Specific to Geely Automobile. In 2021, its total investment in R&D was 5.5 billion yuan, an increase of 16.1% year-on-year, and the total investment in R&D in the past five years totaled 25.6 billion yuan, and the proportion of R&D investment in revenue showed an upward trend year by year.
Not only that, Geely Automobile will also take advantage of the globalization advantages of the parent company, fully enjoy the synergistic resource advantages of the ecosystem, and strengthen the technology ecosystem through the business layout of new energy technology, Internet of Vehicles, automatic driving, low-orbit satellites, on-board chips, operating systems, etc., to create a technology moat and bring high-quality products and experiences to users.
On October 31, 2021, on the same occasion of the release of LeiShenzhiqing, Geely Automobile Group announced the "Smart Geely 2025" strategy to continue to accelerate the transformation to the era of the new four modernizations and build a full-stack self-developed ecosystem in core technologies such as new energy, automatic driving, intelligent networking, and intelligent cockpit.
Throughout 2021, Geely Automobile has made great achievements in technology research and development.
The "Raytheon Power" that has been installed in 8 models is an important part of the "Smart Geely 2025" strategy, marking Geely's full entry into a new era of "Power 4.0" electrified by Power Technology; the first domestic 7nm vehicle-level intelligent cockpit chip "Dragon Eagle One" breaks the monopoly position of international suppliers, and the "new generation of intelligent cockpit" based on the chip will be launched in 2022 and will be the first to be installed on the new smart SUV.
Geely Automobile's intelligent exploration is also continuously extending the boundary of capabilities through enterprise cooperation. Waymo, the largest self-driving company in the United States, has reached a partnership with Geely Automobile to integrate Waymo Drive's autonomous driving solution into Extreme Krypton Automobile, provide exclusive vehicles for waymo One driverless fleet, and put it into commercial operation in the United States. Cooperation with Companies such as Mobileye and Baidu is also deepening.
In terms of ecological layout, in 2021, Geely Automobile will incorporate the power exchange model into its commercial map.
The problem of energy replenishment has become the key to solving the anxiety of endurance, and the sales penetration rate of new energy vehicles in the Chinese market has reached 20%, and the corresponding supporting facilities must be accelerated and improved. Considering the size of the city and the infrastructure construction required for the transformation of the future energy structure, the power exchange model has unique advantages and imagination, and a battery giant recognizes and enters this model in 2022.
Based on the exclusive power exchange architecture, Geely launched a new "power exchange travel brand" Ruilan Automobile, and it is expected that in 2022, Ruilan Automobile plans to launch a new flagship replacement SUV model to fully open the private user market.
Geely Automobile said that it will adhere to technological innovation, comprehensively promote the implementation of the smart Geely 2025 strategy, increase investment in research and development of new energy products, enhance brand premium capabilities, and actively layout to the field of intelligent electric vehicles.
Specifically, while building Geely's leading system strength in the era of intelligent new energy vehicles, it will accelerate the comprehensive architecture car manufacturing efficiency of the geely 4.0 era of science and technology, increase the modular architecture model to 70%, and further enhance and give play to the advantages of modular architecture car manufacturing in terms of cost, quality consistency and efficiency. Geely will take this opportunity to realize the company's new sustainable profit growth point with technical services and technology licensing revenue, transform from product output to technology output, and continuously promote profit diversification. In fact, other revenues such as the company's technical services and licensing profits increased by 245.3% year-on-year in 2021.
Therefore, it is certain that in 2022, Geely Automobile will continue to increase its investment in research and development of new energy products.
03
epilogue
With the gradual intensification of competition in the new energy vehicle market, how to break through from many products, test the ability of enterprises to create explosive models, and test the internal strength of enterprises at the level of technical reserves, platforms and architectures. 2021 is one of the years under the "unprecedented changes in a century", a year in which disruptive technologies sweep the entire automotive industry, and digitalization promotes the continuous reduction of costs and efficiency of economic and social operations.
From the launch and application of the new technology framework, to the accelerated iteration of new models, and the steady advancement of the "Smart Geely 2025" strategy, the continuous improvement of the automotive ecology, Geely Automobile has continuously broadened its own capability boundaries and deepened the moat. Sales volume is a combination of capabilities and feedback on the book.
Therefore, standing on top of 2021 and looking forward to 2022, I believe that with the continuous breakthrough of technology and the increase in sales of new energy vehicles, systematic capacity building will enable Geely Automobile to further consolidate the foundation of competitiveness, once again give excellent report cards in all aspects, continue to lead the high-quality and sustainable development of the industrial chain, and verify the logic of achieving long-term returns behind its strategic layout.