Geely Automobile: Net profit "three consecutive falls" | annual report storm

Text/Leju Finance Jin Wenyu

In 2021, under the ravages of the epidemic, there are many uncertainties in the development of the entire automotive industry, and pressure from the supply chain level such as chip shortages and rising raw material prices add multiple challenges to auto companies that are still in transition.

On March 23, Geely Automobile (00175. HK) disclosed its 2021 financial results. According to the financial report, the company's total revenue in 2021 was 101.6 billion yuan, an increase of 10.3% year-on-year; the profit attributable to shareholders after deducting share payment was 6.06 billion yuan, an increase of 9.4% year-on-year; the total cash level reached 28 billion yuan, and the net cash reached 20.8 billion yuan.

"At present, the valuation level of Geely Automobile is very different from the actual value of the company. We believe the company still has a lot of room for improvement. Gui Shengyue, chief executive officer and executive director of Geely Automobile Holdings Limited, said at the results conference.

Geely Automobile's proposed final dividend for 2021 is HK$0.21, with a dividend payout ratio of 35.3%, an increase of 5.8 percentage points over 2020.

Increase in revenue without increasing profits

Following Geely Automobile's revenue of 106.595 billion yuan in 2018, it will return to the 100 billion yuan club in 2021. However, its profit attributable to shareholders was RMB4.85 billion and net profit was RMB4.35 billion, both of which fell by -12.4% and -21.91% respectively.

This is also the third consecutive year of decline in Geely's net profit since 2018. It can be seen that Geely has obviously increased revenue and not increased profits.

According to the financial report data, in 2021, Geely Automobile's total annual sales reached 1.328 million units. At the same time, the overall average bicycle revenue of Geely Automobile (including Lynk & Co) was 87,700 yuan, an increase of 9% year-on-year, and the brand premium ability was improved.

Among them, the total sales volume of the Geely brand's high-end series "China Star" series models exceeded 200,000 units last year; the cumulative sales of the Lynk & Co brand exceeded 650,000 units, and the average weighted transaction price of Lynk & Co products was about 165,000 yuan; since the delivery of The Company began in October 2021, the total delivery of 12,500 vehicles in four months, with an average order unit price of 335,000 yuan.

From the perspective of Geely Automobile's product layout, the proportion of products below 100,000 yuan has decreased from 64% in 2020 to 34%, the proportion of products with 100,000-150,000 yuan has risen from 25% in the previous year to 44%, and the proportion of products above 150,000 yuan has risen from 11% to 22%, directly driving Geely Automobile's gross profit margin from 16% in 2020 to 17.1% in 2021.

While gross profit margins have increased, why has there been a significant sharp decline in net profit? From the financial report data, it can be seen that in 2021, Geely Automobile has seen a significant increase in distribution and sales expenses, administrative expenses, trade and other impairment losses of receivables. Among them, the higher increase was administrative expenses and financing costs, with growth rates of 58.64% and 58.6% respectively.

For the full year of 2021, Geely Automobile's employee costs (including directors' honorariums) increased from RMB5.85 billion in 2020 to RMB7.72 billion, an increase of 24%. Among them, the payment for equity settlement shares increased from 4.095 million yuan to 1.213 billion yuan. According to the disclosure, as of the end of 2021, the number of employees in geely automobile's entire group was 44,000, compared with 38,000 in the same period of 2020, an increase of about 16%.

In terms of financial expenses, the interest on discounted notes receivable increased from RMB30.854 million to RMB130 million, an increase of 289.6%, and the interest on leasing liabilities increased from RMB2.852 million to RMB13.396 million, an increase of 369.7%.

In addition, according to the 2021 annual report, Geely Automobile's R&D investment totaled 5.5 billion yuan (including expense and capitalization), an increase of 16.1% year-on-year, which has completely exceeded Geely's net profit in the current year, while geely Automobile's total R&D total investment in the past five years totaled 25.6 billion yuan to promote the development of intelligent and electrified layout.

Pressure on short-term debt increased

In 2021, Geely Automotive's other revenues, such as technical services and licensing profits, continued to grow, up 245.3% year-on-year. Geely Automobile said that licensing revenue has become a new profit growth point for the company and an important direction for future profit sources.

It is worth noting that while Geely Automobile has achieved diversified revenue growth, its debt structure has also changed.

According to the financial report, in the past year, Geely Automobile's current liabilities have increased significantly to 60.351 billion yuan, an increase of 44.08%. Net current asset value fell from RMB9.048 billion at the end of 2020 to RMB4.945 billion, a decline of 45.34%. Compared with fiscal 2020, the factors contributing to the substantial increase in Geely Automobile's current liabilities include new bank borrowings of 1.907 billion yuan.

Leju Finance noted that in 2020, 1.96 billion yuan of bank borrowings in Geely Automobile's non-current liabilities need to be repaid, but by 2021, this part of the borrowing has been transferred to current liabilities, long debt has become short debt, and short-term debt repayment pressure will increase.

In addition, there was a significant increase in lease liabilities and taxes payable. Its lease liabilities to be repaid in the near future increased from $30.38 million in 2020 to $198 million, and its income tax payable increased from $340 million in 2020 to $850 million. In 2021, Geely Automobile's asset-liability ratio increased by 13.5% to 47.73%.

From the perspective of cash flow, as of December 31, Geely Automobile's total cash level reached 28 billion yuan, and free cash flow reached the highest level of 20.8 billion yuan in history.

Sales targets are increased

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 2021, Geely Automobile's total annual sales reached 1.328 million units. This sales figure only completed 87% of its 2021 full-year sales target of 1.53 million units. In 2022, Geely Automobile will set a sales target of 1.65 million units and will continue to make a comprehensive transformation to electrification and intelligence.

According to the financial report data, in 2021, geely automotive technical services and licensing profits and other revenue continued to grow, an increase of 245.3% year-on-year. Geely Automobile judges that technology output is an important and sustainable direction for future profit sources, from product output to technology output is the embodiment of Geely's technical capabilities.

Geely Automobile Group CEO Gan Jiayue revealed that 2022 is still a big year for Geely Automobile's products, and it will launch five Raytheon super hybrid models, three Raytheon oil-electric hybrid models, one alcohol-electric hybrid model, a new pure electric MPV of the Extreme Kr brand, two new SUVs of the Geely brand, and a new pure electric SUV of the geometric brand.

Among them, Geely's high-end smart electric vehicle brand Extreme Kr will undertake the sales target of 70,000 vehicles. In the next three years, Kr will launch six new models, and by 2025, The annual sales target of Kr is 650,000 vehicles. At the same time, in 2022, the Extreme Kr OTA will undergo 5 major version updates and several minor version experience optimizations.

It is worth mentioning that Geely's new high-end pure electric brand Extreme Krypton, while achieving certain results, has also aroused widespread concern in the industry due to some problems.

Previously, Krypton was deficient in both product delivery and software. An Conghui, chairman of Geely Automobile Group, executive director of Geely Automobile Holdings Co., Ltd., and CEO of Extreme Kr Intelligent Technology, admitted that there are deficiencies in product delivery and software, the former is affected by lack of cores, supply assurance and the epidemic, and the latter needs greater improvement.

Under the pressure of the domestic market, Extreme Krypton Automobile is still full of confidence in the future development. An Conghui mentioned at the 2021 performance conference of Geely Automobile held on March 23 that although the uncertainty of the epidemic and supply chain is large, The determination of Extreme Kr to achieve sales of 650,000 vehicles in 2025 is unswerving, and it is confident that its global high-end electric vehicle market share ranks among the top three in the world.

Source: Leju Finance