On March 23, Geely Automobile Holdings Limited (hereinafter referred to as "Geely") (0175. HK) released its 2021 financial report, which has many highlights.
According to the financial report, Geely sold 1.328 million new cars in 2021, an increase of 1% year-on-year; operating income of 101.6 billion yuan, an increase of 10.3% year-on-year, and crossed the peak of 100 billion yuan for the second time since 2018; cash and cash equivalents at the end of 2021 were 28 billion yuan, a record high, with a net cash level of 20.8 billion yuan; and a proposed dividend of 0.21 Hong Kong dollars per share, with a dividend ratio of 35.3%, an increase of 5.8 percentage points over 2020.
However, the profit level did not rise with the revenue data. Specifically, the profit attributable to shareholders was 4.85 billion yuan, down 12% year-on-year; the after-tax profit was 4.35 billion yuan, down 22% year-on-year; the operating profit was 3.46 billion yuan, down 33.13% year-on-year; and the operating profit margin was 3.41%, down again compared with 5.62% in 2020.
Two sets of data rose and fell, causing a lot of controversy in the industry, some people said that Geely's ability to earn money has declined, some people say that Geely will spend more money, some people say that Geely will be surpassed by friends, and some people say that Geely is making efforts to invest in the future... More data is needed to illustrate what the actual situation is.
Has there been a decline in earning power?
"Profit attributable to shareholders after deducting share payments was RMB6.06 billion, an increase of 9.4% year-on-year, and without considering the impact of the new business of The New Krypton in the start-up period of the brand, the profit attributable to shareholders was RMB6.46 billion, an increase of 16.7% year-on-year, and the overall gross profit margin increased to 17.1% through product structure improvement." Excluding the impact of the new business of Krypton, the gross profit margin will increase to 17.5% and the operating profit margin will reach 6.9%. ”
At the performance communication meeting held on the same day, Dai Qing, senior vice president and CFO of Geely Automobile Group, explained that in the past year, Geely Automobile has fully entered the era of "Technology Geely 4.0", improving profitability from multiple angles such as product structure optimization, technology output, and joint venture company power.
In 2021, Geely sold 1.328 million units, up 1% year-on-year. In terms of sales structure, China Star High-end Series, Lynk & Co brand, new energy and overseas exports all achieved high growth. Judging from the distribution chart of the market guidance price of the product, the proportion of high value-added products with a price of 100,000-150,000 and more than 150,000 increased by 30%, which increased the average selling price of Geely Automobile's bicycles to 87,672 yuan, an increase of 9.0% year-on-year.
Among them, the total sales volume of the "China Star" series exceeded 200,000 vehicles, with an average price of more than 150,000 yuan; the sales volume of the Lynk & Co brand exceeded 220,000 units, the average weighted transaction price of the product reached 165,000 yuan, and the order for Lynk & Co 09, which entered the 300,000-level market, has also exceeded 10,000 orders, which has promoted the double growth of brand sales and net profit; the delivery of the new pure electric brand Extreme Kr on the first anniversary of its establishment has accelerated, with the average order price of the first model, Extreme Kr 001, reaching 335,000 yuan, and delivering more than 6,000 units in that year. Up to now, the total delivery rate has exceeded 12,000 units, setting a record for the fastest delivery speed of high-end intelligent electric vehicle companies.
At the same time, new energy and export data achieved breakthroughs, and the annual sales of new energy vehicles exceeded 100,000 units, an increase of 177.3% year-on-year; export sales of 115,000 units, an increase of 58.2% year-on-year.
In addition to the vehicle business, technology licensing has become a new profit growth point for Geely's operating income. In 2021, Geely's revenue from technology licensing and R&D services reached 4.5 billion, an increase of 245% year-on-year. Among them, the revenue of technology licensing was 1.275 billion, an increase of 125% year-on-year.
On the other hand, the performance of two joint venture companies, Lynk & Co, also boosted Geely's revenue data, with Lynk & Co's net profit increasing by 37% and J&G Financial's net profit increasing by 45%, making the net profit of Geely's joint venture (Lynk & Co and G&G) increase by 42% year-on-year.
Overall, in 2021, Geely's way to make money is broader.
How did the expenses get bigger?
The business level is good, but the operating profit is declining, so where is Geely's money spent? Judging from the financial report, compared with 2020, there are three main blocks of expenses that have undergone major changes.
The first is the increase in R&D costs. In 2021, Geely's R&D investment reached 5.52 billion yuan, an increase of 48% year-on-year. Among them, the capitalized R&D cost was 4.226 billion yuan, an increase of 34.1% year-on-year; the R&D expenditure was 1.292 billion yuan, an increase of 119.7% year-on-year. To a certain extent, it reflects Geely's idea of shifting from product output to technical output.
It should be noted that most of the R&D expenses are used for model development, and some are used for the development of powertrains and new energy technologies. At the end of October last year, Geely released the super hybrid system , Thor's Hy. X, thermal efficiency of 43.32%, fuel saving rate of more than 40%, 148 key NVH technologies, laid the foundation for Geely power hybrid technology.
The second is the surge in selling expenses and administrative expenses (both of which are on record). According to the financial report, Geely's sales expenses in 2021 were 6.323 billion yuan, an increase of 147.6% year-on-year; management expenses were 9.120 billion yuan, an increase of 124.6% year-on-year.
The surge in these two data should be said to be inseparable from the drag of extreme krypton. According to An Conghui, chairman of Geely Automobile Group, executive director of Geely Automobile Holdings Co., Ltd., and CEO of Extreme Kr Intelligent Technology, the current number of people in the Extreme Kr team exceeds 7,000, of which more than 3,800 are R&D personnel and 2,600 are software talents.
On the sales side, as of December 31 last year, 69 experience centers and delivery centers were delivered and operated; on the energy supply system side, self-built charging stations (including extreme charging stations, super charging stations, and light charging stations) were launched in 15 cities.
Whether it is the expansion of the number of teams, the increase of high-salary software talents, and the construction of sales networks and energy replenishment networks, start-up Extreme Kr is destined to "transfuse" from Geely. According to the financial report, as of the end of the year, The extreme krypton gained 1.82 billion yuan and lost 370 million yuan.
The third is equity incentives worth 1.213 billion yuan. As part of Geely's Common Prosperity Plan, Geely approved a share incentive plan totaling 350 million shares in 2021, granting a total of 629 million options and 350 million restricted shares, with an emphasis on absorbing and retaining talent, up from $4.09 million the previous year.
The growth value behind the "spend"
Judging from Geely's three "big expenses" in 2021, Geely's long-term investment in future technological innovation, brand premium and talent system. Looking at the vigorous new four modernizations of the automotive industry, Geely has reached the "moment when it must go down to research and development" to provide a premise for long-term development.
Putting aside the 2025 strategy, only from the perspective of Geely's short-term three major development priorities in 2022, the first is to expand the advantages of "architecture car building", accelerate the efficiency of architecture car building, increase the proportion of models built by modular architecture to 70%, and the proportion of Chinese stars accounting for Geely brands should be increased to more than 30%.
Relying on the investment and achievements in diversified new energy technologies such as electronic and electrical architecture and Raytheon Power, Geely Automobile Group CEO Gan Jiayue said that Geely will launch more than 8 Models of Raytheon Hi · X oil-electric hybrid and super electric hybrid model, 1 alcohol-electric hybrid model, extreme krypton luxury intelligent pure MPV, Geely brand 2 new SUVs, geometry 1 new pure electric SUV, power exchange travel brand Ruilan launched 2 models.
In terms of product intelligence level, more than eight models equipped with GEEA 2.0 electronic and electrical architecture are launched, and more than 8 models apply a new generation of intelligent driving and intelligent cockpit systems. The "new generation of smart cockpit" technology based on 7Nm chips will be displayed this year and will be the first to be installed in the new smart SUV. In terms of autonomous driving, Extreme Kr and Mobileye have deepened their cooperation and will launch the world's first all-electric vehicle with L4 autonomous driving capability in 2024. Geely will implement a 6V5R intelligent driving system (NOA) during the Hangzhou Asian Games.
For overseas markets where sales increased by nearly 60% year-on-year, Geely will adhere to the overseas development strategy and accelerate the process of globalization. For example, under the new pattern of domestic and international dual-cycle development, we will continue to promote the "European Strategy" and "Asia-Pacific Strategy" of the Lynk & Co brand.
In 2021, the "cost" of the high krypton brand, An Conghui said that it will be improved from the user side, product segment and research and development end, relying on a huge talent team and stable chip supply, releasing the new model of the krypton 001 sports orientation and MPV, making good use of the continuously improving OTA technology, and promoting the plan of annual sales of 70,000 vehicles.