Wednesday, January 23, 2019

Geely Hammered As Macro Challenges Trump Company-Specific Positives

China’s Geely Automobile (OTCPK:GELYY) (0175.HK) is unhappily close to erasing two years of progress in the stock market, as the shares have dropped by almost 60% in the last twelve months as China’s eroding passenger vehicle market has finally started hitting the company’s performance. With minimal volume growth expected in 2019 and margin deleverage likely to bite into earnings, Geely’s strong model roster, technological capabilities, and progress on green initiatives likely won’t help much until 2020.

Although I thought the shares looked expensive on cash flow back in late May of 2018, I did not expect Chinese vehicle sales to drop through the floor. The Chinese government has announced that it intends to stimulate consumer spending on cars, but the announcement was short on specifics and the government may well find it hard to make as much of an impact as it would hope. I still see value in what I believe is China’s best domestic automaker, but the risk of further cuts is real and I’d advise waiting to see how the next few months of sales track before trying to buy into this sell-off.

Read more here:
Geely Hammered As Macro Challenges Trump Company-Specific Positives

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