The downside to following a lot of stocks is that inevitably you have items on your to-do list that just keep sliding down, and such has been the case with Geely Auto (OTCPK:GELYY) (175.HK). Last year was an awful year for auto sales in China (which probably encouraged me to keep pushing it off), but these shares are nevertheless almost 80% higher now from my last write-up, with the company gaining share and putting together a good recent run of above-market volume growth (gaining more share).
Geely has always had its doubters, but the company has successfully transitioned away from being just a maker of lower-end vehicles and has created a viable mass-market platform, with some early successes targeting the lower end of the high-end market with its Lynk & Co ("Lynk") brand. Likewise, Geely has always had bold plans to be a major player in electrification, and the market has taken a lot more notice since the unveiling of the Sustainable Experience Architecture (or SEA) in September of 2020.
There are still plenty of issues and challenges here. The parent company (ParentCo)/listed company (ListCo) structure is confusing at best and creates the potential for self-dealing at worse. To that end, while merging the Volvo (OTCPK:VOLAF) auto business (owned by ParentCo) into Geely ListCo would likely be good for shareholders, there really hasn't been a meaningful discussion of terms. Moreover, the Chinese EV market is exceptionally competitive, with established foreign automakers like Toyota (TM) and Volkswagen (OTCPK:VWAGY), established local players like BYD (OTCPK:BYDDY), and new entrants like Tesla (TSLA) and XPeng (XPEV) all competing for future share.
Today I see Geely as a fairly-priced play on Chinese auto market growth and Geely's own prospects to gain more share and margin leverage. That may sound like damning by faint praise, but with some EV players trading at over 10x '22 revenue "fairly-priced" has some appeal.
Read the full article here:
Geely Back At Cruising Speed And Gaining Share In China's Recovering Auto Market
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