Maintain BUY. We view Geely’s 3Q25 earnings as solid and we believe Geely could accomplish its both sales and GPM targets in FY25. We are of the opinion that Geely’s sales volume growth could continue at least throughout FY26, given its current incomprehensive NEV model line-up and well-received new models including the Galaxy M9, A7 and Zeekr 9X. We also expect these new models, along with rising NEV exports, to lift its margins in FY26. We believe Geely is well positioned among its peers with attractive valuation.
Solid 3Q25 earnings. Geely’s 3Q25 revenue rose 48% YoY amid a YoY sales volume growth rate of 43%, or about 6% higher than our prior forecast, mainly due to Zeekr’s more resilient-than-expected pricing. GPM in 3Q25 widened by 1ppt YoY but narrowed by 0.5ppts QoQ to 16.6%, or 0.7ppts lower than our projection. SG&A and R&D combined ratio was about 12.4% in 3Q25, 0.2ppts lower than our forecast. These key metrics, along with better-than-expected forex loss and higher tax rate, resulted in an in-line net profit of RMB3.8bn in 3Q25.
Better product mix to lift margins in 4Q25 and FY26. We are of the view that QoQ GPM decline could be short-lived, as high-margin new models, including the Zeekr 9X, Lynk & Co 900 and Galaxy M9 are to contribute more sales volume in 4Q25 and FY26. We project the sales volume of these three models combined to more than double YoY to 285,000 units in FY26 with a gross margin range of 20-31%. Therefore, we expect GPMs in 4Q25 and FY26 to be 17.1% and 17.8%, respectively.
Rising NEV exports to fuel sales volume, margins in FY26. Geely’s NEV exports accelerated from Aug 2025, with an average monthly volume of 13,700 units in Aug-Oct 2025, doubled from the average in Jan-Jul 2025, aided by the Galaxy Starship 7 and Zeekr 7X. We expect Geely’s NEV exports to almost triple YoY to 0.3mn units in FY26, as more models are set to be sold abroad. These exports could also contribute higher GPM.
Earnings/Valuation. We project Geely’s sales volume in FY25-26 to be 3.08mn/3.42mn units, with about half of growth in FY26 from exports. We estimate FY25 net profit to be RMB17.4bn, implying 4Q25 net profit forecast of RMB4.3bn. We revise up FY26-27 net profit forecasts by 7.5%/9.0% to RMB20.0bn/RMB21.3bn, respectively. We maintain our BUY rating and target price of HK$25.00, based on 12x (prior 13x) our FY26E P/E, to reflect investors’ recent concerns about industrywide sales slowdown in 2026. Key risks include lower sales volume and/or gross margin than we expect, especially from new NEV models, as well as a sector de-rating.