Despite broader market softness, we expect Geely to achieve YoY growth alongside enhanced product mix in 1Q26, supported by steady ICE demand and structural export tailwinds. For 4Q25, we anticipate earnings may face a sequential contraction due to heavy year-end seasonal accruals and contingent recall provisions for early Zeekr models with Sunwoda batteries. We estimate core net profit at RMB3.5- 3.8bn in 4Q25. For 2026, we view cost headwinds as manageable for Geely as the target of 10%+ annual cost-cut savings (RMB8k-9k per vehicle) could more than offset inflation pressure from various raw materials, effectively safeguarding profitability under regulatory-led price stability. We leave our 2026-27E net profit forecasts largely intact at RMB20bn/23.7bn, on projected sales volume of 3.5m/4.0m units, respectively. At 7.8x 2026E P/E, Geely now trades at a significant discount to its peers BYD (20x+) and GWM (12x). We anticipate a potential valuation re-rating ahead as the market starts to recognise Geely’s top-tier market position, bolstered by its product strength and rapid catch-up in intelligent-driving capabilities. Reaffirm BUY.
Key Factors for Rating
Jan wholesales outshine broad industry; ICE and exports bolster Q1 demand. Geely Auto posted Jan wholesales of 270,167 units, up 1.3%/14.1% YoY/MoM, significantly beating industry trends. This was mainly attributable to deferring late-2025 wholesales to early 2026, after monthly sales dropped from over 300k units in Oct-Nov to 237k in Dec last year. Exports more than doubled YoY to 60,506 units, representing a bright highlight. Also, Geely’s monthly sales surpassed BYD in January, thanks to a balanced ICE-NEV portfolio, we expect Geely is likely to continue lead in Feb. Retail-wise, Galaxy and Lynk & Co saw sharp MoM declines of 50-60%, in line with industry, while Zeekr declined less than 30% MoM with new model contribution and backlog orders. ICE sales had a slight seasonal dip (around 5% MoM). For 1Q26, we forecast modest YoY sales growth, backed by stable ICE demand and robust exports.
Domestic auto consumption reflects "Tight Early, Loose Later" trend. Our channel checks indicate weak domestic passenger vehicle retail sales in Jan, mostly due to delayed local government implementation of vehicle scrappage/trade-in subsidy policies. As of latest date, only 18 provinces/cities issued guidelines, with lottery-based allocations and cross-regional restrictions, alongside NEV purchase tax exemption phase-outs, curbing demand. Hence, we anticipate a policy-wide shift from last year’s “loose early, tight later” to a “tight early, loose later” pattern in 2026, with retail demand recovery post-March fuelled by activated subsidy arrangements and OEM new model launches. This could prioritise ICE vehicles over NEVs during the early-year off-season, advantaging automakers like Geely with diversified ICE-NEV offerings.
4Q25 results preview and 1Q26 preliminary outlook. For 4Q25, we project Geely’s revenue to track its robust sales volume growth, and meeting expectations. However, we anticipate a MoM setback in earnings caused by: (i) heavy seasonal expense accruals at year-end, amplified by cautious 2026 demand out and rising cost headwinds that may lead execution teams to frontload expenses; (ii) contingent recall provisions for 2021-2022 Zeekr models equipped with Sunwoda batteries, which may weigh on profits from the 51%- owned Viridi subsidiary. Consequently, we estimate 4Q25 core profit at RMB3.5- 3.8bn, down from RMB4.0bn in 3Q25. For 1Q26, despite the off-season demand softness, we foresee mild YoY sales growth with product mix optimisation for Geely. Higher contributions from Lynk & Co and Zeekr, especially premium models like Zeekr 9X, should drive strong MoM profit recovery and YoY profit growth outpacing sales volume.
Manageable cost headwinds for 2026 profitability. In 2026, Geely Auto encounters raw material cost pressures similar to the wider automotive industry, but the effects differ, and mitigation measures are implemented well in place. (i) Batteries: The mgmt. deem recent lithium carbonate price hikes are temporary, expecting increased supply should stabilise prices ahead. Additionally, Geely’s scale enables it to negotiate advantageous terms with suppliers like CATL, maintaining cost competitiveness. (ii) Metal Materials: We project the rising copper and aluminum prices may add ~RMB3,000 BOM cost per vehicle, but locked-in pricing mechanism between Geely and suppliers limits the cost inflation impact. (iii) Automotive Memory Chips: The surge in memory chip prices has a more noticeable impact. Costs associated with intelligence levels go up by a few hundred RMB for Galaxy models and RMB4,000-5,000 for Zeekr per vehicle, the aggregate impact remains manageable given the projected sales mix across brands. Overall, by leveraging its platform scale, Geely aims to achieve significant cost reductions, targeting procurement savings of 10%+, equivalent to RMB8,000-9,000 per vehicle. If pricing remains stable with no escalated price wars under regulatory oversight, these savings are expected to more than offset rising costs, thereby preserving per-vehicle profitability.
Valuation
We maintain our 2026-27E sales volume forecast at 3.5m and 4.0m units, respectively. Our forecasts for 2026E are slightly above the company’s 3.45m target, driven by higher Geely brand sales (2.8m units) while Lynk & Co (400k) and Zeekr (300k) aligned with guidance. Net profit forecasts for 2026E and 2027E remain largely intact at RMB20.02bn and RMB23.68bn, respectively.
By adopting 15x 2026 P/E, we fine-tuned our target price to HK$30.00, reflecting Zeekr privatisation-related equity dilution. At present, Geely trades at a 2026E P/E of 7.8x, well below NEV giant BYD (22x) and conventional OEM Great Wall Motor (12x). This undervaluation partly arises from misconceptions about Geely’s intelligent tech strategy and industry-wide de-rating over past months, while Afari Technology (or called Qianli Technology)’s Hong Kong listing arouses concerns over Geely’s capital diversion and synergy invisibility.
We believe the street is undervaluing Geely’s intelligent technology gains and the strategic importance of its partnership with Qianli Technology. In fact, most traditional automakers, such as Geely (via Zeekr), Great Wall, and Chery, have encountered substantial hurdles in developing full-stack, in-house intelligent technologies, rendering supplier collaborations a more effective and pragmatic solution. Against this backdrop, Qianli Technology stands as Geely’s cornerstone platform for advancing autonomous driving, AI, Robotaxi, and robotics, with seamless integration across Geely group ecosystems. This collaboration is instrumental in addressing AI and intelligence deficiencies faced by traditional automakers, therefore bolstering Geely’s ambitious pivot towards electrification and vehicle intelligence catch-up underway.
We interpret that Qianli’s Hong Kong listing is primarily intended to raise capital for R&D activities through the public markets, rather than to divert resources, creating a mutually beneficial outcome for both Geely and Qianli. With Geely being Qianli’s primary customer, the mutually beneficial partnership aligns interests and tailors collaboration to foster effective and productive synergy in products, services, or technologies.
In conclusion, as Geely consistently elevates its product competitiveness, broadens its market presence through increased sales volume, and narrows the gap with industry leaders in intelligent-driving technologies, its current valuation at 8x P/E appears undervalued. We see compelling headroom for a valuation re-rating, fuelled by its strengthening market leadership and the anticipated demand recovery in March-April. Reaffirm BUY rating.