We expect more resilient margins than peers

We expect more resilient margins than peers Maintain BUY.Although Geely’s 4Q25 GPM missed our prior forecast,itsmanagement’s upbeat tone gives us more confidence in its GPM outlook.Webelievethat Geelyis better positioned than most peers with its sales growthoutlook,cost reduction efforts,and overseas sales potential. Unlike someinvestors, we do not view its synergy with parent company and partnerships withother players as a valuation drag given its track record in the past years. Target PriceHK$25.00Up/Downside37.7%Current PriceHK$18.15 China Auto Ji SHI, CFA(852) 3761 8728shiji@cmbi.com.hk 4Q25 miss on GPM and R&D.Geely’s 4Q25 revenue rose22%YoY toRMB106bn, 1% higher than our prior forecast. GPM in 4Q25 widened by0.3ppts QoQ to 16.9%, or 0.8ppts lower than our projection. We estimatethe miss was mainly from Geely and Galaxy brands,and we wish thecompany could continue to disclose Zeekr’srevenue and gross profit afterits privatization. R&D expenses in 4Q25 rose 35% QoQ to RMB5.9bn, orRMB1bn higher than our forecast, largely due to lower capitalization ratio.Accordingly, net profit in 4Q25 rose4% YoYto RMB3.7bn, or RMB0.6bnlower thanour prior projection. Wenjing DOU, CFA(852) 6939 4751douwenjing@cmbi.com.hk Austin Liang(852) 3900 0856austinliang@cmbi.com.hk We expect resilient GPM in FY26E despite component price volatility.We project Geely’s GPM in FY26E to rise by 0.8ppts YoY to 17.4%, aidedby greater economies of scale, rising exports,improving model mix(Zeekr9X,8X, GalaxyM9etc.)and continued synergies from brand integration.Management believes the margin dent from rising component prices islimited andexpects 1Q26 GPM to be no worse than 4Q25 despite atraditional low season, which should be better than most peers.Geely’sexports likely beat its target of 0.64mn units in FY26E and we see moreroom for growth in the medium to long term, as Geely is actively seekinglocal production in different regions with its partners. Stock Data Improving earnings quality.Management expects R&D capitalizationratioto continue decliningfor better earnings quality. That also implies itsconfidence in earnings outlook, in our view. We maintain our FY26E salesvolume forecast of 3.4mn units with slightly lower GPM projection,higherR&Dexpensesand forex loss. Accordingly, we revise down our FY26E netprofit forecast by 3% to RMB19.4bn, which reflects better earnings qualitythan FY25. Infact, we raise FY27E net profit forecast by 3% to RMB21.7bndueto continued cost reduction and lower amortization burden fromdecreased R&D capitalization ratio. Valuation/Key risks.We maintain our BUY rating and target price ofHK$25.00, which is still based on 12x our FY26E P/E.Key risks to our ratingand target price include lower sales volume and/or GPM than we expect,especially from NEV models, as well as a sector de-rating. Source: FactSet Related Report“China Auto Sector-Weak 4Q25 sales may lead to earning miss”–21 Jan 2026 “Geely Automobile (175 HK)-We seemarginlift potential on a solid 3Q25”-18Nov2025 Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or inpart, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report.CMBIGM Ratings BUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM OUTPERFORM:Industry expected to outperform the relevant broad market benchmark over next 12 monthsMARKET-PERFORM:Industry expected to perform in-line with the relevant broad market benchmark over next 12 monthsUNDERPERFORM:Industry expected to underperform the relevant broad market benchmark over next 12 monthsCMB InternationalGlobal MarketsLimited Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852)3900 0800CMB InternationalGlobal MarketsLimited (“CMBIGM”) is a wholly owned subsidiary of CMB International Capital Co