Maintain BUY. Geely’s 3Q26 earnings missed our expectation, leading to a 9% downward revision to our FY26E net profit forecast. However, we believe Geely remains better positioned than peers against macro headwinds due to its leading profit per vehicle and de-risked international expansion model. We project Geely’s FY27E sales volume to outpace industry average, given substantial overseas growth runway.
3Q26 ASP, GPM miss with intact opex efficiency. Geely’s 3Q26 revenue rose 10.3% YoY, trailing our prior forecast by 2.6%. GPM in 3Q26 narrowed by 0.4ppts QoQ and about 0.5ppts lower than our projection. The combined SG&A and R&D ratio narrowed by 0.5ppts QoQ to 12.5% in 3Q26, or 0.2ppts lower than our projection. That, along with forex loss and elevated share-based payment, led to a net profit of RMB4.8bn in 3Q26 (core profit of RMB5.2bn), or 14% lower than our forecast.
Strong positioning with industry-leading profitability and a de-risked global model. Despite industrywide headwinds likely persisting into 2027, we view Geely as better positioned than most peers, supported by its leading profitability and a de-risked global footprint built on strategic automaker partnerships. In our view, this asset-light, partnership-oriented overseas expansion framework offers higher resilience against EU trade friction and tariff risks. Overseas growth runway remains substantial given that only three NEV models are currently on sale abroad. We also believe management’s strategic R&D shift—prioritizing tech-leading, volume-driven models backed by comprehensive charging infrastructure over prolific model launches—is well-calibrated for China’s shortened model cycle with huge sales volume volatility.
4Q26E and FY27E outlook. We project 4Q26E sales volume to rise 7.0% YoY to about 0.91mn units, driving FY26E sales volume to 3.15mn units. We cut FY26E net profit by 9% to RMB19.0bn, implying a net profit of RMB5.1bn in 4Q26E. We forecast FY27E sales volume to rise 7.9% YoY to 3.4mn units and net profit to reach RMB21.8bn, implying a net profit per vehicle of about RMB6,400.
Valuation/Key risks. We maintain our BUY rating but trim target price from HK$27.00 to HK$24.00, still based on 10x (unchanged) FY27E P/E. Key risks to our rating and target price include lower sales volume and/or GPM than we expect, as well as a sector de-rating.