Disclaimer: This article is for information exchange only and does not constitute any trading advice.

Geely Automobile (HK:00175) has a 50% stake in the stock price this year. Under the superposition of various factors, the peak season is not the biggest factor. A performance report issued on Tuesday (November 6) showed a slight increase in sales in October.auspiciouscarAgain being ignored,It was even sung by Morgan Stanley. Yesterday, the stock price plummeted by 4.5%.


However, reviewing the whole industry, the evaluation fell by about 15% in the same period in October, while Geely maintained a positive growth of 3%. In contrast, although Geely’s relative performance is still decent, it can be found by itself that this is its 2015 For the first time in the peak season, I did not get a good start.



Among them, Bo Yue and Emgrand's two main models are facing fierce competition. The growth rate in October was -33% and -25% respectively. The new car, Bandar, is still contributing to the company's growth. It also proves that Geely has strong ability and management efficiency to adapt to the industry downturn.


Of the 30 car companies, less than 10 achieved positive growth, while the three car companies ahead of Geely all experienced negative growth. New car reserves and product support are important reasons why Geely can still be tenacious.


The ability to combat this cycle over the past three years is also an important reason why Geely is able to achieve a share of the cross-cycle. In the past four years, Geely's share has increased from 14th to 4th, which also proves Geely's operational capabilities.

Geely did not have a new model in the first half of 2018, and the new car reserve was gradually enriched in the second half of the year. From the sales in September and October, the company's increase is mainly provided by new models listed in the second half of last year. The rapid and powerful new car launch is an important factor for the company to maintain sales expansion during the industry's low boom period. It is still the company's good management ability. .


At the same time, it is worth noting that Geelynew energyThe full force of 2018 will also stimulate the demand for mid- to high-end models. And this is precisely the reason why Geely Automobile was favored by the market before.


What is certain is that Geely has a good product reserve and production line management capabilities. However, Geely’s problem is that it faces short-term small fluctuations in the cycle. The main reason is that the dealers are hesitant in the current environmental period, which makes the company's overall inventory increase to 2.5-3 months.


The coldening of the dealer market, reflected in the Geely stock price has become a Davis double kill, may be in the valuation and performance are the logic that Geely may not be able to reverse now.


Next, return to Geely's future investment expectations.


Personally think that fromGreat Wall Motor(HK:02333) The price reduction logic begins. Everyone knows that the next will be the long winter of the profits of various car companies; therefore PE (price-earnings ratio) underestimation is an obvious deep pit logic, can not judge the future according to the valuation; In the big logic of cyclical stocks, the first step in performance reversal must be to focus on the most stable sales in the bear market. It will still start from Geely, so investors should still estimate according to long-term returns.


And we know that when the first signal of sales reversal appeared, the stock price has already rebounded. Therefore, for any investor, what should be concerned at this time is still the data of vehicle terminal sales, whether there will be any potential changes. In this field, investors can make a difference.


From the perspective of long-term dividend DCF (discounted cash flow), auto stocks are prone to damage value for a long time – heavy assets, high inventory, and indiscriminate competition will all produce similar situations. As a result, long-term estimates may face the challenge of perpetual cash flow. Therefore, auto stocks are more suitable for relative income investors, based on the bottom of the sales reversal cycle.


The traffic lights have not yet been lit, but the pedestrians on the road have not finished. The real old drivers know that this time they should still abide by the rules. (Author: High Priest)