Geely statement: still the biggest DaimlershareholderThe holding of Daimler shares remains unchanged and there is no plan to reduce the holdings.
When the star car enterprise Geely Automobile once again became a street talk, it was already in jeopardy. On January 7, Geely Automobile announced that it sold 93,000 vehicles in December, a decrease of nearly 40% year-on-year, a 16-month low. Based on the unmet achievement of the 2018 sales target, Geely gave a conservative figure of 1.51 million units for the 2019 sales target.
The next day, Geely's share price fell more than 11% in the secondary market, and the market value of the market evaporated by over 10 billion a day.BrokerInstitutions have also adjusted the target price of Geely Automobile and downgraded its investment rating to “Neutral” or “Reduce”. According to industry insiders, the inventory pressure of Geely auto dealers remained high all the year round. The slump in sales in December indicated that the negative impact of the pressure on stocks appeared. The company had to choose the former between digesting inventory and completing sales.
On January 7, Geely Automobile announced the production and sales report. In December, it achieved sales of 93,000 vehicles, down 39% year-on-year; in 2018, it sold 1.501 million units, up 20% year-on-year, lower than the target of 1.58 million vehicles and market expectations for the whole year.
announcementAfter the release, the market was at a loss. The star company had a 10x increase in 3 years in 2017, and the sales volume has grown from 500,000 to 1.5 million. Until August 2018, the company still maintained a sales growth of more than 30% in a single month, but since September, the sales growth of Geely Automobile has been narrowing, from 14.3% to 2.6% to -1.1%, and the direct rapid decline in December. 39%.
The inflection point came so quickly that Geely Automobile explained that “the dealer inventory is too high”. And said that despite the low level of wholesale sales, the corresponding retail sales level is still stable, reflecting the management's determination to actively manage the total inventory of dealers to a healthy level.
Different from the shock of investors, brokerage institutions have predicted the slump in Geely's sales. On January 2, Morgan Stanley downgraded Geely's auto rating from neutral to underweight, and lowered its target price from HK$15 to HK$8, down 47%. The reason given is that “on the one hand Geely’s Bo Yue and Lectra brands have increased inventories, and the latest channel inspections show that Bo Yue’s inventory has risen to more than three months, and Lectra’s inventory has risen to 1 to 1.5. Month; on the other hand, the current market environment in the automotive industry is not good."
Credit Suisse also recently cut Geely's target price from HK$29 to HK$11/share, and the investment rating was also lowered from “Outperform” to Neutral; Citigroup lowered Geely's target price to HK$12.7, maintaining neutrality. Moto lowered the target price of Geely by nearly 30% to 10 Hong Kong dollars. In addition, institutions such as Everbright, Shenwan and Dahe have lowered their target prices.
Internal and external troubles
The institutions that downgraded Geely's car ratings all mentioned the inventory problem, which is the root cause of the company's continued development. According to the financial report, in the first half of 2018, Geely Automobile's accounts receivable and bills amounted to 24.8 billion yuan (excluding other receivables), a sharp increase of 73.4% compared with the same period of last year, much higher than the same period.PerformanceThe growth rate of accounts payable reached 29.9 billion yuan from the same period last year of 22.3 billion yuan, a sharp increase of 34%, accounting forOperating incomeMore than 50%, the highest proportion of mainstream independent brands, and twice that of SAIC.
Behind it is the problem of suppliers collectively reacting to Geely's low pressure and default on payment. The 21st Century Business Herald had previously reported that Geely used its "volume" as a bargaining chip, lowering supplier quotations and defaulting on suppliers' money to become one of Geely's means of maintaining cash flow stability. Geely Automobile will default on payment for several months or even a year, during which time suppliers will be required to cut prices, and if they do not fall, they will continue to default.
In addition to high inventory, the company is also in a dilemma in research and development. In July 2018, the Association announced the comparison of research and development funds for Chinese and foreign auto companies in 2017. Geely invested only 331 million yuan in research and development funds for the whole year. The turnover of 0.36% is the second lowest among the 28 domestic automakers.
Why is the company's research and development expenses not proportional to its market volume? After completing a round of inventory reduction, what is the current inventory of Geely Automobile? The financial report shows that at the end of the first half of 2018, the company's total borrowings increased by 150% from the end of 2017, reaching 3.29 billion yuan. What is the reason for the sudden surge in borrowing? On January 9th, the investor network sent an interview letter to Geely Automobile’s board secretary Zhang Yiren on the above issues. As of press time, no reply was received.
On January 10, Geely Automobile continued to float green in the secondary market, down 0.72%, closing at HK$11/share, down nearly 60% from the November 2017 high, and the market value also evaporated by nearly HK$170 billion. Currently only HK$98.8 billion. It is not only the past sales situation that forced the capital to flee, but also the 2019 target announced by Geely in the same period. In 2019, the company expects to sell 1.51 million units, which is equivalent to the completion in 2018.
According to Geely, the fundamental reason for the company to fall into a series of problems lies in the uncertainty of the Chinese auto market. Lin Jie, vice president of Geely Automobile Group, publicly stated that if the overall automobile market in China is still declining in 2019, it will be able to win more than 1.5 million vehicles.
According to public information, in 2018, the Chinese auto market experienced the first negative growth in 28 years. In November 2018, the national auto sales decreased by 13.9% year-on-year, falling for five consecutive months. From January to November, the national automobile sales volume was 25.42 million, a year-on-year decrease of 1.7%. Shi Jianhua, deputy secretary-general of the China Automobile Association, predicted that the growth rate of car sales in 2018 will be a negative one, and the decline may expand to 3%. In 2019, the sales volume of automobiles in the whole year was the same as that in 2018, with a growth rate of 0. (Source: Investor News)
(Article source: Geely official website)