Despite market price depreciation, company remains overvalued
Geely, HK$193 billion Chinese automobile company, experienced a good 28% drop from its share price peak in November 2017.
This market price drop has been interesting since the automaker has just reported in January that its total sales volume in December 2017 rose an impressive 42% to 153,625 units–a record high.
“During the month of December 2017, the sales volume of ‘New Emgrand’ and ‘Vision’ sedan weres 25,074 units and 14,524 units, respectively. During the month of December 2017, all the Group’s four new models launched in 2016 maintained high levels of sales volumes, three of which reached record high monthly sales volume during the month: The “Geely Boyue” (吉利博越) recorded a sales volume of 31,205 units; the “Emgrand GS” (帝豪GS), its first crossover SUV model, recorded a sales volume of 18,850 units; whereas the “Emgrand GL” (帝豪GL), its new generation of A+ segment sedan model, recorded a sales volume of 14,088 units. The “Vision SUV” (遠景SUV), its new SUV model, recorded a sales volume of 14,610 units.”
Meanwhile, Geely trades at a nice five-times price-book, and 21 times price-earnings valuations.
Attractively, Geely has paid all of its bank borrowings as of June 2017 while growing its revenue by an impressive 120% and profits by 130%. The automaker also carried a book value of RMB28.32 billion (14.7% higher year on year).
Debt free and strong business expansion makes Geely attractive albeit conservative calculations gave a figure of 53% lower from current share price at HK$10/shares (vs. HK$21.50 at the time of writing) or $25.5 per ADR share (vs. $54.68).
Disclosure: No shares in Geely.