Geely: Can it successfully break through by 'directly challenging' BYD?

$GEELY AUTO(00175.HK) released its Q3 2025 report during the Hong Kong stock market midday session on November 17, 2025, Beijing time. Here are the key points:

1. Revenue side largely met expectations: Geely Automobile's total revenue for the quarter was 89.2 billion yuan, up 26% year-on-year, largely in line with Dolphin Research's expectations.

Breaking down by volume and price: The revenue per vehicle this quarter was 117,000 yuan, an increase of 7,000 yuan from the previous quarter, mainly due to the upward shift in model structure. This quarter's vehicle sales reached 761,000 units, up 8% quarter-on-quarter, primarily due to the continued expansion of Geely's Galaxy series (Galaxy Starshine 8, Galaxy M9, Galaxy A7) and Lynk & Co brand models (Lynk & Co 10 EM-P, Lynk & Co 900).

2. Gross margin side showed a quarter-on-quarter decline: The gross margin for the quarter was only 16.6%, down 0.5 percentage points quarter-on-quarter. Dolphin Research believes this was mainly due to the transformation of Lynk & Co products and Geely's inventory clearance with higher discounts. However, with the continued upward shift in model structure and the recovery of Lynk & Co brand gross margin, the gross margin is expected to rebound quarter-on-quarter in Q4.

3. Core operating profit margin improved quarter-on-quarter, with reasonable cost control after integrating 'One Geely': Core operating profit margin (gross profit minus three expenses minus SBC expenses) rose 0.3 percentage points quarter-on-quarter to 3.8%, mainly due to reasonable cost control after integrating 'One Geely', combined with the leverage effect of sales release. The core net profit per vehicle also increased by 500 yuan quarter-on-quarter to 4,400 yuan.

Dolphin Research's view:

Overall, Geely's car sales process in Q3 continued to progress steadily. Management raised the 2025 sales target to 3 million units last quarter, and Geely's car sales reached 2.17 million units in the first three quarters (up 46% year-on-year), achieving 72.3% of the target. Given that Q4 is a peak sales season combined with pre-purchase before the reduction of purchase tax, and Geely still has many facelift models launching in Q4, Dolphin Research expects Geely's full-year sales in 2025 to reach 3.1 million units (with an estimated Q4 sales of 930,000 units), exceeding the sales target.

Meanwhile, in the most critical aspect of the speed of new energy transition, Geely continues to make good progress. In Q3, new energy vehicle sales reached 443,000 units, continuing to grow 15% quarter-on-quarter, and the proportion of new energy vehicles in the overall model structure continued to increase by 3 percentage points quarter-on-quarter to 58%. The main contributors to the increase in new energy vehicle sales this quarter were Geely's Galaxy series (Galaxy Starshine 8, Galaxy M9, Galaxy A7) and Lynk & Co brand models (Lynk & Co 10 EM-P, Lynk & Co 900) continuing to expand.

Finally, Geely's new energy vehicle sales in the first three quarters reached 1.17 million units, achieving 78% of the adjusted full-year target of 1.5 million units for 2025.

Dolphin Research believes that Geely's continuous breakthroughs in the new energy direction are mainly due to its 'close combat' with BYD:

a) Switching technology solutions to reduce costs: By reducing the original three-speed DHT solution to a single-speed DHT solution (which can reduce costs by approximately 5,000 yuan), and by reducing engine horsepower, essentially, Geely's original solution was more comprehensive for all driving scenarios (especially advantageous in high-speed scenarios), but most users in the 70,000-150,000 yuan price range focus on urban driving scenarios and are guided by cost-effectiveness, so Geely made this change.

b) BYD's price war is restricted by 'anti-involution', giving Geely a competitive window: Geely's Galaxy series continues to expand, not only due to technical catch-up and switching technology solutions to reduce costs but also mainly because BYD's price war is restricted by 'anti-involution', and the price war is easing, giving Geely a competitive window.

In terms of high-end positioning, Geely's three models targeting high-end positioning, ZEEKR 9X, Lynk & Co 900, and Galaxy M9, have achieved good order volumes and sales:

① ZEEKR 9X was launched on September 29, priced at 455,900-589,900 yuan, with over 10,000 orders within 13 minutes of launch (advantage of large space + luxury configuration + ZEEKR brand appeal), and ZEEKR 9X's gross margin is expected to be around 40%;

② Galaxy M9 was launched on September 17, priced at 173,800-238,800 yuan, with over 23,000 orders within 24 hours of launch, and monthly sales in the first month reached 10,000 units, with a gross margin also reaching 20%-25%;

③ Lynk & Co 900 currently has stable monthly sales of around 7,500 units, with a gross margin also stable at around 40%;

In Q4, ZEEKR 9X and Galaxy M9 will enter a full delivery season, further improving the model structure in Q4, combined with the release of scale effects in Q4, and the continued acceleration of Lynk & Co brand's new energy transition speed, Lynk & Co brand's gross margin will rise from 11% in Q3 to approximately 15%-16% in Q4, Dolphin Research expects Geely's gross margin and net profit per vehicle to further increase in Q4.

Looking ahead to 2026:

① Geely continues to extend its strong product cycle:

Geely expects to launch at least 1-2 new models per quarter in 2026, with nearly 10 new models throughout the year, covering ZEEKR/Lynk & Co/Galaxy/China Star, supporting Geely's market share in the new energy market to continue to rise;

② Strong growth guidance for overseas expansion: Strong guidance for new energy overseas expansion, Geely expects to expand overseas channels to 1,100-1,200 stores, and accelerate the overseas launch of new energy models, with overseas sales expected to achieve 50%-80% growth in 2026, reaching 600,000-720,000 units (2025: 300,000 units), with nearly 300,000 new energy vehicles, accounting for 45%-50%.

Geely's overseas models have higher gross margins and net profits per vehicle, with overseas model gross margins 10 percentage points higher than domestic models, and net profits per vehicle reaching 10,000 yuan, continuing to drive Geely's profitability upward.

③ Cost reduction and efficiency improvement release after integrating 'One Geely': ZEEKR will be consolidated before the end of the year, and synergies will be fully realized in 2026, with the three expense ratio expected to continue to decline;

Management guidance indicates that with the increase in overseas proportion, release of scale effects, and cost reduction and efficiency improvement after integrating 'One Geely', Geely's vehicle profitability in 2025 is expected to continue to improve by 30% year-on-year.

The current stock price corresponds to Geely's 2025 P/E of only 9 times, and 2026 P/E of less than 8 times, and this 'cheap' valuation is still mainly due to market concerns about the potential decline in industry beta after the reduction of purchase tax next year.

However, with Geely's new energy transition speed already approaching 60%, and both overseas expansion and high-end positioning steadily advancing, especially with relatively good progress in high-end positioning, the fundamentals remain very stable, Dolphin Research believes Geely's stock price still has upward potential.