Geely’s Q1 core operations are solid, with rising momentum in Zeekr and overseas business
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Geely’s Q1 core operations are solid, with rising momentum in Zeekr and overseas business
Bernstein maintains Geely’s Outperform rating and a HK$22.00 target price, noting that Q1 revenue, gross margin, and overseas sales were robust, but FX volatility led to a year-over-year decline in net profit.
- Q1 26 revenue was RMB 83.8 billion, up 15.2% year-over-year and down 20.8% quarter-over-quarter; wholesale sales totaled 709,000 units, up 0.8% year-over-year and down 17.0% quarter-over-quarter.
- Improved product mix and cost reductions pushed gross margin to 17.5%, above Q1 25’s 15.7% and Q4 25’s 16.9%.
- Overseas sales reached 203,000 units, up 129% year-over-year and 64% quarter-over-quarter, with overseas sales accounting for 28.6% of total volume.
- Zeekr’s contribution rose to 10.9%, with an ASP of RMB 295,000—more than three times the Geely brand’s RMB 91,000.
- Net profit was RMB 4.2 billion, with a net margin of 5.0%; the year-over-year decline was largely due to a RMB 3.5 billion FX swing.
Report interpretation
Overview
This report is Bernstein’s commentary on Geely Automobile Holdings Ltd’s Q1 2026 results. The firm views the company’s core operations as stable, with year-over-year revenue growth, improved gross margins, and significant contributions from overseas sales and the premium Zeekr brand; however, year-over-year profit was dragged down by a shift in FX gains from Q1 2025 to losses in Q1 2026.
Core views
Key takeaways include: First, Q1 sales were roughly flat year-over-year but saw structural improvements, with exports and Zeekr driving higher ASPs; second, cost cuts and product mix enhancements offset some commodity and inventory costs, lifting gross margin to 17.5%; third, overseas channel expansion, new model launches, and EV demand amid high fuel prices have fueled rapid growth in overseas sales; fourth, management remains confident in its 2026 target of 750,000 overseas units and its i-HEV strategy; fifth, the pace of model launches and pricing will determine competitiveness relative to global peers like Toyota.
Analysis framework
The report employs a review of quarterly financial and operational data, breakdowns of sales composition, analyses of brand and powertrain structures, observations of overseas regions and channels, and a reassessment of the valuation framework to assess the company’s performance quality and future momentum.
Methodology notes
EV/sales valuation for Zeekr and one/two-year P/E multiples for non-Zeekr businesses.
The report’s HK$22.00 target price is based on 8x P/E for non-Zeekr businesses and 0.5x EV/sales for Zeekr, implying an overall P/E of about 11x for 2026.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Geely Automobile Holdings Ltd / 0175.HKResearch Subject
- Strengths
- Q1 revenue grew year-over-year, gross margin improved, overseas sales were strong, Zeekr’s premiumization contribution increased, and i-HEV technology could enhance fuel economy and reduce costs.
- Weaknesses
- Year-over-year net profit was dragged down by FX swings, Q1 EV sales share declined from Q4 2025 levels, and sales and R&D expenses remain under pressure.
- Comparison
- The i-HEV strategy must be validated through model launches and pricing to demonstrate competitiveness relative to global peers like Toyota.
- Risks
- Underperformance of new product execution, opaque separation of economic interests related to Lynk, currency volatility, and cost pressures.
- ZeekrPremium New Energy Vehicle Brand and Valuation Segment
- Strengths
- Q1 2026 contribution rose to 10.9%, with an ASP of RMB 295,000—significantly higher than the Geely brand.
- Weaknesses
- Wholesale sales fell 4.3% quarter-over-quarter, and the resilience of premium sales still needs ongoing verification.
- Comparison
- In SOTP valuation, it is assigned 0.5x EV/sales, distinct from the P/E valuation applied to non-Zeekr businesses.
- Risks
- Competition in the premium EV segment, model cycle dynamics, and pricing pressures.
- Overseas BusinessGrowth Driver
- Strengths
- Q1 2026 overseas sales reached 203,000 units, up 129% year-over-year and 64% quarter-over-quarter, with channel expansion to approximately 1,900 dealerships.
- Weaknesses
- Growth depends on continued channel expansion, successful new model launches, and sustained overseas demand.
- Comparison
- Western Europe, Eastern/Central Europe, and North America are the primary export destinations, accounting for 39%, 25%, and 14% of overseas sales, respectively.
- Risks
- Changes in overseas market demand, fuel prices, regulations, exchange rates, and trade environments.
Key data
- Q1 2026 RevenueRMB 83.8 billionUp 15.2% year-over-year and down 20.8% quarter-over-quarter; table figures show RMB 83,776 million, up 15.6% year-over-year.
- Q1 2026 Wholesale Sales709,000 unitsUp 0.8% year-over-year and down 17.0% quarter-over-quarter.
- Q1 2026 Gross Margin17.5%Higher than Q1 2025’s approximately 15.7–15.8% and Q4 2025’s 16.9%.
- Q1 2026 Net ProfitRMB 4.2 billionWith a net margin of 5.0%, down about 27–28% year-over-year, largely due to FX swings.
- Overseas Sales203,000 unitsUp 129% year-over-year and 64% quarter-over-quarter; accounting for 28.6% of total sales.
- EV Sales Share51.7%Higher than Q1 2025’s 48.2% but lower than Q4 2025’s 60.9%.
- ASPRMB 112,000According to management-reported figures, up 19% year-over-year and flat quarter-over-quarter, driven by exports and Zeekr’s growing contribution.
- Zeekr ASPRMB 295,000More than three times the Geely brand’s RMB 91,000.
- 2026 Overseas Sales Target750,000 unitsManagement reaffirmed confidence, and Bernstein believes this goal is achievable with model launches and channel expansion.
Impact & implications
From an investment perspective, the report sees Geely’s earnings quality supported by improvements in product mix, exports, and its premium brands, with overseas operations and i-HEV poised to enhance mid-term competitiveness; however, the current target price is slightly below the closing price, suggesting that short-term stock price already reflects some optimism, and further validation will be needed on new model rollouts, pricing, overseas channel efficiency, and FX dynamics.
Risks
- Execution risks associated with the launch of new products under the Geely and Lynk brands.
- Insufficient clarity in the separation of economic interests between listed entities and the parent company, potentially creating uncertainty in future estimates of Lynk’s revenue and profits.
- FX volatility may continue to affect year-over-year profit performance.
- Rising commodity and inventory costs could erode gross margins.
- The timing of i-HEV model launches, pricing, and their competitive positioning relative to peers like Toyota remain to be verified.
What to watch
- Whether overseas sales can reach the 750,000-unit target in 2026.
- Sales share, ASP, and profitability contributions of Zeekr and Galaxy, exclusive new energy brands.
- Fuel economy, costs, and pricing performance of i-HEV models such as the Boyue L and the new Dihao after launch.
- The structure of export destinations, particularly changes in demand across Western Europe, Eastern/Central Europe, and North America.
- Trends in FX gains/losses, sales expense ratios, the capitalization/expense treatment of R&D costs, and gross margin.