Geely Automobile Holdings Limited
Credit Opinion: Geely Automobile Holdings Limited: Update following confirmation of Baa3 ratings
Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of Geely Automobile Holdings Limited
Peer Snapshot: Geely Automobile Holdings Limited - June 2020 (LTM): Peer Snapshot
Rating Action: Moody's confirms Geely's Baa3 ratings; changes outlook to stable
Issuer Comment: Geely Automobile Holdings Limited: Proposed new share issuance is credit positive
Moody's: Geely's 2018 results support its Ba1 rating
Hong Kong, March 29, 2019 -- Moody's Investors Service says that Geely Automobile Holdings Limited's 2018 results support its Ba1 corporate family rating
The rating outlook is positive.
"Geely posted healthy unit sales growth in 2018 that led to meaningful gain in its overall market share, as a result of improvements in its product breadth and strength," says Gerwin Ho, a Moody's Vice President and Senior Credit Officer.
Geely's unit sales, including those from its 50%-owned Lynk & Co joint venture, grew 20% year-on-year to 1,500,838 units in 2018. Such a rise was led by 19% year-on-year growth in its domestic sales to 1,473,070 units and 136% year-on-year growth in export sales to 27,768 units.
Moody's analysis of Geely's key credit metrics accounts for the Lynk & Co joint venture on a consolidated basis.
The company's sales growth in 2018 reflected (1) a positive market response to its new models and steady sales of existing models; and (2) an improvement in its product mix, reflecting the introduction of higher-end models in its line-up and greater consumer acceptance of such products.
Geely's unit sales growth rate in 2018 outperformed the 3% decline registered by China's auto industry over the same period, resulting in a further expansion of its market share, and positioning it as the third largest passenger vehicle brand and the seventh largest auto maker by unit sales in China.
Moody's expects Geely's unit sales to grow about 4% year-on-year to 1.6 million in 2019 and its market share in China's auto market to continue to rise as it grows faster than the overall market, which Moody's expects to expand 2% year-on-year during the same period.
Geely's adjusted EBITA margin reached about 8.3% in 2018. Moody's expects Geely's EBITA margin to remain stable at about 8.2% in the next 12-18 months, reflecting the company's continued investment in research and development, but the effects of which will be partly offset by greater operating leverage as its revenue scale continues to expand.
Geely's debt leverage -- as measured by adjusted debt/EBITDA -- rose to about 1.1x in 2018 from 0.5x in 2017, reflecting a higher level of debt to fund the company's investments.
Moody's expects the company's debt level to rise to about 1.3x in the next 12-18 months as it continues to invest in capacity expansion and product development. Nonetheless such a level of leverage remains strong for the Ba rating category.
Geely's liquidity position also remains solid. At the end of 2018, its reported net cash holdings totaled RMB12 billion. The company has maintained a net cash position since the end of 2012.
The principal methodology used in this rating was Automobile Manufacturer Industry published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Geely Automobile Holdings Limited is one of the largest privately owned, local brand automakers in China. Geely develops, manufactures and sells passenger vehicles that are sold in China and globally. Its chairman and founder, Mr. Li Shufu, and his family, held a 44.16% stake at the end of June 2018. The company is incorporated in the Cayman Islands and listed on the Hong Kong Stock Exchange.
Gerwin Ho
VP - Senior Credit Officer
Clement Cheuk Yiu Wong