Geely Auto Financial Report Analysis
1.0 Executive Summary
This report discusses the details of the Geely Automobile Company and an analysis of its financial statements in the past 5 years. The purpose of the report is an application of the knowledge learnt from the Financial Statement Analysis course, and tries to give recommendations. Rather than giving simple suggestions like buy, sell or hold the stocks, it is hoped that by analyzing the financial statements, the data can provide support for the recommendations such as the future profit and loss of Geely. As one of the four largest independent private automobile manufacturers in China, Geely Auto has been expanding rapidly. The sale of Geely has increased from 200 units in 1998 to 329.100 units in 2009. In addition, in 2010, the purchase of Volvo greatly increases the reputation of Geely. Although the acquisition just happened few months ago, it is believed that it will beneficial to increase the market share. Further SWOT analysis shows that, the well-established sales network and the emphasis on R&D capabilities will have a positive effect on the future growth of Geely. Moreover, the external environment such as the continuous growth in Chinese market and government policy support shows a promising future for Geely. However, there are also threats exist outside the market and weaknesses inside Geely. It is really hard to give any suggestions by simply analyzing the industry and outside environment.
Therefore, the report mainly focuses on the analysis of the financial statements. Analysis includes the capital structure and solvency, liquidity, operating performance and profitability, and cash flow statements. By using common-size analysis, ratio analysis and trend analysis, taking the rapid expansion in recent 5 years into consideration. Though some results turn out to be either not satisfactory or below industry average, the overall performance of Geely is quite good. Geely was using its money effectively and investing the money in the right place in the past 5 years.
It is recommended to buy Geely Stocks, with the potential growth in their production and profitability. It is quite pessimistic that the earnings of Geely is going to increase and therefore the stock price in future.
Geely Automobile Holdings is a Chinese automaker and is with BYD, Chery, and Great Wall, one of the four largest independent private automobile manufacturers in China. Geely is now headquartered in Hangzhou, Zhejiang, and operates six car assembly and power-train manufacturing plants in China that are located in Lanzhou (Gansu province), Linhai (Zhejiang province), Luqiao (Zhejiang province), Ningbo (Zhejiang province), Shanghai and Xiangtan (Hunan province). These facilities enable a production capacity of approximately 300,000 cars per year.
2.1 Brief History
Geely (Jílì, meaning "auspicious, lucky") was founded in 1986 as a manufacturer of refrigerators, and then moved to manufacturing decoration materials in 1989, and by 1992, motorcycle parts. In 1994, Geely began manufacturing motorcycles. By 1996, Geely had produced over 200,000 motorcycles and scooters. Automobile production started in 1998. Geely began exporting its first cars in 2003. Geely had its IPO on the Hong Kong Stock Exchange in 2004.
Purchase of Volvo
Geely was reported to have approached Ford in mid-2008 about a possible takeover of Volvo Cars. On October 28, 2009, Geely was named as the preferred buyer of Volvo Cars by Ford. On December 23, 2009, Ford confirmed that all substantive commercial terms for the sale to Geely had been settled. A definitive agreement was signed on March 28, 2010 worth $1.8 billion, and the deal was completed on August 2, 2010.
* Executive directors: Mr. Li Shu Fu, Mr. Gui Sheng Yue, Mr. Yang Jian, Mr. Ang, Siu Lun, Mr. Yin Da Qing, Mr. Liu Jin Liang, Mr. Zhao Jie, Dr. Zhao Fuquan * Non-Executive Directors:Mr. Xu Gang
Bibliography: DBS (8. June2010) Hong Kong/ China Company Focus; Geely Automobiles Holding; DBS Vickers Securities; Analyst: Miu, Rachel
Credit Suisse (12
CIMB (28. Sep. 2010) Geely Automiles Holding LTD; CIMB Reasearch; Analyst: Cheam, The Shen
JP Morgan (26
Deutche Bank (26. Aug. 2010) Geely Automiles Holding LTD; Deutche Securities Asia LTD; Analyst: Ha, Vincent
Please join StudyMode to read the full document