Geely Automobile’s net profit will shrink by 30% in 2020, and its net cash flow from operating activities will plummet by 87%.

On March 23rd, Geely Automobile Holdings Limited released its 2020 financial report. Although some sectors performed brilliantly, Geely Automobile’s revenue and net profit declined in 2020 compared with 2019, which the company attributed to the COVID-19 epidemic.

In 2020, Geely Automobile achieved revenue of 92.1 billion RMB, down 5.4% year-on-year. Net profit was 5.57 billion yuan, down 32% year-on-year, compared with 8.26 billion yuan in the same period last year. The profit attributable to shareholders was RMB 5.53 billion, and the ending cash balance was RMB 19 billion.

After the results were announced, the market reacted strongly. In the afternoon, Hong Kong stock Geely Automobile plunged in a straight line, with a drop of over 7%.

In 2020, the cumulative sales volume of Geely Automobile exceeded 1.32 million, ranking first in the sales volume of China brand passenger cars for four consecutive years. However, this figure is 3% lower than that in 2019.

Among them, the annual cumulative sales volume of high-end brand Lexus reached 175,000 units, up about 37% year-on-year.

In terms of profit structure, its joint venture company contributed 880 million profits (including 580 million yuan from Jizhi Financial Company and 260 million from Link), accounting for about 15.6% of the net profit; Royalty income is 570 million yuan, accounting for about 10.2% of net profit.

In 2020, Geely Automobile accelerated the payment to its suppliers to alleviate the impact of production interruption caused by the epidemic, which also led to a significant decrease in the net cash inflow from its operating activities.By the end of 2020, the net cash flow from operating activities of Geely Automobile decreased by 87% year-on-year to 1.6 billion yuan.

In order to revive its financial resources, in May 2020, Geely raised HK$ 6.48 billion by placing 600 million new shares to institutional investors.

With the help of the proceeds from the placement, the total cash level of Geely Automobile (bank balance and cash+pledged bank deposits) will remain at about 19 billion yuan at the end of 2020.

In the second half of the year, the negative impact of the COVID-19 epidemic on Geely Automobile decreased.

In contrast to the bleak sales in the first half of 2020, in the second half of 2020, Geely Automobile’s sales increased by 49%, revenue increased by 50% and net profit increased by 40%.

In overseas markets, despite the restrictions of the COVID-19 epidemic, Geely Automobile’s "sea layout" is still accelerating.

In 2020, Geely Automobile sold nearly 273,000 overseas vehicles, up 25% year-on-year, covering nearly 30 countries. Among them, Link’s European offline experience store opened; In the Southeast Asian market, the annual sales volume of Proton Automobile under Geely reached 109,000 vehicles, and the export increased by 49.8%.

In terms of research and development, Geely Automobile has invested 4.8 billion yuan in 2020.In 2021, Geely’s R&D investment will continue to increase to cope with the wave of smart electric vehicles.

In 2020, in order to optimize the product structure, under the poor environment, Geely Automobile successively launched new models such as ICON, Haoyue, Xingrui, LECK 05 and LECK 06.

However, since mid-2019, the higher discounts and concessions offered by Geely to its dealers offset the positive impact brought by the continuous improvement of its product portfolio, making the average ex-factory sales price of Geely in 2020 similar to that of the same period last year.

If the high-end brand Lexus sold by its 50% equity joint venture company is taken into account, the average ex-factory sales price of Geely Automobile increased slightly year-on-year.

This also shows that the current profit pressure of new car sales in the automobile industry is great, and enterprises should pay more attention to after-sales service and other value-added businesses.

In order to continue to increase the market share, in 2021, Geely Automobile set the sales target at 1.53 million vehicles, up 16% year-on-year.

In order to step into the era of "4.0 comprehensive architecture system" faster, Geely Automobile announced that it had entered into a framework agreement with Geely Holding and established a joint venture company.

On March 23rd, Krypton Company was established, and it is planned that Geely Automobile and Geely Holding will jointly contribute 2 billion yuan. Among them, Geely Automobile holds 51% and Geely Holding Group holds 49%.

Li Shufu became the chairman of the company, and An Conghui became the CEO of the company.

Extreme Krypton Company will increase its R&D investment in the field of new four modernizations, and build the full-stack self-research capability of intelligent software and hardware. It will integrate various assets and technologies, including but not limited to electric vehicle technology, the right to use the vast intelligent evolutionary experience architecture (SEA), brand authorization, three power technologies, supply chain system construction and user ecological construction.

The joint venture company will become a subsidiary of Geely Automobile, and its financial performance will be consolidated with Geely Automobile.

As early as last September, the Shanghai Stock Exchange disclosed that Geely Automobile had an IPO meeting in science and technology innovation board. However, Geely has made no substantial progress in the process of officially landing in science and technology innovation board.

China’s stock market regulator questioned whether the company was high-tech enough, Lianhe Zaobao quoted people familiar with the matter as saying.

In this regard, Yang Xueliang, vice president of Geely Holding, said that there is no further information to provide. According to the information disclosure standard of the listing process, everything is subject to the approval of the regulatory authorities.