Geely FC1 launched this month Geely H1 profits triple
FC-1 will be on sale end of this month. costs is 100,000 rmb
Monday September 18, 3:07 PM
UPDATE 1-Chinese car maker Geely jumps after H1 net triples
(Adds analysts comments, updates stock performance)
By Alison Leung
HONG KONG, Sept 18 (Reuters) - Shares in Chinese car maker Geely Automobile Holdings Ltd. surged on Monday after topping rivals with a tripling in first-half earnings and unveiling plans to double capacity in two years, but a senior executive warned that margins could dwindle in the second half.
Geely, which makes some of China's cheapest cars, will launch a 100,000 yuan ($13,600), 1.8-litre "FC1" sedan by the end of the month, its latest salvo to grab market share in the world's third-largest vehicle arena.
The FC1 will be an advanced version of the "Free Cruiser", developed with South Korea's Daewoo International last year.
"We think our new model is comparable to South Korean and Japanese cars, but much will depend on the market's reception," executive director Lawrence Ang told Reuters in a telephone interview on Monday.
Shares of Geely ended Monday morning up 3.45 percent at HK$0.90, boosted by a 196 percent rise in interim net profit to HK$121 million (US$15.55 million).
But the smallest Hong Kong-listed car maker was cautious on the market's outlook in the second half as a price war intensified.
"We're on high alert. Our net profit margin in the first half was 8 percent and that could easily be eroded," Ang said.
Geely earlier this month cut prices on its "Free Cruiser" series by 1,000 yuan to 5,000 yuan, or an average of just below 5 percent, keeping pace with rivals' moves.
This followed a price cut in April in Geely's other models of between 4 percent and 10 percent.
However, analysts say Geely shares should benefit from falling oil and raw material prices, which could boost the firm's sales and reduce costs.
The Zhejiang-based auto maker said on Friday it planned to more than double its annual capacity to 650,000 cars in two years from 300,000 units by the end of 2006.
Geely's parent, controlled by founder and chairman Li Shufu, is investing an estimated 3 billion yuan to build four new plants with a total initial capacity of 300,000 units.
"Geely will buy stakes in these plants from the parent when construction is completed and ready for production," Ang said.
The company's two 46.8 percent-owned car maker units sold a total of 91,953 vehicles in the first half, up 60 percent from the same period last year -- satisfying 51 percent of an annual sales target of 180,000 units.
In the first eight months, Geely sold 48 percent more vehicles from a year earlier, or 112,633 units.
Geely also maintained an export target of 10,000 cars for 2006 after selling 4,000 abroad in the first half.
"We are preparing for that and significant exports should start in 2010," Ang added.
The stock has risen more than 180 percent this year,
outpacing a near 30 percent gain on the index for Chinese
companies listed in Hong Kong .
Some Hong Kong-listed Mkt cap p/e H1 net stock change
Chinese car maker (US$mln) 2006 pct yr-to-date
Dongfeng 3,322 11.1 +69 +56 pct
Denway 1,580 9.6 +30+11 pct
Brilliance 561 23.8 n/a +4 pct
Geely 464 21.8 +196+177 pct
Index for Chinese firms listed in Hong Kong +31 pct
Source: Reuters Estimates'