[I-bank focus]Morgan chops Geely Automobile (00175) to HK$5

    Morgan Stanley lowered its target price for Geely Automobile (00175) to HK$5 from HK$8 and maintained its "underweight" rating.
  The research house said Geely's sales volume in the first 5 months of 2019 was down 12% to 561k units, only accounting for 37% of its full-year sales target of 1.51m units, which implies 0.6% sales growth. Sales growth has worsened in recent months, with April and May sales down 19% and 27%.
  Sales of Geely's old models have declined in the double-digits year-to-date, with multiple models down over 30% and New Vision down as much as 50%, while its new models
are struggling to ramp up, with the best of its new models, Jiaji MPV, only seeing 4k units per month.
  Morgan cited its channel checks noting that Geely is reducing its R&D workforce by 25% and also plans to reduce new model launches in 2020. It believes Geely is under pressure to reduce costs as sales come under increasing pressure. In turn, Morgan expects this to hurt Geely's long term prospects as the company relies on its new models to generate sustained profit, with significant declines in sales of its old models.
  It expects net profit of only Rmb3.5-3.6bn for Geely in 1H, given the weak sales and
significant discounts, implying a yoy decline of 46%-48%. For the full year, it cut its net profit assumptions by 39% to Rmb7bn, implying a 44% decline as it expects continued deterioration in Geely's sales. Morgan also cut its 2020 and 2021 net profit assumptions by 41% and 44%.