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5 Analyses of management discussion and analyst’s opinion.doc

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5 Analyses of management discussion and analyst’s opinion

5.0 Analyses of management discussion and analyst’s opinion Appendix C summarizes some Analysts view of Geely. However, not all Analysts agree upon whether you should sell, hold or buy the stock. Several reasons are discussed in the respective reports; though all analysts agree that Geely is a healthy company with a stable revenue base, increasing volume and satisfactory margins. What analysts do not agree upon is whether Geely can maintain their growth potential and gain market share in both the domestic and export market. The penetration in the Chinese passenger car market is extremely low compared to USA and Europe (JP Morgan, 2010) and as the Chinese people are getting wealthier the market potential will increase the upcoming years. Loads of Automobile manufacturer will compete to gain market share and earn extraordinary profit. Credit Suisse and CIMB are representing the negative analysts who believe that domestic market competition will increase as the nearest competitors have invested heavily in the industry and developing of new brands (CIMB, 2010). Geely Management has not commented upon this in their report, but instead they emphasize they have sufficient funds to cover investments and RD expenses to facilitate their own growth. Additionally, Credit Suisse (2010) emphasize that every auto manufacturer in the Chinese market are currently investing in production facilities. Credit Suisse is therefore worried it will result in an oversupply and consequently make inventories to rice. To bring inventories down a price war on vehicles can arise. This will affect margins negatively. JP Morgan represents a positive analyst that strongly believe that the current acquisition of Volvo will result in synergy effects and a technology platform that no one else can imitate in the near future. Further JP Morgan is confident that the low penetration of vehicles in the domestic market will ensure future growth, and therefore recommends buying the stock. DBS, Deutche Bank a