Brokers slash Geely targets after profit warning over Russian risks
Currency volatility in Russia, the firm's biggest foreign market, could lead to half of this year's earnings being wiped out by falls in export sales
Car maker Geely Automobile stunned investors yesterday with a profit warning that said as much as half of this year's earnings may be wiped out by falls in export sales and losses from operations in Russia, the firm's biggest foreign market, which is buckling under a currency crisis.
Geely shares traded in Hong Kong sank as much as 22.1 per cent in response to the news, eventually recovering some poise but still ending down 17 per cent on the day at HK$2.59.
Geely, which owns Volvo, said in a filing to the Hong Kong stock exchange that it expected net profit for this year to fall by about 50 per cent from 2.66 billion yuan (HK$3.36 billion) last year.
JP Morgan cut its target price for the carmaker to HK$3.50 from the previous HK$3.70 in response. The bank also revised down its earnings forecast for Geely by 30 per cent to 1.4 billion yuan this year, and cut its forecast for next year by 17 per cent to 2.2 billion yuan.
Geely's foreign exchange losses could amount to 600 million yuan in the second half of this year and 300 million yuan next year as the Russian rouble could depreciate by another 40 per cent by the end of 2015, JP Morgan analysts wrote in a research note.
The rouble has lost about 50 per cent of its value against the dollar so far this year - with a massive 20 per cent being lost in just the first two trading days of this week.