Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.

Geely Automobile Holdings Ltd. lured investors with the promise of worldwide expansion after big purchases like Volvo Car AB and Proton Holdings Bhd., making it the best performer on the Hang Seng Index in the last 12 months. 

It turns out the carmaker's greatest value is providing investors with a pure play on China's rising middle class.

Geely is the best performer on the Hang Seng Index, beating tech giants Alibaba and Tencent
Source: Bloomberg

Less than 1 percent of Geely's unit sales in the first six months came from exports, the company said Wednesday in reporting jaw-dropping results for the half-year: Profit jumped 128 percent from 12 months earlier to 4.34 billion yuan ($650 million), and sales volume climbed 89 percent to 530,627 vehicles.

Investors will recall that Geely derived more than 20 percent of its sales from exports back in 2013. Then the carmaker was stung in 2014 by a 77 percent drop in the Russian ruble, triggering a 50 percent decline in profit. 

Geely executives said Wednesday they'll continue to take a "more prudent approach" to export markets. Read: They're not changing course soon. That's a smart move. 

Export Woes
Profit slumped in 2014 after Geely was hit by a 77 percent drop in the Russian ruble
Source: Bloomberg

Although China's auto sales growth has slowed, the market still grew 6.4 percent in July from the year before, compared with a 6 percent drop in the U.S. It's far better in any case to focus on growth initiatives that Geely's home market cares about -- churning out new SUV models faster than its competitors, producing higher-priced models with more bells and whistles, and coming out with electric vehicles.

While all the big manufacturers, from General Motors Co. to Volkswagen AG, have exposure to China, they also have issues to deal with elsewhere that have weighed on their shares. And domestic brands are gaining favor in China, where they make up more than 40 percent of annual sales.

In the first half, the passenger-vehicle market for indigenous brands expanded 4.3 percent from the year before, Geely said, citing data from the China Association of Automobile Manufacturers. That Geely increased sales by 89 percent in the period shows how it's eating into competitors' share. 

Certainly, investors must pay for the growth. Geely is trading at an EV/Ebitda multiple of 10.1 times, compared with a 6.2 EV/Ebitda for global automakers in a Bloomberg Intelligence index. That's not as crazy as it seems set against the likes of Guangzhou Automobile Group Co., which is trading at an EV/Ebitda multiple of 20.

Sticker Shock
Geely's shares look pricey compared with global automakers but are palatable against Guangzhou Auto
Source: Bloomberg

Although Geely's founder and controlling shareholder, Li Shufu, would probably like to think of himself as a global car mogul, his real success has come from exploiting a home court advantage. And who's to say going global is always the best way to expand? 

-- Shuli Ren contributed to this article.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in Hong Kong at

To contact the editor responsible for this story:
Paul Sillitoe at