Morgan Stanley has issued a research report stating that BYD COMPANY (01211), following a year of adjustment, is expected to see a robust recovery in its second-quarter performance. This is anticipated to help rebuild market confidence and provide support for a valuation re-rating in the second half of the year and looking ahead to 2027. The firm maintains its 'Overweight' rating with an H-share price target of HK$121.
The bank estimates that BYD's second-quarter net profit will rebound from the low base of the first quarter to 9 billion yuan, corresponding to sales of 1.1 million vehicles, a sequential increase of 58%. This growth is driven by a 68% quarter-on-quarter rise in domestic sales and a 47% increase in overseas sales. Second-quarter revenue is projected to reach 217 billion yuan, up 45% sequentially, with the overseas sales mix temporarily declining due to faster domestic growth. The average selling price is expected to fall by about 2% quarter-on-quarter. Gross margin is forecast to remain stable sequentially at 19%. Operating expense ratio is anticipated to remain manageable following adjustments for capitalized R&D. This is expected to bring second-quarter profit per vehicle to 7,600 yuan, up from 5,700 yuan in the first quarter.
The report notes that currency exchange rates are a key variable, with a stronger Renminbi potentially masking better-than-expected operational profit performance. The outlook for the second half of the year is well-positioned, with market focus already shifting to 2027. Beyond favorable base effects, an intensive pace of new model launches coupled with easing battery production bottlenecks should restore positive sales growth. The bank forecasts full-year 2026 vehicle sales to reach 4.6 million units, comprising 2.8 million domestic and 1.8 million overseas sales. Sales for the second half of 2026 are projected at 2.8 million units, representing a 12% year-on-year increase.
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