BYD: Q3 2024, New Model Momentum And Supportive Policies Driving Growth

seekingalpha11-02

BYD's 3Q24 revenue surpassed Tesla for the first time since inception.Volume growth is likely to remain sustainable driven by superior value proposition in the budget EV segment.Supportive macro ...

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The net profit increased 11% to RMB 11.6bn, the highest quarterly net profit since its inception. The topline revenue of RMB 201bn grew by +24% y/y, surpassing that of Tesla (TSLA) for the first time. The share sold off by -4% during Hong Kong trading as net profit per car came in at roughly RMB 9,300, a decline of 18% y/y and slightly below the consensus expectation of RMB 10,000. However, we are bullish on BYD’s outlook due to continued volume momentum and strong unit growth in October. Additionally, favorable macro policies support EV demand in China, and BYD will likely be a key beneficiary.   Company report, Astrada AdvisorsQ3 can be characterized by a slight product mix deterioration due to a higher concentration of the budget NEVs, offset by a slight improvement in gross profit margin. We note that the sequential improvement in gross margin was due to the debut of the DM-i 5.0 plug-in hybrid, which drove roughly RMB 3k—RMB 6k in ASP on top of a lower cost structure than the last generation DM-i 4.0. This resulted in NEV's gross profit margin reaching 22%, driving an increase in gross profit per vehicle to RMB 35.6k, up +17% QoQ. At the net profit level, it is worth noting that BYD Electronics, BYD’s assembly subsidiary, contributed roughly RMB 1bn to 1.5bn in attributable profit due to a better-than-expected gross profit margin. If we are to net out BYDE’s RMB 1.5bn in net profit from BYD’s net profit of RMB 11.6bn, the net profit per car is roughly RMB 9,300. Company report, Astrada AdvisorsIn terms of volume, Song PHEV was the top-selling model, followed by Yuan EV and Seagull on a quarterly basis. However, the Qin L PHEV and Sea Lion 07 grew the fastest quarterly volume.   Company report, Astrada AdvisorsWith a 35% market share in Q3 amid a highly competitive environment, BYD’s growth demonstrated solid execution driven by its competitive positioning and superior value proposition, in our view. Based on the October data, the Q4 outlook for BYD appears to be positive. Domestic retail delivery surpassed 400k, reaching another record monthly volume since inception, while the wholesale volume hit another record high, surpassing 500k. Company report, Astrada Advisors We are positive on BYD shares for the rest of the year, fueled by accelerated momentum from the new model rollout and supportive macro policies. On the new models, both the Denza and Fangchengbao are off to a solid start in October. For Fangchengbaothe off-road SUV, the wholesale volume hit a record high, up 11% MoM to over 6k units after reducing the price tag by around RMB 50k from RMB 290k to RMB 350k in July. The Bao5 off-road SUV is considered one of the popular luxury off-road SUVs in China. Besides the off-road feature that Chinese consumers widely seek after, the interior features a more high-end triple screen setup (two 12.3-inch instrument panels and a 15.6-inch central control screen) with physical buttons seamlessly embedded throughout the cabin to combine both tactile feedback and advanced tech. We expect the price reduction to further drive consumer demand, and the recent trend is clearly positive. October retail sales exceeded 5k, outperforming its direct competitors, such as the Great Wall Motors Tank model, which sold around 3k-4k in October. The upcoming Fangchengbao Bao8 SUV could further accelerate the demand by year-end, given that Bao8 features the Huawei ADAS 3.0 system, which provides driver assistance features for both urban and highway environments. Denza Z9GT also had a strong start since its launch in September, with 5k non-cancellable orders within 36 hours of the debut. The October wholesale volume indicates that this demand trajectory is likely to continue. We note that Z9GT saw a wholesale volume of over 3k, doubling from the prior month. Besides the momentum of the new model, we also believe that the supportive trade-in subsidy policy towards EVs could allow BYD to be a key beneficiary. We note that on July 25, China’s National Development and Reform Commission and Ministry of Finance both came out with an announcement that focused on strengthening the trade-in for large-scale equipment and consumer goods in an effort to boost consumption. The announcement raised the passenger vehicle subsidy by nearly 100% from RMB10k to RMB 20k per unit for NEV vehicles and RMB 7k to RMB 15k per unit for ICE vehicles. Given that this subsidy amount is the same for different price ranges, lower-priced vehicles are likely to benefit the most from this trade-in subsidy, given the higher cashback-to-price ratio. As such, low-priced NEVs produced by BYD are likely to be key beneficiaries, given that the majority of BYD’s NEVs lined up are focused on the low-priced segment. Finally, the export risk remains low for BYD. We note that export volume as a percentage of total volume remains high in the single digits for BYD as much of the demand has been domestic rather than international. As such, we do not believe the recently announced tariff against Chinese EVs by the European Union will have a material impact on BYD's export numbers.   Company report, Astrada AdvisorsIn conclusion, we are positive about BYD’s growth outlook after the 3Q24 result. We believe volume momentum is likely to be sustainable for the rest of the year, and the ongoing subsidy program will likely support the fundamentals. With the stock trading at 16.5x 2025E P/E and consensus revenue and EPS growth of 20%, we believe BYD is reasonably priced for long-term investors. Risks to our thesis include China's macro overhang and the overall competitive environment. The market continues to anticipate a large stimulus package being rolled out by November 8, with some investors and economists hoping that the measures could drive consumer demand. If the stimulus measures are ineffective in driving consumer demand, then BYD is likely to face demand pressure in 2025. The lack of demand could drive further price competition amongst the auto brands. Although we are positive about the demand catalyst from Fangchengbao after the price reduction, as we pointed out earlier, we are concerned that profit per car could be under pressure if further price reduction is needed to stimulate demand.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2480820341"}