Ge Long Hui·2025-11-01 03:27Core Viewpoint - BYD's 3Q25 earnings showed a quarter-on-quarter recovery, although the pace was slower than expected, supported by its industry-leading technologies and lessons learned from pricing strategy and inventory management [1][2]. Financial Performance - BYD's 3Q25 revenue decreased by 3% year-on-year, with a 2% decline in sales volume [2]. - Gross profit margin (GPM) in 3Q25 widened by 0.7 percentage points quarter-on-quarter but narrowed by 2.5 percentage points year-on-year to 17.6%, which was below forecasts [2]. - Net profit rose by 23% quarter-on-quarter but fell by 33% year-on-year to RMB 7.8 billion in 3Q25, translating to a net profit per vehicle of approximately RMB 7,000 [2]. Future Outlook - BYD is reducing dealer inventories, which may enhance sales volume in 4Q25 [3]. - The FY25 sales volume forecast has been revised down from 4.9 million units to 4.61 million units, with an estimated 1.34 million units for 4Q25 [3]. - GPM is expected to gradually recover to 18.0% in 4Q25, with net profit per vehicle projected to rise to about RMB 7,700 [3]. - The decline in profitability since 2Q25 is attributed to increased competition in China, with other automakers launching competitive PHEVs [3]. - BYD's introduction of advanced technologies in 2025 is anticipated to support future sales and earnings, with projected sales volumes of 5.25 million and 5.8 million units in FY26 and FY27, respectively [3]. - Net profits are expected to increase by 30% and 20% year-on-year to RMB 43.8 billion and RMB 52.5 billion in FY26 and FY27, respectively [3]. Valuation - The target price for BYD's H-shares has been adjusted from HK$140 to HK$125, based on a 20x FY27E P/E ratio [4]. - The A-share target price is set at RMB 125, reflecting an A/H premium of 8% [4].