BYD- H&A_ Placing on Positive Catalyst Watch_ The advancement in AD solution and adoption. Thu Feb 06 2025

Summary of BYD Company Limited - H&A Research Call Company Overview - Company: BYD Company Limited - Ticker: 1211 HK (H shares), 002594 CH (A shares) - Market Capitalization: Approximately $110.6 billion for H shares, $116.7 billion for A shares Key Industry Insights - Industry: Automotive, specifically focusing on electric vehicles (EVs) and advanced autonomous driving (AD) solutions - Market Trends: - Rising adoption of advanced autonomous driving solutions - Increased market share for Chinese brands in overseas markets due to foreign competitors facing financial pressures from tariffs Core Investment Thesis - Growth Projections: BYD's global deliveries expected to reach 6.5 million units by 2026, with 1.5 million from overseas markets and the remainder from domestic sales [12][27] - Market Share Expansion: Anticipated growth in global light vehicle market share from 3% in 2023 to 7% in 2026, and NEV market share (excluding HEV) continuing at approximately 22% [12][27] - Strategic Milestones: Completion of four overseas production bases in Thailand, Indonesia, Brazil, and Hungary by the end of 2026, which will enhance BYD's global footprint [12][27] Financial Performance and Projections - Earnings Estimates: BYD's earnings estimates for 2025 are approximately 10% above consensus, with projected net income of Rmb54.1 billion [12][18] - Revenue Growth: Expected revenue growth from Rmb602.3 billion in FY23 to Rmb1,098.3 billion by FY26, reflecting a compound annual growth rate (CAGR) of approximately 25.9% [24] - Profit Margins: Anticipated improvement in net profit margin from 5.0% in FY24 to 5.9% in FY26 [24] Advanced Autonomous Driving (AD) Solutions - Technological Developments: BYD plans to debut its advanced navigation on autopilot (NOA) solutions, including city-level and highway features, powered by Nvidia and Horizon Robotics chips [4] - Cost Reduction: Significant reduction in bill of materials (BOM) costs for AD solutions, with city NOA expected to drop from Rmb20k in 2024 to Rmb10-15k in 2025 [6][7] Valuation and Price Targets - Price Target: - H shares: HK$475.00 by December 2025 - A shares: Rmb440.00 by December 2025 [11][26] - Valuation Methodology: Sum-of-the-parts (SOTP) valuation approach, with key assumptions including a P/E ratio of 13x for EV battery and 1.4x for NEV manufacturing [13][28] Risks and Challenges - Downside Risks: Potential for worse-than-expected sales and increased competition from both domestic and foreign mass-market brands, such as Volkswagen and Geely [15][30] Additional Insights - Stock Performance: BYD's stock has increased by 18% year-to-date, outperforming the HSCEI index, which rose by 6% [1] - Market Positioning: BYD is positioned to leverage its extensive distribution channels and diverse product portfolio to drive industry penetration in the AD space [4] This summary encapsulates the key points from the research call regarding BYD Company Limited, highlighting its growth potential, financial projections, technological advancements, and associated risks.