BYD Co. (.SZ)_ 4Q24 First Take_ Revenue_Net profit in-line, with higher opex offset by higher government subsidy; Buy

Summary of BYD Co. (002594.SZ) 4Q24 Conference Call Company Overview - Company: BYD Co. (002594.SZ) - Industry: New Energy Vehicles (NEV) Key Financial Results - Revenue: Increased by 4% compared to Goldman Sachs estimates (GSe) and Bloomberg Consensus - EBITDA: Increased by 3% vs. GSe - Net Profit: Decreased by 3% vs. GSe, but increased by 5% vs. Bloomberg Consensus - Gross Margin: Reported at 17.0%, significantly lower than GSe (23.6%) and Consensus (20.8%); adjusted gross margin would have been 21.5% [2][2][2] - Operating Expenses: Administrative expenses rose by 32% quarter-over-quarter (qoq) in 4Q24, while taxes and surcharges increased by 30% qoq [2][2][2] - Other Income: Primarily from government subsidies, increased by 105% year-over-year (yoy) and 18% qoq, accounting for 33% of net profit in 4Q24 [2][2][2] Balance Sheet and Cash Flow - Net Cash: Rmb113 billion at the end of 4Q24, up from Rmb52 billion in 3Q24 and Rmb81 billion in 4Q23 [2][2][2] - Free Cash Flow: Positive free cash flow of Rmb49 billion in 4Q24, compared to Rmb20 billion in 3Q24 and Rmb51 billion in 4Q23 [2][2][2] - Cash Conversion Cycle: Improved to -60 days in 4Q24 from -79 days in 3Q24 and -77 days in 4Q23 [2][2][2] - Debt Ratios: Total debt to equity ratio improved to 15% from 24% in 3Q24, and total liabilities to asset ratio decreased to 75% from 78% [2][2][2] Future Outlook and Management Guidance - Investor Call: Scheduled for March 28, focusing on 2025 volume and profitability guidance, consumer demand for new models, overseas expansion plans, and strategies on smart driving and AI [3][3][3] - Sales Volume Growth: Expected to grow from 4.3 million in 2024 to 8.9 million by 2030, capturing one-third of China's NEV wholesale demand [10][10][10] - Overseas Market: Anticipated to contribute 23% of incremental vehicle sales volume from 2024 to 2030 [10][10][10] Investment Thesis - Positioning: BYD is well-positioned in both domestic and international markets, with a comprehensive product portfolio and strong in-house capabilities [10][10][10] - Valuation: A/H shares are trading below historical average 12-month forward P/Es, considered attractive for investment [10][10][10] - Risks: Potential risks include intensifying competition in the electric vehicle market, slower-than-expected overseas expansion, and lower-than-expected external battery sales [10][12][12] Conclusion - Recommendation: The company is rated as a "Buy" due to its strong market position, growth potential, and attractive valuation metrics [10][10][10]