BYD (1211 HK) Equity Research Summary
Core Content
BYD, a leading Chinese automotive and technology company, has demonstrated strong performance in its New Energy Vehicle (NEV) segment, particularly in December 2020, with NEV sales reaching 29,000 units. The company's flagship Han EV model contributed significantly to this success, with 12,000 units delivered in December alone. Overall, BYD's auto sales reached 56,000 units in December, showing a 30% YoY increase and a 4% MoM increase. For the full year 2020, cumulative NEV sales amounted to 427,000 units, aligning with CMBI's expectations.
Looking ahead to 2021, the report highlights several positive catalysts for BYD's NEV business, including the launch of new DM EV models, cooperation with DiDi for ride-hailing, expansion of power battery capacity, and the spin-off of its semiconductor segment. These initiatives are expected to significantly boost NEV sales volume to 364,000 units in 2021, representing a 99% YoY increase. The report also notes that BYD's market share in NEPV is projected to rebound to 20%, while ICE vehicle sales will remain relatively stable at 244,000 units, with a 3% YoY increase.
Key Information
Financial Highlights (2020E to 2022E)
| Metric |
FY18A |
FY19A |
FY20E |
FY21E |
FY22E |
| Revenue (RMB mn) |
130,055 |
127,739 |
157,047 |
215,856 |
273,037 |
| YoY Growth (%) |
22.79% |
-1.78% |
22.94% |
37.45% |
26.49% |
| Net Income (RMB mn) |
2,780 |
1,614 |
5,256 |
7,659 |
10,719 |
| EPS (RMB) |
0.93 |
0.50 |
1.83 |
2.71 |
3.83 |
| YoY Growth (%) |
-34% |
-47% |
268% |
48% |
41% |
| P/E (x) |
226.21 |
423.83 |
115.16 |
77.75 |
54.99 |
| P/B (x) |
10.42 |
10.13 |
9.18 |
8.09 |
6.94 |
| Yield (%) |
0.10% |
0.03% |
0.09% |
0.13% |
0.19% |
| ROE (%) |
5.05% |
2.88% |
8.80% |
11.46% |
13.93% |
| Net Gearing (%) |
64% |
79% |
86% |
79% |
72% |
Market Position and Valuation
- Market Cap (HK$ mn): 663,002
- Avg 3 mths t/o (HK$ mn): 2,443.62
- 52-week high/low: 248 / 33.46
- Total Issued Shares (mn): 915 (H) / 1,813 (A)
Shareholding Structure
- Wang Chuanfu: 18.83%
- Lv Xiangyang: 8.77%
- Bershire Hathaway Energy: 8.25%
Share Performance (vs. Bloomberg)
| Period |
Absolute |
Relative |
| 1-mth |
32.4% |
24.9% |
| 3-mth |
87.1% |
62.3% |
| 6-mth |
224.6% |
204.2% |
Target Price
- H-Share Target Price: HK$300.0 (+24.9% upside from current price of HK$240.2)
- A-Share Target Price: RMB293.2
Main Views
NEV Sales Outlook
- The NEV penetration rate in China is expected to exceed market expectations in 2021, reaching 7% with a sales volume of 1.92 million units, a 57% increase from 2020.
- BYD's NEV market share is projected to rebound to 20% in 2021, significantly boosting its sales volume to 364,000 units.
- The company is expected to gradually shift its focus from ICE to NEV, with NEV accounting for 61% of total sales and ICE for 39% in 2021.
Power Battery Segment
- The report highlights the strong demand for LFP batteries, which is expected to boost segment valuation.
- The valuation multiple for the power battery segment is revised from 25x to 35x for 2025, leading to a valuation of RMB189 billion.
- BYD's blade battery is noted for its high volume density and cost efficiency, making it a strong contender in the LFP battery market.
Semiconductor Spin-off
- BYD plans to spin off its semiconductor business in 2021, focusing on IGBT modules and third-generation semiconductor products (SiC).
- The spin-off is expected to enhance the company's position in the power battery segment and boost the external shipment pace, thus increasing the segment's value.
H-Share Placement
- BYD has submitted an application for additional H-share issuance, which is expected to have a limited pricing discount and dilution impact on EPS.
- The H-A discount is at a close level, which is favorable for fundraising and accelerating power battery capacity expansion.
Key Figures and Valuation
SOTP Valuation Summary
| Business Segment |
Valuation Method |
Valuation Multiple |
2021E Valuation (RMB mn) |
Implied Share Price (RMB) |
| Automobiles and Related Products |
PS |
6.6x |
656,716 |
240.7 |
| Power Battery |
2025E/PE |
35x |
189,338 |
69.4 |
| IGBT |
2025E/PE |
35x |
15,995 |
5.9 |
| Total Valuation |
- |
- |
941,100 |
345.0 |
| Valuation @ Conglomerate Discount |
- |
0.85 |
799,935 |
293.2 |
Valuation Comparison with Major NEV Players
| Ticker |
Major Model |
2021E Sales (units) |
Market Cap (US$ mn) |
2021E Sales Revenue (US$ mn) |
P/S Multiple |
| TSLA US |
Model 3 |
12,143 |
773,525 |
46,616 |
16.6 |
| NIO US |
ES6, EC6, ES8 |
7,007 |
85,374 |
4,037 |
21.1 |
| LI US |
ONE |
6,126 |
31,497 |
2,523 |
12.5 |
| XPEV US |
G3, P7 |
5,700 |
35,538 |
1,967 |
18.1 |
| BYD (1211 HK) |
Han* |
12,089 |
69,104 |
10,153 |
6.6 |
Valuation Comparison with Major Power Battery Players
| NEV Company |
Ticker |
Market Cap (RMB mn) |
2021E Net Profit (RMB mn) |
P/E |
BVPS |
P/B |
P/S |
| CATL |
300750 CH |
942,272 |
7,184 |
131.2 |
27.2 |
14.9 |
13.7 |
| BYD Power Battery |
1211 HK/002594 CH |
162,286 |
N/A |
N/A |
N/A |
N/A |
N/A |
| EVE Energy |
300014 CH |
183,900 |
2,842 |
64.7 |
6.9 |
14.2 |
13.4 |
| Guoxuan High-Tech |
002074 CH |
55,051 |
435 |
126.6 |
10.2 |
4.2 |
7.2 |
Summary of Key Financials
- Revenue Growth: Expected to increase by 37.45% in 2021E and 26.49% in 2022E.
- Net Profit Growth: Expected to increase by 48% in 2021E and 41% in 2022E.
- EPS Growth: Expected to increase by 12% in 2021E and 40% in 2022E.
- Gross Margin: Expected to remain stable at around 17.58% in 2021E.
- Operating Margin: Expected to increase to 5.21% in 2021E.
- Net Margin: Expected to increase to 3.55% in 2021E.
- ROE: Expected to rise to 13.93% in 2022E.
Conclusion
The report maintains a BUY rating for BYD, citing strong performance in the NEV segment, the potential of its power battery business, and the spin-off of its semiconductor division. The revised target price for H-shares is HK$300.0, reflecting the optimism about the company's future growth and the potential for the power battery segment to significantly increase in value. BYD's strategic moves and market position are expected to drive its valuation and earnings in the coming years.
