20200901-招银国际-比亚迪-002594.SZ-Expect_high_growth_of_NEV_in_2H20E_7页_1mb

BYD (002594 CH) Equity Research Summary

Core Content

This report provides an equity update on BYD (002594 CH), highlighting its performance in the first half of 2020, guidance for the second half, and revised financial forecasts. The analysis is based on the company's financial data, market conditions, and internal performance metrics, with a focus on its growth prospects, particularly in the New Energy Vehicle (NEV) segment.

Main Points

1. Financial Performance in 1H20

• Revenue: RMB60.5bn, a 3% YoY decline.
• Net Profit (NP): RMB1.7bn, a 14% YoY increase.
• Operating Cash Flow (OCF): RMB15.5bn, with an OCF/Core profit ratio of 5.2.
• Advance Receipts: Increased by RMB3.7bn from the beginning of the year, reflecting strong order backlog.
• Asset Impairment: Total of RMB658mn, which the report suggests is clearing historical burdens, potentially improving the balance sheet.

2. Auto Segment Performance

• Revenue: RMB32.0bn, a 6% YoY decline despite a 30.4% drop in sales volume.
• Unit Revenue: Increased by 36% YoY to RMB202K.
• Gross Margin (GPM): Improved by 0.7ppt to 23.9%.
• NEV Segment: Increased sales proportion by 2ppt YoY, driven by strong performance of the "Song Pro" and "Han" models.

3. NEV Outlook for 2H20E

• Sales Volume Forecast: Expected to increase by 74% YoY.
• ASP (Average Selling Price): NEPV ASP is projected to rise by 18% YoY to RMB196K.
• Strong Consumer Demand: Expected for "Han" in 2H20E, with 300k orders in backlog.

4. Handset Components and Assembly Services (HCAS)

• Revenue: RMB23.3bn, flat YoY.
• GPM: Increased by 5ppt to 13.6%, partially due to the performance of the mask business under BYDE (285 HK).

5. Revenue and Profit Forecast Revisions

• Revised FY20-22E EPS: Up by 114%/53%/43% respectively.
• Target Price (TP): Lifted slightly to RMB113.09, reflecting 79.0x/70.6x FY20/21E PER.
• CMBIS vs Consensus: CMBIS estimates show a 20%–30% higher revenue and profit expectations for FY20E and FY21E.

6. Segment Revenue Breakdown

• Automobiles and Related Products: RMB66,457mn in FY20E, growing 5% YoY.
• Handset Components: RMB86,049mn in FY20E, growing 61% YoY.
• Rechargeable Batteries and Photovoltaic: RMB12,607mn in FY20E, growing 20% YoY.
• Other Business: RMB646mn in FY20E, growing 10% YoY.

7. Valuation and Market Position

• SOTP Valuation (2021E): Overall value at RMB363.0bn.
• P/E Ratio: 59.36x for FY20E, 53.09x for FY21E, and 23.08x for FY22E.
• P/B Ratio: 3.78x for FY20E, 3.50x for FY21E, and 2.98x for FY22E.
• ROE: Expected to rise to 14.31% in FY22E, showing improved profitability.

8. Key Ratios

• GPM: Improved to 17% in FY20E and is expected to remain stable.
• Net Margin: Expected to increase to 3% in FY20E and 5% in FY22E.
• Debt/Equity Ratio: Net debt/equity ratio is expected to decrease from 91% in FY20E to 78% in FY22E.

Key Information

• Analyst Ratings: Maintain "BUY" rating.
• Target Price: RMB113.09 (up from RMB112.12).
• Price Performance: 12-mth chart shows significant movement, with a range of 42.27 to 97.84.
• Share Performance: Strong 3-mth return of 43.4% absolute and 18.2% relative to the market.
• Shareholding Structure: Key shareholders include Wang Chuanfu (18.83%), Lv Xiangyang (8.77%), and Berkshire Hathaway Energy (8.25%).

Summary of Forecasts

Conclusion

BYD is expected to show strong performance in the NEV segment, with significant growth in both volume and ASP in 2H20E. The company's financial health is improving, as seen in the increased GPM and EPS, and the improved balance sheet after asset impairment adjustments. CMBIS maintains a "BUY" rating, citing strong growth potential and a revised target price of RMB113.09. The report also highlights the potential of BYDE as a key supplier to Apple, which could further boost BYD's revenue and profitability.