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Can BYD’s share price keep motoring upwards?

The electric vehicle (EV) industry has been growing at an accelerating pace, and helping to lead the charge is Asia’s second-biggest winner of 2020: BYD [1211.HK]. It was beaten to the number one spot by internet services group Sea [SE].

The Shenzhen-headquartered company, perhaps best known for building rechargeable batteries such as the lithium-ion ones found in smartphones, was an early adopter of EV technology. Last year, BYD’s share price skyrocketed 409.0% from 2 January through to 30 December, rising from HKD38.308 to HKD195.00. It also jumped 481.8% from its year-low of HKD33.514, recorded on 23 March. BYD’s market value rose 359% in 2020, ending the year worth a healthy $78bn, according to the Financial Times.

 

 

For the three months to the end of March 2020, BYD — which stands for ‘Build Your Dreams’ — reported a 35% drop in revenue to CNY19.68bn, while net profit tumbled 85.0% from CNY749.7m in Q1 2019 to CNY112.6m. Meanwhile, overall vehicle sales fell by 48% to 61,273 units, which included 22,192 new energy vehicles (NEVs). 

In April, the company said that it expected the Chinese economy to bounce back strongly and quickly from the impact of the coronavirus pandemic, according to Bloomberg. For the third quarter of fiscal 2020, BYD reported revenue of CNY44.52bn, up 40.72% year-over-year, while net profit was up an astronomical 1,362% to CNY1.751bn. The company shifted 19,881 NEVs in September alone. 

 

1,362%

BYD's Q3 net proft increase YoY

 

Model results

BYD’s share price owes its 2020 success to a number of factors. The firm launched its Han EV back in June, a saloon model that has been pinpointed as a potential rival to Tesla’s [TSLA] Model 3. Data released at the end of December showed that the Han EV was November’s fourth most popular plug-in vehicle in China in terms of sales. BYD shifted 7,842 units of the model, while Tesla sold 21,606 Model 3 vehicles.

Also in June, BYD reportedly inked its first battery supply deal with a major global automotive company, Ford [F], according to Reuters. The deal will see EV components, such as batteries and power management devices, installed in Ford vehicles sold in China.

However, perhaps the biggest contributing factor for BYD’s share price rise has been the frothy road trip the wider EV industry has taken in the last year or so.

Fellow Chinese manufacturer Nio [NIO]’s share price has risen an eye-watering 1,030.37% in the 12 months to 19 January, hitting an all-time intraday high of $66.99 on 11 January 2021. Li Auto [LI] is up 115.31% since debuting on the Nasdaq on 30 July. Xpeng [XPEV] has risen 153.72% since debuting on the NYSE on 27 August (as of 19 January’s close). 

 

1,030.37%

Nio's 12-month rise

 

The future picture

Heading into 2021 and beyond, BYD recently unveiled the EV it has been developing for the Chinese ride-hailing company and Uber rival, Didi Chuxing, which has the backing of Softbank [9984]. Fintech company Ideanomics [IDEX] said in December that 2,000 units had been ordered. 

Despite the exciting partnerships BYD is rolling out and the potential for future battery technology developments, the frenzy surrounding the EV industry has left some analysts wary. Rebecca Wen, analyst at JP Morgan, downgraded BYD from overweight to neutral in November, raising concerns about its valuation. 

As reported by MarketWatch, even though Wen thinks the company has an attractive and interesting story regarding how it’s transforming itself into a top battery maker, “the stock now [looks] fairly valued to us, hence our advice to book profit and look for a better entry point” when overall growth in the EV industry has decelerated.

There are currently 30 analyst ratings available for BYD, according to the Wall Street Journal. Twenty of these are buy, two overweight, five hold, and three sell. BYD’s share price targets on the site are within a range of HKD238.05 and HKD349.20, with a consensus of HKD215.63, which would represent an 11.6% decrease from its 20 January closing price.

 

Market cap HKD710.7bn
PE ratio (TTM) 230.43
EPS (TTM) 1.059
Quarterly revenue growth (YoY) 40.70%

BYD's share price vitals, Yahoo Finance, 20 January 2021

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