After surpassing Tesla in sales to become the global leader in electric vehicle (EV) sales, BYD has successfully attracted the attention of many investors. As a foreign heavyweight, Citibank has also chosen to upgrade BYD's rating to "Buy".

Following its sales surpass over Tesla, BYD is still working hard to capture global market share, to which the capital market has also responded quickly.

On March 13, the latest report released by Citibank stated that it would initiate a 90-day upward catalyst observation for BYD, with a target price for H-shares at HKD 463, which has a potential increase of over 120% compared to the closing price on that day, and the rating is "Buy".

It is worth noting that as of the closing on March 15, BYD's Hong Kong stock price was reported at HKD 209.47 per share, which is more than double the target price given by Citibank. Previously, the historical highest price of BYD's Hong Kong stock was only HKD 331.74 per share.

In fact, BYD's ambition goes beyond this. While further improving the company's profits by perfecting its vast car manufacturing system, BYD is continuously seeking to expand in the global market.

Upgraded to a Buy Rating

BYD, in the spotlight, is attracting the attention of many capital providers.

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On March 13, Citibank stated that it would initiate a 90-day upward catalyst observation for BYD, with a rating of "Buy", and set its target price for H-shares at HKD 463.

It is reported that the upward catalyst observation usually represents that investment banks believe that the stock price of the company has the potential to rise in the near future, possibly due to upcoming new product releases, positive financial reports, changes in industry trends, or other events that may drive stock prices up.

Citibank believes that in March of this year, BYD's domestic retail sales may recover to 280,000 units, and exports are also expected to recover to 30,000 units. With March's wholesale plus moderate restocking, the total sales forecast for BYD in March is approximately 320,000 units, which is quite reasonable.Furthermore, Citibank's report also indicated that in the first quarter of 2024, BYD's net profit per vehicle is expected to stabilize at around 6,000 RMB. With the arrival of the new model cycle, the strengthening of cost economies of scale, the recovery of sales momentum, and the optimization of the product mix, BYD's net profit per vehicle in the second quarter may further increase to between 8,000 and 9,000 RMB, and the company's pre-tax profit margin improvement may exceed the recovery speed of the gross margin.

From an industry perspective, Citibank believes that the recovery of the domestic Beta value in the passenger car industry is mainly driven by plug-in hybrid electric vehicles (PHEV) and extended-range electric vehicles (EREV), while BYD is entering its best model cycle with the DM-i 5.0 quarterly upgrade and the increase in sales of mid-to-high-end DM-p models.

In fact, at the beginning of March this year, Citibank initiated a 30-day upward catalyst observation for Zero Run Automobile. The bank believes that the catalyst observation for Zero Run Automobile and BYD will strengthen the bank's view that PHEV and EREV will be the next big trend in the slowing passenger car market.

It is worth noting that not long ago, Morgan Stanley's analyst Adam Jonas downgraded Tesla's target price from $345 to $320 while maintaining a "Buy" rating. Among the reasons he cited, he emphasized the fierce competition and price war in the Chinese market. For BYD, which has a firm grip on the Chinese market, breaking through its own ceiling is the next focus of work.

Breaking through the "ceiling"

After successfully conquering 2023 with annual sales exceeding 3 million vehicles, BYD is still striving to break through its limits.

On January 29, BYD announced its 2023 performance forecast. The data shows that the company's net profit attributable to the parent company for the full year of 2023 is expected to be between 29 and 31 billion RMB, a year-on-year increase of 74.5%-86.5%; the net profit attributable to the parent company for the full year of 2023, excluding non-recurring gains and losses, is expected to be between 27.4 and 29.7 billion RMB, a year-on-year increase of 75.2%-89.9%; the basic earnings per share are 9.98 RMB to 10.67 RMB.

The data shows that BYD sold 3,024,417 vehicles in 2023, a year-on-year increase of 61.9%, of which passenger cars sold 3,012,906 units, a year-on-year increase of 61.8%.

Specifically, BYD's pure electric vehicles sold a cumulative total of 1,574,822 units in 2023, a year-on-year increase of 72.84%; plug-in hybrid vehicles sold a cumulative total of 1,438,084 units in 2023, a year-on-year increase of 51.98%.BYD's "craziness" continues. From March 4th to March 10th, 2024 (the 10th week), BYD's own-brand car sales reached 49,400 units, accounting for 16.3% of China's automobile market share, ranking first in China, with a market share level breaking historical records.

However, China's new energy vehicles have experienced explosive growth in recent years and have gradually entered a period of moderation. According to data from the China Association of Automobile Manufacturers (CAAM), the sales of new energy passenger cars in 2024 are expected to reach around 11.5 million units, a year-on-year increase of 20%.

It is reported that compared to the sales of China's new energy vehicles in 2023, which were 9.495 million units, a year-on-year increase of 37.9%; in 2022, the sales were 6.887 million units, a year-on-year increase of 93.4%; in 2021, the sales were 3.521 million units, a year-on-year increase of 160%. By comparison, it can be seen that the growth rate of China's new energy vehicles in 2024 continues to slow down.

Against this backdrop, it is not an easy task for BYD to further capture market share, and for this reason, BYD has been continuously lowering prices.

After the Spring Festival, BYD launched three new models with price reductions. Not only did the Qin PLUS Glory Edition and Destroyer 05 Glory Edition start at a price of only 79,800 yuan, but the previously priced Dolphin, which started at 116,800 yuan, also saw a price reduction of 17,000 yuan, with the final Dolphin Glory Edition's guided price starting at 99,800 yuan.

Subsequently, automakers such as SAIC-GM-Wuling, Changan Qiyuan, Beijing Hyundai, and Buick also released price reduction posters, setting off the first wave of electric vehicle price reductions of the year.

However, based on the calculation of the production capacity planned by BYD's nine production bases, BYD's total domestic volume can reach 3.9 million units. Even with continuous market share capture through price reduction strategies, this is still far from enough for BYD.

In fact, BYD has long set its sights on overseas markets.

Export Constraints

In 2023, for the first time, the proportion of China's passenger car export sales exceeded 15%, successfully surpassing Japan to become the world's largest car exporter. This was also the first year that BYD's passenger cars went global in full swing.It is worth mentioning that, according to the latest data from the China Association of Automobile Manufacturers, from January to February 2024, China's automobile exports reached 822,000 units, a year-on-year increase of 30.5%. This year, China's automobile export sales are expected to achieve a 12% growth, reaching 5.5 million units, retaining the title of the world's largest automobile exporter.

The data shows that in 2023, BYD entered 58 countries and regions worldwide, exporting a total of 242,765 passenger cars, a year-on-year increase of 334.2%. However, the proportion of its exports accounted for less than 10%.

Specifically, BYD became the sales champion for new energy vehicles in Thailand, Brazil, Israel, and Uzbekistan. In the Thai market, BYD's sales exceeded 30,000 units, accounting for 40% of the Thai new energy vehicle market; in the Brazilian market, BYD's sales exceeded 17,000 units; in the Israeli market, BYD's sales exceeded 15,000 units; in the Uzbekistan market, BYD's sales exceeded 10,000 units.

In addition, BYD's sales in Australia exceeded 12,000 units, becoming the second-largest seller of new energy vehicles in the country. In January of this year, BYD also launched a rebate campaign in Australia.

However, although BYD's export sales achieved certain results in 2023, they were somewhat less than the overseas export sales of SAIC, Chery, and Great Wall in 2023. The data shows that the export sales of the aforementioned three car manufacturers in 2023 reached 1.208 million, 937,000, and 316,000 units, respectively.

This means that BYD still has considerable export potential, but if it wants to further accelerate its overseas expansion, the first thing BYD needs to face is the huge shipping costs.

To solve the transportation capacity issue and reduce the cost of "going global," BYD decided to build 8 ro-ro car carriers. On January 10, 2024, BYD's "EXPLORER NO.1" car carrier held a delivery ceremony at Yantai Port, Shandong Port; on the 15th, the ro-ro ship set sail from Shenzhen to Europe with 5,449 new energy vehicles.

It is worth noting that the remaining seven ro-ro ships will be put into use in the next two years, and it is ultimately expected to provide BYD with an annual export transportation capacity of more than 300,000 passenger cars.

In addition, BYD is continuously expanding its overseas factories. In 2024, BYD's three overseas factories in Uzbekistan, Thailand, and Brazil will officially start production and will enter the construction period of the Hungarian factory.

For BYD, solving the constraints of going overseas and further capturing the global market share of new energy vehicles has become one of its next strategic focuses.