BYD's Solid Second-Quarter Net Profit No Surprise; HKD 315 FVE Maintained

No-moat BYD delivered a solid second quarter with net profit up by 2 times year over year and at the high end of company’s guidance. Stripping out some noncash items such as foreign exchange gain and impairment loss, net profit still came in 8% higher than the midpoint of guidance. With first-half revenue and profit accounting for 42% and 44% of our full-year forecast, respectively; and the second half being the peak season for auto sales, we maintain our fair value estimate of HKD 315 per share (CNY 258), which implies a 2023 price/sales ratio of 1.7 times. Excluding its stake in BYD Electronics, the implied forward price/sales ratio for the combined automotive and battery business is 2.1 times, in line with Chinese new energy vehicle, or NEV, peers’ 2.0 times.