BYD Earnings: Revenue and Net Profit In Line; Solid Vehicle Margin Despite Price Competition Concern

BYD’s first-quarter revenue and net profit grew by 80% and 411% year over year, respectively, accounting for 23% and 21% of our full-year forecast. Despite rising industrywide price competition during the period, the company delivered a 5-percentage-point increase in vehicle margin compared with a year ago. We maintain our revenue forecast but raise 2023-25 net profit by 2%-7% to factor in a higher margin outlook. We raise our fair value estimate to HKD 295 (CNY 256) from HKD 280 (CNY 244), which implies a 2023 price/sales ratio of 1.4 times and price/earnings ratio of 37 times. Excluding its stake in BYD Electronics, we estimate the implied forward price/sales ratio for the combined automotive and battery business is 1.7 times. Trading at 20% below our fair value estimate, we view H-shares of BYD as undervalued.