If there’s anything about BYD’s past that predicts its future, it’s that it’s slow and steady. The nearly 30-year-old company may beat Tesla in total vehicle production in 2023, but its market value will still be only one-tenth of Tesla’s. Tesla’s stock price has roughly doubled in the last year. BYD shares rose about 10%. Bernstein did not start coverage on BYD until September, giving BYD an outperform rating and a target price of HK$359. As of Thursday’s close, the gain was 71%, well above the 42% posted at the start of the report. Are there issues that the market is overlooking, such as oversupply? Foreign investor sentiment was not helped by news that its famous early investor, Warren Buffett’s Berkshire Hathaway, has been reducing its holdings for unknown reasons. Taylor Ogan, chief executive of Snow Bull Capital, said one factor behind the low valuation is that BYD does not dominate flashy markets like Norway, which “may have a greater impact on stock prices than EVs in Brazil.” Another problem, he said, is the lack of financial research analysts, especially for Tesla and China. BYD trades on the Hong Kong and Shenzhen exchanges in mainland China. The company sells passenger cars primarily in China and is expanding into regions such as Southeast Asia and Europe, but not North America. In comparison, Nasdaq-listed Tesla’s main market is the United States, and China accounts for about 20% of revenue. Energy company? Until recent years, Elon Musk’s automaker had trouble convincing Wall Street to buy into it. “I’m a long-time Tesla observer and investor,” Ogan said. “It’s been very frustrating over the years. The rough excuse is, Wall Street, they don’t understand Tesla.” In January 2023, Ogan moved to Shenzhen, China, with his team of three people to open a research office. BYD started out with batteries and has a huge campus on the outskirts of Shenzhen. The company reduces costs by developing expensive car batteries in-house while offering a variety of models at different price points. “I think when people start realizing that BYD is an energy company, BYD’s sales will suffer like Tesla did,” Ogan said. “I do think one day they will realize, wow, BYD makes its own of photovoltaic cells, make their own inverters, they make batteries,” he said, adding that the company also makes electric buses that are “essentially roaming batteries.” He doesn’t expect the market to realize BYD’s strength until 2025. Several analysts have rated the stock a buy, although their 12-month price targets still don’t put BYD anywhere close to Tesla in terms of market capitalization. Lyon Securities’ Xiao Feng said in a Jan. 2 report that better-than-expected sales of BYD’s high-end models helped boost profit margins. Although the company’s channel check showed that recent price cuts helped BYD increase orders in December . The report stated: “Overall, our 2024 auto sales forecast remains at 4 million units, and we expect the consensus to raise the overly pessimistic profit forecast.” CLSA has a target price of HK$310 and gives BYD a buy Rating. Auto parts analyst Joel Ying is optimistic about BYD and sets its target price at HK$382. But he also noted that the stock could benefit from being a battery supplier to a Chinese smartphone and electric vehicle joint venture with Xiaomi. “According to our understanding, participants currently participating in Xiaomi’s electric vehicle supply chain include CATL (300750 CH)/BYD (1211 HK, battery), Inovance Technology (300124 CH, motor), Ningbo Tuopu (601689 CH, chassis, air suspension, etc.) and HSAI US,” Ying said in a January 3 report. He said that Xiaomi SU7 may be priced between 200,000 yuan and 300,000 yuan ($28,160 to $42,240), similar to Zeekr 007. This is also the price range of BYD’s Han sedan, while the Tesla Model Y is priced slightly higher. —CNBC’s Michael Bloom contributed to this report.
Svlook
