BYD Shares Fall as China's Auto Price War Weighs on Bottom Line
By Tracy Qu
Shares of Chinese electric vehicle maker BYD were lower after its latest profit forecast fell short of expectations, amid an intensifying price war among China's automakers.
Shares were 5.8% lower in afternoon trade in Hong Kong at HK$175.20, taking losses this year to over 18%.
BYD, the Warren Buffett-backed company that recently surpassed Tesla to become the world's largest EV maker by sales volume, late Monday forecast a steep jump in 2023 net profit that nonetheless missed some analyst expectations. The Shenzhen-based company forecast full-year profit of between CNY29 billion and CNY31 billion, up 75%-87% on the year, on record sales of new-energy vehicles.
Nomura analysts said in a research note that the forecast was 4%-10% below their expectations, and highlighted a fourth-quarter bottomline that appeared to be down 7%-27% sequentially.
"Considering the intensifying competition in the China auto market, we have become more cautious regarding the margins and profitability of all players... exposed to China," they wrote. With companies "sacrificing profitability for market share, it is possible that there may be no clear winners in the short run."
Daiwa analyst Kelvin Lau said BYD's profit per car fell from the third quarter, likely hurt by discounts offered during November and December to boost sales.
Citi analyst Jeff Chung said the full-year profit forecast was in line with the bank's projection and the bottomline in the fourth quarter net profit was lower than consensus, partly due to extra costs at the year's end for dealer incentives. Sales-mix improvement on high-end products were lower than expected, Chung said, adding that the ongoing price wars appear to be taking a toll.
He kept a buy rating but said the stock could be hurt in the short-term given the sector's overall demand weakness in January along with a low-season impact in February and price-war uncertainty into March.
Shares of BYD Electronic, a maker of handset components, were also lower, slipping 4.8% in the afternoon trade to HK$27.65. The company late Monday forecast full-year profit to more than double on year to CNY3.9 billion to CNY4.1 billion, which Citi analysts said implied a 28%-44% sequential decline in fourth-quarter profit.
"Given expectations have been reset amid market caution on first-quarter seasonality and smartphone demand, we see this as a buying opportunity," they said.
Write to Tracy Qu at tracy.qu@wsj.com
(END) Dow Jones Newswires
January 30, 2024 00:32 ET (05:32 GMT)
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