BYD increased revenue but not profit in the first half of the year
The company’s non-net profit was only 369 million yuan, a year-on-year decrease of 59.76%
BYD (002594) released a semi-annual report. Data show that BYD achieved operating income of 90.885 billion yuan in the first half of this year, an increase of 50.22% from 60.502 billion yuan in the same period of the previous year; net profit was 1.173 billion yuan, a 29.41% decrease from the 1.662 billion yuan net profit in the same period of the previous year; Non-net profit was only 369 million yuan, a year-on-year decrease of 59.76%. BYD said that due to changes in product structure, the company’s gross profit margin has declined; at the same time, the company’s overall profitability has been affected to a certain extent by the price increase of raw materials such as commodities.
The increase in raw material prices is the main reason for the decline in net profit
In the first half of this year, BYD’s performance “increased revenue but not profit” was inseparable from BYD’s internal business structure adjustment, raw material price increases, and increased sales and operating costs.
During the reporting period, BYD’s operating income increased by about 50%, but operating costs also rose. BYD’s operating costs in the first half of the year changed from 48.646 billion yuan in the same period last year to 79.284 billion yuan, an increase of 62.98% year-on-year, sales expenses increased by 32.25% year-on-year, and management expenses increased by 19.14% year-on-year. This was mainly related to the increase in after-sales service fees and employee compensation. .
BYD straddles the three major areas of automotive, IT, and new energy, with automotive, mobile phone components and assembly, secondary rechargeable batteries and photovoltaics as its three main businesses. From the perspective of product structure, the proportion of BYD’s auto business revenue declined significantly in the first half of the year, from 53.01% in the same period of the previous year to 43.08%, a drop of about 10%. The proportion of mobile phone components and assembly business revenue increased the most. In the first half of this year, it achieved operating income of 43.132 billion yuan, accounting for 47.46%, an increase of about 9%. The operating income of secondary rechargeable batteries and photovoltaics was 8.287 billion yuan, accounting for 9.12% , Also slightly improved. At the same time, the revenue of mobile phone components and assembly business, secondary rechargeable batteries and photovoltaics increased significantly, increasing by 84.48% and 72.97% respectively over the same period.
BYD’s semi-annual report has repeatedly mentioned the rising cost of raw materials and the risk of raw material price fluctuations. The main raw materials required for production include steel, plastics and other metal raw materials, such as lithium and cobalt. The price fluctuations directly affect the production cost of the group’s main business and have a certain impact on the operating performance, which brings many challenges to the development of the company.
In the face of this situation, BYD stated that it will closely follow the latest developments in the macro economy, industrial policies, industry development and the epidemic situation, grasp the pace of investment and expansion, and adjust business strategies in a timely manner; at the same time, it will strengthen R&D investment and technological innovation. Enhance the comprehensive competitiveness of related products in each business. In terms of raw materials, the Group will consolidate its cost advantages through the upstream strategic layout and cost optimization in the production process, and minimize the impact of raw material price fluctuations on the group.
The market has big differences on the company’s valuation
As of the close of August 27, BYD A shares closed at 288.15 yuan, with a total market value of 824.4 billion yuan. The high market value of more than 800 billion yuan and the nearly 30% decline in net profit are very inconsistent. Whether BYD has the strength to hold up the huge market value, investors’ differences have increased significantly.
Some investors questioned BYD’s “increasing revenue but not profit”, and even pointed out that BYD’s semi-annual report results are far lower than the previous forecasts of securities firms. Just a week ago, CITIC Securities Research Report analyzed that, taking into account the increase in BYD’s electric vehicle sales + external supply of power batteries, and acceleration of energy storage battery shipments, the net profit of BYD attributable to the parent from 2021 to 2023 is maintained to 4.91 billion yuan and 8.81 billion yuan. RMB 12.24 billion, giving BYD a total reasonable value of RMB 1,064.3 billion in 2022, corresponding to a target price of RMB 372/HK$447 for A/H shares. Based on the calculation of BYD’s net profit in the first half of last year, it only achieved a net profit of 1.173 billion yuan in the first half of this year, or it may be difficult to complete the full-year net profit forecast given by CITIC Securities.
However, after BYD released its semi-annual report, there are still brokerage research reports that “backed” BYD. According to the analysis of the Minsheng Securities Research Report, BYD’s current product cycle continues to rise, and the sales of DMi hybrid models are expected to continue to increase in the second half of the year. It is estimated that BYD’s net profit attributable to its parent in 2021-2023 will be 5.684 billion yuan, 7.257 billion yuan, and 8.45 billion yuan, corresponding to the current stock price PE of 140.20 times, 111.38 times, and 95.66 times, respectively. With reference to the median price-to-earnings ratio (TTM) of the wind automobile industry of 33.63, considering that the company’s current product cycle continues to rise, the rating of “recommended” is maintained.
However, it is worth noting that despite the decline in net profit, BYD still maintains considerable sales. In addition to good revenue performance and high year-on-year growth rate of revenue, BYD’s sales this year are still very eye-catching. In the first half of the year, BYD’s sales of new energy vehicles increased significantly. The sales of new energy vehicles were 154,800, a year-on-year increase of 154.76%. Among them, the sales of plug-in hybrid models represented by Qin PlusMDi increased by more than 400% year-on-year.
In addition, the increase in cost is also related to the increase in R&D investment in new projects. In the first half of this year, BYD invested 4.412 billion yuan in research and development, an increase of 36.51% compared to 3.232 billion yuan last year. BYD said that it will continue to increase investment in electric and intelligent in the future to maintain its leading position in the industry.
In the secondary market, investors also showed optimism about BYD. Since the beginning of this year, the company’s stock price has risen significantly. As of the close of August 27, BYD’s A-shares closed at 288.15 yuan, a cumulative increase of 48.13% during the year, and BYD’s H-shares’ stock price increased by approximately 28.89% during the year.
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BYD Semiconductor IPO presses the “pause button”
The spin-off and listing of BYD Semiconductor, which has attracted much attention from the market, has encountered uncertainties. On August 18, according to the information on the official website of the Shenzhen Stock Exchange, BYD Semiconductor’s IPO review was in a “suspended” state. The main reason for the suspension of its IPO review is that BYD Semiconductor’s issuance law firm is Beijing Tianyuan Law Firm, which has been investigated by the China Securities Regulatory Commission. According to relevant regulations, the Shenzhen Stock Exchange has suspended its issuance and listing review.
On August 18, four intermediary agencies, namely Hualong Securities, Zhongxing Caiguanghua Certified Public Accountants, Beijing Tianyuan Law Firm and Kaiyuan Asset Appraisal, were filed for investigation at the same time. This incident has affected the progress of multiple IPO projects, and more than 40 IPO filing companies have collectively entered a state of suspension. Among them, on the evening of August 18, the review status of 30 GEM companies to be listed on the GEM was collectively changed to suspension.
BYD shares directly hold 72.30% of BYD Semiconductor and is the controlling shareholder of BYD Semiconductor. The shareholding structure of BYD shares will not change as a result of this spin-off and will still maintain control over BYD Semiconductor.
In the first half of last year, BYD Semiconductor completed two rounds of strategic financing and introduced a number of well-known investment institutions and industrial capital. After two rounds of financing, BYD Semiconductor’s valuation reached 10.2 billion yuan. In contrast to the high valuation, BYD Semiconductor’s financial data is not brilliant. According to BYD Semiconductor’s unaudited financial data, from 2018 to 2020, BYD Semiconductor’s revenue was 1.34 billion yuan, 1.096 billion yuan, and 1.441 billion yuan, respectively. The net profit attributable to the parent in the same period was 104 million yuan, 85.114 million yuan, and 58.632 million yuan. Yuan; net assets at the end of last year were 3.187 billion yuan, and net profit has been declining continuously in the past two years.
(Editor in charge: Zhu He)
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