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新葡萄京娱乐场网址BYD:Analyst briefing takeaways

十月 6th, 2019  |  基金

In 1H17, BYD recorded a 19.9% YoY decline in passenger new energyvehicle
(NEV) sales, and a 22.9% YoY decline in commercial NEV sales,due to cuts
in govt subsidies and changes to the official eligibility list
forrecommended vehicle types that qualify for subsidies. However, mgmtis
positive about the future growth of passenger NEV sales as they
willintroduce several new models. Mgmt expects BYD’s market share
inpassenger NEV to be stable at c.30% over the next three years.

4Q guidance below expectation but new energy vehicle (NEV) sales
stillGrowing。

    For the NEV model pipeline, BYD will launch the pure-electric (EV)
versionof the Yuan SUV in June 2018, with a driving range of more than
250km.

    BYD has reported 3Q17results under PRC GAAP. Gross revenue grew by
3.8% YoYto RMB28.9bn on higher demand for its own brand passenger and
commercialnew energy vehicles (up 9.7% and 7.5% YoY, respectively),
partially offset by a36.4% YoY decline in conventional vehicle sales
during the period. Gross profitmargin declined by 2.3ppt YoY probably on
lower NEV margin after subsidy cut,in our view. Meanwhile, BYD’s 3Q17net
profit declined 23.9% YoY to RMB1.1bn,which is near the mid-range of
BYD’s previous guidance.。

    Management expects this value-for-money model to sell c.5,000
unitsper month, mainly in lower-tier cities in Shandong, Hebei and
Henan. Inaddition, BYD will introduce the new generation Qin sedan, Tang
SUV anda plug-in hybrid EV (PHEV) version of the Song SUV in 2018.

    In its announcement, BYD guided that it expects to register a
15.1-20.0% YoYdecline in FY17net profit to RMB4.04-4.29bn, which
translates to 4Q17E net profitof RMB1.2-1.5bn (vs. RMB1.4bn in 4Q16),
implying an YoY decline of up to 10.0%or an YoY growth of up to 8.0%.
For 4Q17, BYD expects NEV sales to continue togrow at a high pace, while
traditional passenger vehicle sales can improve withgood market
reception for the new Song Max MPV. Besides, management seespositive
outlook for its handset component and assembly business, and
morerevenue/profit recognition for its monorail projects.。

    BYD has 17k units of NEV bus orders on hand, and will deliver
c.15kunits in 2017. Management is positive about future growth of
commercialNEVs, as there are more than 30 cities promoting electric
buses. Anotherstrong driver is the conversion of conventional
environmental sanitationvehicles, mixer trucks and dump trucks to
electric vehicles in the future.

    Deutsche Bank view – Buy BYD-H as scalable Chinese NEV play。

    All in all, management expects a c.50% YoY growth rate for
commercialNEVs for the next three years, and a gross profit margin of
around 20%.

    BYD’s FY17E earnings guidance accounts for about 91-96% of our
forecast.Considering the guidance, we trim our FY17-19E revenue by
0.8-3.6% on 1) moreprudent vehicle sales forecast and 2) a possible cut
in subsidy income amountin FY18amid policy refinement. We also cut our
FY17-19net profit forecasts by6.9-11.8% on lower margin assumptions for
the auto business.。

    The first 40km Monorail project will be completed in Ningxia
Yinchuannext month. BYD is currently negotiating with around 20 cities
forpotential 2018 Monorail projects, which will mainly be in
public-privatepartnership(PPP) format and have better profitability than
the NEVbusiness. According to mgmt, Monorail will record c.RMB5bn in
revenuein 2017.

    Our SOTP-derived target prices are based on 1) a peer average FY18E
P/E of 15.5x,22.4x and 7.4x for the handset business (18% of SOTP
value), battery business(6% of SOTP value) and monorail business (2% of
SOTP value), respectively; and 2)a peer average FY18E P/sales of 1.7x
and 2.1x for the conventional auto business(12% of SOTP value) and the
NEV business (62% of SOTP value), respectively.The implied target FY18E
P/E is 29.8x, the highest target P/E benchmark amongits local peers,
which we believe is justified by its unique exposure to China’sNEV
market and its 37% FY17-19E two-year EPS CAGR. We maintain Buy onBYD-H
on a positive earnings outlook, mainly driven by robust NEV demandand
potential NEV battery sales to third parties. We maintain Hold on
BYD-A,given the valuation premium to the H-shares. Key upside risks:
rapid auto salesand margin improvement, driven by successful new models,
better-than-expectedsales, and/or a margin recovery in battery and
handset component businesses.Key downside risks: weakening in NEV sales
and margin pressure.。

    BYD’s NEV battery production volume is expected to reach c.10Gwh
in2017 (7.6Gwh in 2016). Currently, the total production capacity is
13Gwh.

    BYD’s Qinghai Salk Lake JV will begin operation in 2H18, with
5Gwhproduction capacity at phase 1 out of total capacity of 10Gwh.

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