BYD announced that its 1-3 quarter results were 9 billion yuan. Based on this, it is speculated that the final profit in 2022 may exceed 15 billion yuan. However, many investors believe that BYD’s profits this year mainly come from subsidies, and even directly believe that BYD’s profits will be directly reduced by 20 billion next year.
Of course this idea is wrong.
The new energy promotion subsidy itself is to make up for the high cost of the company’s new energy vehicles in the promotion stage. The pricing of car companies is currently set according to the promotion subsidy. In essence, the subsidy itself is prepaid by the car factory for consumers. Most car companies will automatically restore the pre-subsidy pricing, and there is no problem that the subsidies will lead to the disappearance of corporate profits. There is no need for companies to bear additional costs for this. BYD’s pricing itself is based on pre-subsidy and post-subsidy pricing (including most products).
The gross profit margin of BYD automobiles, batteries and related products will reach 18%+ in Q3 in 2022, and may be higher in 2023.
The first is that the current subsidy income may be partially included in the company’s income. The annual subsidy is applied by the company after the year. After the provincial unified accounting, the relevant departments will investigate the applicant company to see if the company’s application conditions and whether the vehicle meets the conditions, and the subsidy will be added. It will be issued in the following years. Therefore, from a financial point of view, companies generally do not include all vehicles sold in the current year into the income of the current year according to the subsidy standard. After the company resumes and cancels the subsidy, all the price difference is included in the income in the year, so under the same conditions, the gross profit rate should be higher.
BYD requires a 5% cost reduction for upstream material and parts suppliers every year. Even if BYD does not restore pre-subsidy pricing, this cost reduction can largely offset the loss of subsidy cancellation.
In 2023, BYD’s industrial chain will jump to a higher level of scale, and the depreciation of fixed assets under scale alone can bring about 1.5 to 2 points of gross profit, corresponding to a gross profit of 9-13 billion.
Price is the most sensitive factor to gross profit margin. In 2023, BYD expects to sell 3.5 million new energy vehicles. The rise of high-end brands will greatly change BYD’s profitability rules. A substantial increase in interest rates is entirely possible.
BYD’s large-scale exports next year, including pricing and various preferential policies given by the local government, will also greatly promote BYD’s increase in gross profit margins.
In 2023, more Fudi batteries, more Fudi technology and Fudi power products will be supplied, and the scale of BYD semiconductors will also be larger, which will also help improve gross profit margins.
How much can BYD’s gross profit margin reach in the future?
BYD’s gross profit margin is not the simple gross profit margin of new energy vehicle companies, but the accumulation and reflection of gross profit margins of the entire industry chain. With a large enough scale and good distribution efficiency, a 30% gross profit margin is theoretically possible for BYD.
An increase in gross profit margin corresponds to a gross profit of 6.5 billion, so BYD’s profit elasticity in 2023 is very large.
The price of lithium carbonate will go downhill in the next two years, and the elasticity of lithium carbonate to gross profit margin is also not small.
In 2023, the old price may be implemented for the vehicles that were not delivered in 2022. This part may be borne by BYD itself, which may be two to three months of subsidy losses.
The rise of BYD brand, overseas price is comparable to BBA, BYD high-end and luxury brands have just started in 2023, and the price center of mid-to-high-end products will continue to rise in the future.
BYD’s electric and intelligent business model has not yet been implemented. All this is left to the evolution of BYD in the future. BYD’s gross profit margin has a long way to rise.
A fully rising BYD, a globalized BYD, but many Chinese people dare not imagine, or even do not want to imagine it.
I own BYD, the remarks do not constitute any reason to buy, I specifically declare!
@Today’s topic $BYD(SZ002594)$
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