foreword
2022 is about to pass, and I have invested and researched BYD for three years. Previously, I had written two in-depth research reports on BYD in June 2020 and November 2021, explaining BYD’s core competitiveness, valuation model and 2022 valuation. Among them, in “BYD In-depth Research II: BYD’s Valuation Model and 2022 Valuation”, the valuation of BYD in 2022 according to the segmental valuation method is 10,400 (pessimistic), 1,299.2 billion yuan (neutral), 15,585 yuan 100 million yuan (optimistic), the corresponding stock prices are 357.27 yuan, 446.31 yuan, and 535.38 yuan. In July of this year, BYD’s stock price reached 358.75 yuan, which is considered to have reached the lowest valuation level. Regrettably, due to factors such as the increase in US interest rates, the epidemic, and the reduction of BYD’s holdings by Buffett’s companies, as of the date of writing this article, BYD’s A shares have fallen to 256.97 yuan. If you think about it, although the predictions on BYD’s fundamentals are basically consistent, the impact on the macro level is still not expected, and the overall valuation is still optimistic.
The links to the two previously written research reports are as follows:
One of the in-depth studies of BYD: the core logic of investing in BYD
BYD In-depth Research II: BYD’s Valuation Model and 2022 Valuation
This article will update the latest information and valuation of BYD’s fundamentals based on previous research. At the same time, some simple analysis will be made on the macro environment and the new energy automobile industry, and reference information on BYD’s trading methods will be added.
Due to space limitations, this article only briefly elaborates on most of the contents.
1. Analysis of macro environment
Overall, my view on the macro environment is pessimistic:
(1) The epidemic has lasted for three years, and it is optimistically estimated that it will take 3 to 6 months to end. This has seriously hit the consumption ability and confidence of enterprises and other units and individuals. As a large-scale optional consumer product, automobiles may be hit harder than Other industries are bigger.
(2) For overseas consumers, apart from the epidemic, the U.S. dollar has raised interest rates several times. Although it has basically reached its peak, there is basically no possibility of interest rate cuts in 2023. Since overseas consumption is usually a loan to buy a car, high interest rates will increase overseas consumption. The cost of funds for consumers inhibits their spending power.
(3) The United States passed the subsidy bill, Europe may follow suit, and trade protectionism may rise, which may have a negative impact on Chinese companies’ overseas business expansion.
(4) Due to factors such as geopolitics and policy stability, China’s capital market may be negatively affected in terms of absorbing foreign capital, which may affect corporate financing and inhibit corporate valuation in the capital market.
(5) Positive factors. In order to stimulate economic growth, the Chinese government is expected to introduce stimulus policies including RRR cuts and interest rate cuts. Although the “national subsidy” policy for new energy vehicles will be withdrawn in 2023, it is not ruled out that other types of preferential policies will be introduced, including preferential policies at the national level and preferential policies at the local government level.
On the whole, I think that various elements of the macro environment are currently at a low level, but the margin will gradually improve. Negative factors in the macro environment will affect the sales of new energy vehicles, and more importantly, the valuation of new energy vehicle companies.
2. Analysis of investment opportunities in the new energy vehicle industry
(1) Strategic significance
For China’s new energy vehicle industry, four strategic significances are superimposed:
1. The environmental protection goal of “carbon peak, carbon neutrality”.
2. China’s national energy security. China relies on imports for 72% of its oil, and 70% of the imported oil is transported to our shores through the South China Sea. Automobiles consume 70% of China’s oil. The development of new energy vehicles and the reduction of oil consumption from the consumer side are of great significance to China’s national energy security.
3. China’s auto industry realizes “curve overtaking”. Fuel vehicles have formed a relatively stable competitive landscape. China is difficult to make breakthroughs in core technologies such as engines, transmissions, and electronic control systems. However, in the era of new energy vehicles, China’s auto industry has achieved major breakthroughs in core technologies such as “three electric” and Leading the world, it is expected to achieve “curve overtaking”.
4. Boost consumption and expand domestic demand. In the “Communication of the Central Economic Work Conference” released in December 2022, it said: “Increase the income of urban and rural residents through multiple channels, and support consumption such as housing improvement, new energy vehicles, and elderly care services.” New energy vehicles are one of the key industries to expand domestic demand .
(2) Market capacity
The potential market capacity (annual output value) of China’s new energy vehicles has reached about 10 trillion yuan, and the market capacity of the global auto industry is converted to about 30 trillion yuan. Compared with traditional fuel vehicles, new energy vehicles have many long-tail businesses, including intelligent network connection, smart cockpit, automatic driving, etc., as well as ecological services such as driverless taxis and driverless logistics vehicles. The potential market capacity exceeds traditional ones. fuel car. In China, only one-third of households currently own a car. With the improvement of people’s living standards, the market capacity of China’s auto industry is expected to remain at a relatively high level.
(3) Industrial environment
China’s new energy vehicle industry has a good policy and industrial environment, a complete industrial chain, engineer bonuses and human resource advantages.
(4) Penetration rate and growth rate
According to the forecast of the China Automobile Association, the total sales of automobiles in China will be 26.8 million in 2022, a year-on-year increase of 2%. Among them, the sales volume of passenger vehicles was 23.5 million units, a year-on-year increase of 9.4%; the sales volume of commercial vehicles was 3.3 million units, a year-on-year decrease of 35.3%. In addition, the China Automobile Association predicts that sales of new energy vehicles will reach 6.7 million in 2022, a year-on-year increase of 90.3%. Based on the above data, it is estimated that the penetration rate of new energy vehicles will be 28.5% in 2022; the sales volume of new energy vehicles in China will be 3.52 million in 2021 and will increase by 91% in 2022.
The China Association of Automobile Manufacturers predicts that my country’s total automobile sales in 2023 will be 27.6 million, a year-on-year increase of 3%; of which 23.8 million are passenger cars, a year-on-year increase of 1.3%; commercial vehicles are 3.8 million, a year-on-year increase of 15%. The China Automobile Association predicts that the number of new energy vehicles will reach 9 million in 2023, a year-on-year increase of 35%.
According to the forecast of the international consulting firm Arrival Platinum, global car sales in 2022 will be 79 million. According to the forecast of Guotai Junan Securities, the global sales of new energy vehicles will reach 10 million units in 2022. Based on this calculation, the global penetration rate of new energy vehicles in 2022 will be 12.7%. According to the forecast of Guotai Junan Securities, the global sales of new energy vehicles will reach 14 million in 2023. Based on this calculation, the growth rate of global new energy vehicle sales in 2023 will be 40%.
Comments on the forecast data above:
In my opinion, the China Automobile Association’s forecast for the sales of China’s new energy vehicles in 2023 is conservative, because not only the growth rate has dropped sharply, but the increment has also dropped from 3.18 million in 2022 to 2.3 million in 2023. In China, the cost of new energy vehicles is close to that of fuel vehicles, and the advantages of “green, quiet, good, economical and fast” compared with fuel vehicles are widely accepted by consumers, and major new energy vehicle companies are generally vigorously expanding production capacity and marketing and In the case of the service network, the increment in 2023 should not be lower than that in 2022. Of course, limited by the unfavorable factors of the macroeconomic environment mentioned above, the total car sales in 2023 may experience a relatively large decline, which will affect the sales of new energy vehicles. I personally agree with BYD President Wang Chuanfu’s forecast that China’s new energy vehicle sales in 2023 will be between 9 million and 10 million, that is, the pessimistic estimate is 9 million and the optimistic estimate is 10 million.
(5) Evaluation on industry beta value
Many friends in the investment circle believe that after the penetration rate exceeds 30%, the growth rate of the industry will decline, thereby reducing the beta value of the industry. Some people even arbitrarily believe that the entire new energy vehicle industry has no investment value. I think it is wrong to simply apply investment experience in other fields to the new energy vehicle industry. The reasons are as follows:
1. New energy vehicles are an industry with a potential market capacity of 10 trillion yuan, which cannot be compared with the “small industry” that belongs to a certain subdivision of billions or tens of billions. If the penetration rate of China’s new energy vehicles increases by 10%, the increment will be about 1 trillion yuan, which will bring great room for growth for outstanding companies in the industry.
2. China’s new energy vehicle industry has a global competitive advantage and has the opportunity to vigorously develop overseas business. If we look at the global penetration rate, it is expected to be lower than 13% in 2022.
3. Even if the beta value of the industry declines, if the alpha of the enterprise itself is strong enough, such enterprises still have investment opportunities. When Buffett invested in Apple, the penetration rate of mobile phones had exceeded 80%, but Buffett still obtained about 5 times the income, which is one of his investments with the best returns in recent years.
(6) Regarding the impact of the cancellation of the “National Subsidy” for new energy vehicles.
According to the 2022 subsidy policy, there is no subsidy for pure electric vehicles with a battery life of less than 300 kilometers, a subsidy of 9,100 yuan for a battery life of 300 to 400 kilometers, a subsidy of 12,600 yuan for a battery life of more than 400 kilometers, and a subsidy of 4,800 yuan for plug-in hybrid vehicles (including extended range models). Yuan. By 2023, the aforementioned subsidies will be eliminated. Some commentators believe that the cancellation of the “National Subsidy” will have a major adverse impact on the new energy vehicle industry. They even say that some car companies’ “net profit per vehicle” has not yet reached this amount. If it is cancelled, wouldn’t the net profit be reduced to zero? In my opinion, the cancellation of the “National Subsidy” will certainly lack a very important preferential policy for the new energy vehicle industry, and will promote differentiation within the industry, but it will not constitute a major adverse effect. analyse as below:
1. The “national subsidy” of new energy vehicles is originally developed in the early stages of the development of the new energy vehicle industry, when the company’s R&D costs, manufacturing costs, marketing costs and other costs are high, but the sales scale is small and the profit is not enough to support the healthy development of the company. Industry incentive policies provided by the government. All subsidies will eventually be eliminated. After years of development, the penetration rate of new energy vehicles in China has exceeded 30% (according to the most recent month), consumers are increasingly accepting new energy vehicles, and the competitive advantages of new energy vehicles are becoming more and more significant. A large number of new energy automobile companies such as “Xiaoli” have achieved considerable development. At the same time, China’s new energy vehicle production and sales share have reached more than 50% of the world. At this time, it is reasonable to withdraw from the “state subsidy”.
2. Due to the expansion of sales scale and the development and improvement of the supporting industrial chain, various costs will be reduced, including the reduction of research and development expense ratio, marketing expense ratio, management expense ratio, and depreciation rate of fixed assets. At the same time, most The purchase price of parts and components will also drop, and these cost reductions can offset or partially offset the impact of the cancellation of “state subsidies”. As a counter-evidence that “the cancellation of the state subsidy will bring major adverse effects”, we can see that since 2017, the state subsidy for new energy vehicles has been declining, but the profitability of new energy vehicle companies has continued to increase (such as BYD) , or the loss narrowed or even turned into a profit (such as Wei Xiaoli), indicating that the impact of the decline in marginal costs brought about by the expansion of scale is greater than the impact of the decline in subsidies.
3. Due to the improvement of the competitiveness of new energy vehicles and the increasing acceptance of new energy vehicles by consumers, manufacturers can raise prices appropriately when necessary to offset the impact of the cancellation of “state subsidies”. In 2022, we have seen companies such as BYD raise prices many times, but the supply of products is still in short supply.
4. Although the “state subsidy” has been cancelled, under the background of “expanding domestic demand” and making new energy vehicles one of the key industries in the Central Economic Work Conference, the preferential policy of purchase tax reduction and exemption will still be retained in 2023. It does not rule out the introduction of other preferential policies, or local governments at all levels will continue to provide some subsidies.
5. Relatively speaking, the cancellation of “state subsidies” has a greater impact on enterprises with relatively weak competitiveness in the industry. It has both advantages and disadvantages on the impact on leading enterprises, because after the enterprises with relatively weak competitiveness are eliminated, it is equivalent to “out of production capacity” Clear”, the industry competition pattern will become better, which is beneficial to leading enterprises.
(7) Manufacturing attributes of new energy vehicles
Another common fallacy in the investment circle is that new energy vehicles are also cars, and the automotive industry is a manufacturing industry after all, so new energy vehicles are also manufacturing industries, and their valuations should refer to manufacturing industries. This is as absurd as saying that Ma Yun is Chinese, so Ma Yun’s wealth is at the same level as that of most Chinese people. The absurdity lies in the inability to distinguish between commonality and individuality.
To evaluate the “sexiness” of an industry’s business model, in addition to factors such as market capacity, growth rate, penetration rate, and competition pattern, the key point is to look at the revenue model, because the revenue model will largely determine the level of profitability. Generally speaking, “one-time revenue” businesses are the least profitable; regular “recurring revenue” businesses are more profitable, and recurring “order-based revenue” businesses are the most profitable. Many traditional manufacturing industries belong to “one-time income”. For example, after we buy an air conditioner, we have almost no relationship with the manufacturer. When the new energy vehicle industry sells cars, it is a “one-time income”, but after-sales services such as maintenance, insurance, auto finance and other businesses are “recurring income”. After the business is promoted, new energy automobile companies still have the opportunity to obtain “order-based income”. To sum up, new energy vehicles belong to the manufacturing industry with a more “sexy” business model, and should have a higher valuation level than traditional fuel vehicles and ordinary manufacturing industries.
Another common mistake about the valuation of new energy vehicle companies is: the current PE of mature car companies such as Toyota is about 10 times, so the PE of companies such as Tesla and BYD should also be 10 times. We must know that companies such as Toyota Motor have developed for nearly a century, and even Tesla, BYD and other companies have an ultimate PE of 10 times, but when should their profits be? This erroneous view obviously does not correctly understand that companies at different development stages and with different growth rates should have different valuation standards and even different valuation models.
(8) Comprehensive evaluation of investment opportunities in the new energy vehicle industry
1. The fourfold strategic significance of superimposing double carbon, national energy security, overtaking in China’s auto industry, and expanding domestic demand.
2. The market capacity is huge, the penetration rate still has a lot of room, the growth rate is still relatively high, and the Matthew effect of leading enterprises is showing.
3. Good policy and industrial environment, perfect industrial chain, engineer bonus and human resource advantages.
4. The cancellation of state subsidies does not constitute a major adverse impact. Preferential policies such as reduction and exemption of purchase tax are still being implemented, and policies to promote consumption may be introduced.
5. Valuation should be higher than that of traditional manufacturing industries and mature car companies.
6. The new energy automobile industry is an industry with “long slopes and thick snow”, and still has very good long-term investment opportunities. As Ren Zeping said: “Not investing in new energy now is like not buying a house 20 years ago.”
3. Fundamental analysis of BYD
To analyze the fundamentals of a new energy vehicle company, we need to conduct a comprehensive analysis from multiple dimensions. The analysis model below is for reference.
Due to space limitations, this article only analyzes the fundamentals of BYD from the seven most important dimensions of strategy, core technology, products, production capacity and supply chain, sales and service channels, capital and financing capabilities, and governance structure.
(1) Strategy
BYD’s strategy is very clear. The auto business focuses on new energy vehicles and related industrial chains, and has stopped the fuel vehicle business.
For those traditional fuel vehicle companies that are still in the process of transformation, their strategic determination to transform to new energy vehicles is limited by the fact that their revenue and profits are heavily dependent on the fuel vehicle business, and there are a large number of customers and upstream and downstream partners in the industry chain that need to be maintained. Challenges, may face the risk of losing the era of new energy vehicles.
Note: In addition to the automobile business, BYD also has BYD electronics, photovoltaic and energy storage, rail transit and other businesses.
(2) Core technology
1. Electrification (the only new energy vehicle company with a deep grasp of three electric technologies)
1) Blade battery : According to the latest actual performance of mass-produced vehicles, whether it is energy density, charge and discharge performance, or low-temperature performance, the blade battery can be compared to most ternary lithium batteries, but the cost is lower than that of ternary lithium batteries. At the same time, due to the special “long knife” design, the structural strength of the blade battery also exceeds that of most lithium batteries, providing a solid foundation for CTB technology.
After the battery life reaches 600 kilometers, the marginal utility of long battery life decreases. Battery life anxiety is essentially charging anxiety. For the industry, the key to solving battery life anxiety is not to extend battery life, but to improve the charging network and develop fast charging technology. The low-cost advantage of BYD’s blade battery has greatly promoted its competitiveness.
Note: Under the premise of ensuring a reasonable body structure, battery life can be used as the most important basis for comprehensively evaluating the energy density and comprehensive performance of power batteries.
2) DM-i/p plug-in mixing technology : supports parallel working mode, which is better than extended program. Because the power-type blade battery has the characteristics of small capacity and high power, it can produce the plug-in hybrid model with the smallest battery capacity in the market; due to the excellent performance of the power-type blade battery and the progress of electric drive technology, the transmission is no longer needed. The reducer has the lowest cost, volume, noise, weight, space, and higher reliability, and is superior to plug-in hybrid products using transmissions.
3) Others : four-wheel four-wheel drive wheel motors (soon to be applied to high-end brand “Looking Up” off-road vehicles), eight-in-one powertrain, wide temperature range integrated heat pump, 1200V high-voltage platform based on SiC electronic control, etc.
2. Intelligent (on the road)
On the current mass-produced models, BYD’s intelligence lags behind Tesla, “Wei Xiaoli” and other companies. However, I believe that BYD’s autonomous driving technology is not far behind most of the world’s most advanced companies such as Tesla and Baidu, except that BYD’s self-driving technology is not far behind most other companies, because everyone currently belongs to the L2+ level of intelligent assisted driving. . In addition, I think that BYD’s lagging behind in intelligence is also related to its long-term low-cost product strategy and conservative safety strategy (these are conducive to increasing sales). With BYD’s model positioning gradually extending upwards and the competition of new energy vehicles gradually entering the second half, I think BYD’s intelligence is on the way, and it will be one of the biggest winners in the future. The reasons are as follows:
1) Established cooperative relationships with excellent technology or product suppliers such as Huawei, Baidu, Nvidia, Horizon, Momenta, and Sagitar. As the “top seller” of new energy vehicles in the world, BYD has the opportunity to obtain the best cooperation opportunities and conditions.
2) As the “top seller” of new energy vehicles in the world, it can invest a huge amount of research and development funds and lay out multiple technical routes at the same time to ensure that it does not miss any “feast”.
3) As the “top sales” of new energy vehicles in the world, the most new energy vehicles on the road can collect data for data training and other purposes.
Note: Lidar can be seen on the off-road vehicle expected to be released in January 2023, and on the new SUV to be released by Denza in 2023.
3. Platformization
There are platforms such as BYD OS, e platform 3.0, and DM-i/p, which can accelerate product iteration internally, improve product development and release speed; externally, they can help partners improve R&D efficiency and reduce costs.
(3) Products
1. Diversified car models. From the perspective of vehicle types, BYD’s models include sedans, SUVs, and MPVs (Tengshi D9), and will soon launch off-road vehicles (looking up to the R1) and pickups (camouflaged vehicles have been seen); in terms of price range, it currently covers 100,000 to The mainstream price space of 300,000 will be extended to the price space of 60,000 (seagull) to 1.5 million (looking up) in the future; from the perspective of power type, it includes both pure electric models and plug-in hybrid models. In short, BYD models are extremely rich and can cover the broadest target customers.
2. Very cost competitive. On the one hand, BYD’s overall sales scale is very large. It is expected that the sales volume will exceed 1.8 million units in 2022 and reach 3.6 million to 4.5 million units in 2023; The sales volume of single products is also very large. Basically, the monthly sales volume exceeds 20,000 vehicles, and even some car series have monthly sales volumes exceeding 60,000 vehicles. Therefore, a deep cost barrier has been formed and the price is extremely competitive. “Price is always the sharpest weapon.” When necessary, BYD can cut prices to achieve goals such as seizing the market, squeezing the living space of competitors, and maintaining capacity utilization. It is a bit of an exaggeration to say that if the “Rolling King” wants to start a price war, the sword will point to no grass.
3. Entering into a strong product cycle, “quantity, price, and profit” will all rise. On the one hand, new models continue to be launched and sales increase rapidly. On the other hand, prices continue to increase (explicitly increase through letters, or secretly increase through model upgrades), and ultimately the scale of revenue and profit grows rapidly.
(4) Production capacity and supply chain
1. Multi-base layout. There are multiple large-scale production bases (9 in China and 1 in Thailand in the future) across the country and around the world to produce complete vehicles, batteries, automotive semiconductors and other components. It is estimated that by 2023, BYD’s vehicle production capacity will exceed 5 million.
2. The supply chain realizes deep integration and vertical integration. When the scale is small, integrated vertical integration will increase the cost; but when the scale is large, integrated vertical integration will reduce the cost. In addition, through the deep integrated vertical integration of the supply chain, the autonomous controllability of the supply chain can be enhanced, and passive production reduction caused by supply chain problems (such as the shortage of chips or high-quality power batteries that other car companies may face) can be avoided.
(5) Sales and service channels (deep cultivation in China, facing the world)
There are 2,285 stores in mainland China (data as of September 2022). In terms of overseas markets, it has extensive presence in other major auto sales markets other than the United States, including other countries and regions in Asia, Europe, South America and Australia.
Previously, commercial vehicles have been operated in more than 60 countries and hundreds of cities around the world, and have relatively good overseas operation experience and basic conditions.
(6) Capital and financing capacity
Large cash reserve, good cash flow and strong refinancing ability are conducive to providing financial support for the continuous expansion of business.
(7) Governance structure
The governance structure is standardized, the actual controller is All In BYD, and there are basically no affiliates other than listed companies (BYD Electronics is a holding subsidiary), and the actual controller rarely reduces its shareholding.
4. BYD’s Unfulfilled Growth Expectations
The capital market is biased towards speculation and expectations. Some commentators believe that BYD’s forecast has been “full”, so here we talk about BYD’s unfulfilled growth expectations. BYD’s unfulfilled growth expectations include:
(1) In 2023, rising brand positioning will bring excess profits.
It is expected that BYD will release the R1, the first model of the high-end brand “Looking Up”, a high-end off-road vehicle in January 2023. After that, it is expected that “Looking Up” will release high-end SUV, high-end coupe and other models.
The mid-to-high-end MPV model D9 released by the “Tengshi” brand has been successful, and the number of orders for “Dading” has exceeded 40,000. It is expected to form a relatively large sales scale in 2023. It is expected that “Tengshi” will release a variety of new models including SUVs in 2023. These models can compete with new forces such as “Wei Xiaoli”.
In addition, BYD will release a new personalized brand in 2023. There are rumors that the main model is a pickup, but there is no definite news yet.
To sum up, as BYD’s brand positioning rises, it will enjoy the excess profits brought by the brand premium.
(2) In 2023, the overseas business of passenger vehicles will begin to increase in volume.
1. Export business. BYD currently has a global presence. Although the current sales in overseas markets are relatively small, the main reason is that BYD’s production capacity and transportation capacity are insufficient. Shipping capacity is tight and costs are rising sharply. BYD has currently ordered 6 ro-ro ships and built a terminal in the Shenshan Cooperation Zone. At the same time, it is also cooperating with some container shipping companies to study the method of transporting cars in containers. The production capacity of BYD has increased and it has well satisfied the Chinese domestic market. After that, the overseas business of BYD passenger vehicles will inevitably increase significantly. As mentioned above, BYD’s diverse models can meet the needs of different consumers around the world. For example, in addition to pure electric models, there are also plug-in hybrid models, which can well adapt to countries and regions with less perfect power facilities. The demand for using new energy vehicles. In short, BYD’s products have good applicability to consumers around the world.
2. Set up overseas factories. BYD has decided to build a vehicle factory in Thailand with an annual output of 150,000 new energy vehicles. It is reported that BYD has decided to build a complete vehicle factory in Brazil and plans to build two complete vehicle factories in Europe. In the future, it is possible to build more overseas factories to better meet the localization needs of customers.
(3) In 2024, the power battery external supply business will start to increase in volume.
BYD’s blade battery technology has outstanding advantages, but limited by its production capacity and the huge demand for its own vehicle business, the external supply of batteries has not been able to increase in volume. According to Wang Chuanfu, BYD’s battery production capacity in 2023 will mainly meet its own needs, and it will not be able to increase the volume of power batteries until 2024. According to Lian Yubo, vice president of BYD, BYD has already established a cooperative relationship with Tesla to supply batteries. In addition, information from public channels also shows that BYD has established battery supply partnerships with well-known car companies such as Toyota Motor and FAW Hongqi. It is speculated that a considerable proportion of BYD’s huge operating net cash flow comes from deposits paid by power battery customers. Therefore, the certainty of the power battery external supply business is undoubtedly.
In summary, I predict that from 2024, BYD’s power battery external supply business will increase in volume.
(4) In 2024, the energy storage business will be scaled up on a small scale.
BYD currently conducts energy storage business in the United States, the United Kingdom and other places, and has a factory in the United States, which has certain competitiveness in the field of energy storage.
One of the core components of energy storage facilities is the battery. After BYD’s battery production capacity increases in 2024, the energy storage business may also increase in volume.
At present, the proportion of energy storage business in BYD’s overall business is relatively low, but it cannot be ruled out that BYD will expand its energy storage business in the future according to market development.
(5) In 2024, the external supply of semiconductors and other Fudi parts will be expanded.
1. BYD Semiconductor. BYD Semiconductor is vigorously expanding its production capacity, and its production capacity will expand rapidly. Not long ago, BYD Semiconductor voluntarily applied to cancel the listing after it had “passed the meeting” (that is, passed the listing review and was waiting in line for the IPO). There was a considerable reason that BYD Semiconductor was developing too fast, and the previous listing materials were no longer available. It is very suitable for the current status of BYD Semiconductor. After the substantial expansion of production, BYD Semiconductor is expected to expand its external supply business on the premise of ensuring that its own needs are met. At the same time, we believe that BYD Semiconductor will also restart the listing process at an appropriate time in order to seek better development.
2. Other Freddy parts. In addition to Fudi Battery, Fudi Group also has Fudi Technology, Fudi Power, Fudi Seiko and other enterprises, which produce various auto parts and molds and other products. BYD regards the output of platforms and the external supply of parts as one of its key businesses. The Toyota BZ3 model currently in cooperation with Toyota adopts BYD’s e-platform 3.0 technology, and Skyworth Auto uses BYD’s DM-i platform. With the increase of BYD’s parts production capacity, it is expected that in 2024, the external supply business of Foday parts will also expand.
Comments on peer companies adopting BYD products and technologies:
While peer companies are generally less willing to adopt technology and components from rivals, there are exceptions. One situation is that peer companies have a high degree of technical confidence and believe that the use of high-quality components from competitors will not reduce their own competitiveness. For example, Tesla plans to adopt BYD’s blade battery; However, when adopting competitors’ technologies and high-quality components is conducive to improving their overall market competitiveness, embracing competitors has also become a choice.
(6) In 2024, long-tail businesses such as auto finance and insurance brokerage will increase profitability.
By 2024, it is expected that the annual sales of BYD’s new energy vehicles will exceed 5 million, and the number of cars owned by existing customers will exceed 10 million. Long-tail businesses such as auto finance and insurance brokerage will increase profitability.
(7) In 2025, the business of commercial vehicles (buses, trucks, etc.) will begin to increase in volume.
At present, the key business of new energy vehicles in the world is passenger vehicles, but we believe that after the penetration rate of passenger vehicle business reaches a certain level, the electrification wave of commercial vehicles will also come, otherwise the implementation of the “dual carbon” strategy will be incomplete of. We have already seen the delivery of Tesla Semi, and BYD’s pure electric buses are already operating in hundreds of cities in more than 60 countries around the world.
BYD has launched many products in subdivided fields such as pure electric buses, pure electric trucks, and pure electric logistics vehicles, and has rich technology and product reserves. It is expected that by 2025, BYD’s commercial vehicle business will begin to increase in volume.
(8) In 2025, intelligent business will become a new profit growth point.
New energy vehicles are gradually entering the second half. Although it is uncertain when humans will win the holy grail of L5-level autonomous driving, the low-availability L4-level autonomous driving is gradually approaching. Optimistically, in 2023, we have the opportunity to see (Baidu and other companies) new energy vehicles equipped with lidar, with the support of high-precision maps, vehicle-road coordination and other technologies, to achieve L4-level automatic driving in limited areas or on limited roads . After technological breakthroughs, the revision and improvement of laws and regulations will soon follow.
As mentioned above, BYD has many advantages for the development of intelligence, and will become one of the ultimate winners of intelligence. By 2025, BYD’s new energy vehicle ownership will exceed 15 million, and intelligent technologies such as intelligent network connection, smart cockpit, and autonomous driving will become new profit growth points.
5. BYD Valuation Analysis
When I wrote ” BYD In-depth Research II: BYD’s Valuation Model and 2022 Valuation ” in 2021, because BYD had obvious characteristics of a growth company at that time, with large revenue and small profit, I used PS (market value) at that time. Sales rate)-based valuation method, combined with the segmental valuation method, BYD will be valued in 2022.
Frankly speaking, BYD’s profit in 2022 far exceeds the expectations of myself and most brokerages in 2021 (the median value is about 10 billion), and may reach a level of around 18 billion. At the same time, the competitiveness demonstrated by BYD in 2022 and the expansion of production capacity give us reason to believe that BYD’s operating income and net profit will increase significantly in 2023. conditions of valuation.
BYD’s brand matrix:
The following table uses the segmental valuation method to provide a summary valuation of BYD’s main business:
(1) Explanation of the valuation of new energy passenger vehicles
1. I predict that the sales volume of BYD’s new energy vehicles will reach 3.6 million to 4.5 million in 2023. In 2022, BYD will ask suppliers to stock up according to the demand of 5 million vehicles in 2023. I think it has relatively high credibility. In 2021, BYD will ask suppliers to stock up according to the demand of 2 million vehicles, and the actual completion is expected to be around 1.88 million vehicles, with a completion rate of 94%. Based on the impact of uncertain factors such as the macro environment, this article adopts relatively conservative expectations and predicts revenue and profits based on the total sales volume of 3.6 million vehicles.
2. According to BYD’s 2022 third-quarter report, the average sales price of bicycles is about 165,000 yuan. Due to the upward positioning of BYD’s brand, the average sales price of bicycles in 2023 is predicted to be 170,000 yuan.
3. According to BYD’s 2022 third quarterly report, after deducting the profit of BYD Electronics, BYD’s cumulative sales in the first 9 months increased from 640,000 in the semi-annual report to 1.18 million, and the net profit per vehicle increased from 4,600 yuan to 6,800 yuan . It is estimated that in 2022, the net profit of BYD bicycles will increase to about 8,000 yuan. After the sales volume reaches 3.6 million vehicles in 2023, due to the downward trend of marginal costs, there is a large room for growth in net profit per vehicle. This article predicts an average net profit of 10,000 yuan per vehicle.
4. In summary, it is estimated that BYD’s new energy passenger vehicles will achieve a net profit of 36 billion yuan in 2023.
5. Due to the negative impact of the macro environment mentioned above may affect the valuation level, but BYD’s new energy vehicle business has a high growth rate and great development potential (that is, many unfulfilled growth expectations mentioned above) , this paper evaluates BYD’s new energy vehicle business based on the median value of 30 times PE, which is 1,080 billion yuan.
(2) Other instructions
1. Only the external supply part is considered for the power battery, because the valuation of the domestic sales part has been reflected in the valuation of new energy passenger vehicles. The benchmark company for the valuation of power batteries is Ningde Times, and the PS of Ningde Times is about 6.0 times. Since Ningde Times is a leading company in the field of power batteries, BYD’s valuation should be slightly lower than that of Ningde Times. This article takes 4.0 times PS to value BYD’s power battery external supply business.
2. When valuing commercial vehicles, the reference object is Yutong Bus. The PS of Yutong Bus is 1.7 times. This article takes 1.6 times PS to value BYD’s commercial vehicle business.
3. BYD Electronics adopts the average valuation amount of multiple securities firms and multiplies it by BYD’s shareholding ratio. BYD Electronics has a total of 2.253 billion shares, of which BYD holds 1.482 billion shares, with a shareholding ratio of 65.75%. Brokers on Futu predict an average price of HK$27.539 per share, and the market value of BYD’s holdings is about HK$40.8 billion, equivalent to RMB 36.5 billion.
4、 其他业务的估值均为零，因为其主要业务要么被包含在新能源汽车中，要么业务占比较低，可以忽略。
(三) 目标价
比亚迪（A股和H股）共有约29.11亿股，按上述估值，对应比亚迪A股的股价分别为：304元（悲观）、445元（中性）、585元（乐观），相对2022年末收盘价256.97元的升幅空间分别为：18%（悲观）、73%（中性）、128%（乐观）。
六、比亚迪交易方法参考
(一) 比亚迪A股
市场对比亚迪的分歧较大，体现在股价上的波动较大。建议投资者制定一个可以量化的交易方案，进行波段操作。
例如：将年度估值进行分解，设定每个季度的目标价，如果股价突破目标价之后发生下跌，就可以按下跌幅度进行一定比例减持；如果股价重新向上，再按上涨比例分批加回仓位。另外，也可以制定止损策略，如果跌破止损线，表示可能发生了超出我们掌握的信息之外的负面因素，或理解能力之外的负面因素，可以强制止损，以保住本金，等行情转暖时再进场。
交易的目的不是追求“赚尽最后一个铜板”（即最高收益率），而是追求持续、稳定的赢利。
(二) 比亚迪H股
1、 正股交易方法与A股类似。
2、 除正股之外，还可以重点考虑长线窝轮的投资机会。
3、 关于巴菲特减持的补充意见：截止目前，本人认为巴菲特减持比亚迪H最主要的原因是港股市场流动性紧缩，以及宏观层面的负面因素导致的整个市场极度低估，与巴菲特的投资理念或比亚迪的基本面无关。随着港股市场宏观环境的改善，巴菲特可能终止减持。即使巴菲特继续减持，其影响将递减，且目前已经非常小了。
七、风险提示
(一) 宏观风险
1、 如前文所述，宏观层面的负面因素可能降低比亚迪新能源汽车的销量预期，同时也会对比亚迪的估值产生负面影响。
2、 中美贸易战、全球范围内的贸易保护主义抬头、地缘政治等因素，可能对比亚迪的海外业务造成重大不利影响。
(二) 行业竞争风险
1、 中国新能源汽车行业的竞争非常激烈，可能降低比亚迪的销量和盈利水平。
2、 大众等传统车企投入巨资加速向新能源汽车转型，这些传统车企基础实力雄厚，他们进行转型的战略决心和投入规模是未来新能源汽车行业竞争格局的最大变量。
(三) 比亚迪自身风险
1、 扩张风险。比亚迪的扩张规模极其惊人，从业务板块上来看，整车、电池、半导体、其他零部件都在大规模地扩张，甚至开始订购滚装船，建设自己的海外运输船队；从地域来看，不仅仅在中国，在全球各地也在大规模地布局，包括发展营销和服务网络，以及建设本地化的工厂等。这些规模惊人的扩张行为，在理想情况下，将提高比亚迪的产能和市场份额、增加供应链的深度，降低成本，从而提高利润；但如果业绩不及预期，将带来产能闲置、盈利水平降低，资产负债率大幅上升等风险。
本人认为，比亚迪规模极其惊人的扩张，是比亚迪目前最大的风险。当然，本人也承认，这些风险截止目前只是理论上的潜在风险，未必会成为现实风险。同时我们也看到，比亚迪近年来的扩张非常富有成效，管理层展现了卓越的战略眼光和执行力。
2、 智能化战略失误。此前，比亚迪在智能化战略上的表现比较保守，目前智能化水平落后于特斯拉、百度等优势企业。如果未来智能化战略失误，有可能输掉新能源汽车的“下半场”。
八、总结
投资不易，需要具备宏观分析、行业分析、企业基本面分析、估值的能力，还得具备良好的交易能力。本文从上述多个维度对投资比亚迪的各个要素进行了分析，供各位投资者朋友参考。总结如下：
宏观环境：各个要素目前处于低位，但边际逐步改善。
新能源汽车行业的投资机会：新能源汽车行业叠加四重战略意义、市场容量巨大、中国及全球渗透率均有很大发展空间、增速仍然比较高，属于“长坡厚雪”的行业，仍然具有非常好的长线投资机会。
比亚迪的基本面：战略清晰、资金实力雄厚、核心技术突出、进入强产品周期、估值具有较大的上升空间，具备非常好的长线投资价值。
风险：宏观风险影响销量、降低估值；行业竞争加剧、分化加速；比亚迪扩张风险和智能化战略失误风险。
祝各位朋友在即将到来的2023年里大展宏图，投资顺利，并赚得盆满钵满！
彩虹领队
2022年12月31日
#比亚迪# $比亚迪(SZ002594)$ $比亚迪股份(01211)$ $比亚迪ADR(BYDDY)$
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