BYD’s Aug auto sales data was a bit mixed in our view. ICE and NEV bus sales continued good sales performance, and the new Han EV had a brilliant performance with a sales volume of 4K units in Aug, while overall NEV sales looked sluggish with an 8.6% YoY decline. We are not too concerned about the Aug sales data, as we expect the growth pace to pick up with the new NEV model and blade battery to release capacity. We trim 2020E earnings slightly by 5% on conservative NEV sales project. We are optimistic on 2021E, as our earnings and valuation remain intact. Reiterate BUY rating with TP unchanged at RMB113.1.
- NEV sales lagging behind our projection pace. BYD’s NEV sales in Aug was 15,283 units (+1.2% MoM / -8.6% YoY), reflecting slow recovery in Aug, and sales pace is lagging our projection. However, we spot some positive signs in Aug auto sales, including 1) BYD’s official Weibo disclosed it delivered 4K units of flagship Han series NEV; 2) NEV bus sales remained strong at 1,051 units, up 114% YoY; and 3) PHEV sales reached 4,595 units (-9.8% YoY/+37.6% MoM), marking a bottom-out in PHEV segment.
- NEV outlook remains optimistic. We are not too concerned about slower-than-expected Aug NEV sales, since we believe 1) some NEV demand was delayed as BYD is in a new product launching cycle in 2H20E; 2) hot sales of Han series reflects consumers’ recognition of BYD’s efforts in promoting safety, while the safety-focused blade battery capacity is still ramping up; and 3) sales of ride-hailing NEV models (e5) still suffered economic impacts associated with COVID-19. Based on 8M20 sales update, we trim the FY20 NEV sales projection to 183K units, reflecting a decline of 20.4% YoY. Looking ahead to FY21E, supported by the new NEV model based on the DM4.0 platform (PHEV), and capacity release from blade battery (EV), our NEV sales outlook on BYD remains optimistic. We estimate BYD’s 2021E NEV sales volume will achieve 300K units, representing an increase of 64.4% YoY.
- ICE segment remains strong. In Aug, the sales volume of ICE was 21,499 units, up 11.5% YoY. It was mainly driven by sedans and SUVs, of which sedan sales were 4,284 units (+92.7% YoY) and SUV sales were 13,813 units (+6.7% YoY). We believe shining ICE sales performance was attributable to best-selling of Song Pro. With the rollout of Tang (2021 edition in Aug) and upcoming models such as Song Plus (expected in Sep), we expect ICE sales to maintain strong momentum. We raised our ICE sales volume forecast to 250K in 2020E, partially offsetting the decline in sales of NEV.
- 2021E outlook and TP remain intact; maintain BUY. We trim down 2020E earnings forecast by 5% based on 1) slower-than-expected NEV sales led by delay in the launch of new models; 2) the increase in the market share of ICE； and 3) the better-than-expected sales of NECV bus. However, we remain confident in BYD’s auto sales in 2021E given 1) the launch of the DM4.0 model in 1Q21E; 2) the production capacity release of blade battery; and 3) recovery of the overall NEV market. As a result, we maintain our 2021E bottom-line forecast at RMB4.6bn. Our earnings forecast and valuation for 2021E remain intact. Reiterate BUY rating with a TP of RMB113.1.
