BYD delivered outstanding auto sales in Dec. NEV sales reached 29K with flagship Han EV shipment exceeded 12k units in Dec. NEV sales volume had accounted for 44% of total auto sales in 2020. Looking ahead in 2021E, we still see several positive catalysts for BYD from 1) new DM EV model to boost sales; 2) cooperation with DiDi to take the lead in the ride-hailing renewable cycle; 3) power battery capacity expansion to support EV sales; and 4) semiconductor segment spin-off to release business value. We revised up BYD’s TP by 31% to RMB293.2. Reiterate BUY rating.
- NEV sales speeded up in Dec. BYD announced that total auto sales volume achieved 56K units in Dec, +30% YoY/+4%MoM.In Dec, NEV reached 29K, +120%YoY (NEPV 28K/+157%YoY, NECV 1K/-48%YoY). Delivery of Han continued to climb with a total of 12K units in Dec, up 19.6%MoM. The annual cumulative sales volume was 427K units/-7%YoY, in line with CMBI expectation.
- China NEV sales growth to accelerate in 2021E. We expect that the sales volume of NEV in China will continue to rise at a high speed in 2021E. Given 1) the strong NEV pipeline among all major OEMs; 2) the product recognition from retail consumers; 3) the beginning of the first round of replacement cycle in ride-hailing business; 4) the gradual introduction of LFP version for existing models, we expect the penetration rate of NEV will exceed market expectations. Specifically, we expect the penetration rate of NEV to reach 7% in 2021E, with a corresponding sales volume of 1.92mn units, representing an increase of 57% (1.66mn NEPV/260K NECV).
- NEV sales volume to increase 99% in 2021E. We estimate BYD’s NEV market share declined to 15% in 2020, due to epidemic impacts and late release of new vehicle model. Starting from 2021, BYD will use a brand new logo and launch several new models including Qin Plus (based on the latest super hybrid DM-i platform), Song Pro DM, etc. We expect those measures will boost its NEV sales. At the to-B end, we expect the cooperation model D1 between BYD and DiDi to take lead in the ride-hailing renewable cycle. We estimate D1 to have 66K units shipment in 2021E. As we believe the Company’s NEV sector to maintain strong recovery, we expect BYD's market share in NEPV to continue to rebound to 20%, and that will boost NEV sales volume to 364K units in 2021E, +99%YoY. We think BYD will gradually shift its business focus to NEV from ICE (61% vs 39% in 2021E), and maintain relatively stable ICE vehicle sales at 244K units, +3% YoY.
- 2020E earnings to reach RMB5.3bn. Given the updated sales volume and sales mix, we revised our net profit forecast by +1% to RMB5.3bn in 2020E. At the same time, we expect a more optimistic sales forecast of NEPV in 2021E, from 300K units to 364K units. As a result, we raised our 2021E bottom-line by 11% to RMB7.7bn.
- Revise valuation; maintain BUY. We estimate BYD is currently trading at 2021E 6.6x NEV P/S, and 30x 2025E power battery P/E according to our SOTP valuation model. We think both sector’s current valuation is far behind corresponding peers. Based on our revised NEV sales outlook and optimistic NEV sales mix in total auto sales volume, we lifted 2021E NEV P/S to 9x, and boost power batter valuation slightly from 25x to 35x then discount back. Our segment valuation for Auto/power battery/semi-conductor business is RMB656.7/189.3/16.0bn. Applying 15% conglomerate discount, we derived BYD’s valuation at RMB799.9bn with TP of RMB293.2 for A-share (HK$300.0 for H-share). Maintain BUY rating.
