BYD released its FY2020 results. In 2020, the Company achieved a revenue of RMB156.6bn yuan, a growth of 23% YoY. NP was RMB4.2bn (vs CMBI estimate RMB5.2bn), up 162%YoY. We expect sales volume of the DM-i series will gradually increase from 2Q21E while BEV product matrix will be fully equipped with blade batteries, and both will open a new growth cycle. We raised our bottom-line forecast by 7% to RMB7.3bn in 2021E to reflect a higher GPM on auto segment. Reiterate BUY Rating and revised our TP to HK$282.0.
- FY20 GPM was 19.4%, beat our expectation. Automobile GPM was 25.2%, up 3.3ppt YoY. We think margin expansion was mainly driven by hot sales of high-end EVs. Net gearing ratio reduced 39ppt YoY to 40% by end-2020. Going forward, we expect BYD will maintain its profitability and healthy balance sheet.
- 1Q21 earnings outlook lower than expectation. BYD also announced 1Q21E earnings range in RMB200-300mn, up 77.6%-166.3% YoY. The preview was a bit disappointing, since 1Q20 was a low base quarter. We think there are several reasons for weaker-than-expected earnings, including 1) ICE sales are squeezed by DM-i models; 2) surging upstream material costs caused margin pressures; 3) destocking old models for new DM-i products and switching whole series of BEV to blade batteries in 1Q21E; and 4) gradual control of COVID-19 has reduced contributions from masks.
- DM-i series to become hit product. DM-i series equip with 1.5L Xiaoyun engine, with 43.4% thermal efficiency and running with less than 3.8L fuel consumption per 100km. Whole DM-i series are equipped with dedicated high power blade battery, and have same price as ICE vehicles with extraordinary using experience as EV. We think the high cost performance of DM-I will drive strong retail demand growth. Mgmt. disclosed Qin Plus DM-i has accumulated orders of more than 50K units. We expect cumulative orders to be delivered gradually in 2Q-4Q21E as the dedicated blade battery release capacity output.
- Maintain BUY with TP trimmed slightly to HK$282. Based on our revised EV sales projection, we raised our bottom-line forecast by 7% to RMB7.3bn in 2021E. We think recent weak market sentiment had created good opportunity to accumulate BYD. We remain optimistic on BYD’s automotive sales in 2021E. We cut TP by 6% to HK$282 mainly on more conservative auto shipment volume assumption, maintain BUY.
