20210111-招银国际-比亚迪-002594.SZ-Benefit_from_the_outperformance_of_LFP_9页_1mb

CMB International Securities | Equity Research | Company Update Summary

Core Content

CMB International Securities has released an updated equity research report on BYD (002594 CH), highlighting its strong performance in the new energy vehicle (NEV) sector and providing a revised target price. The report outlines the company's strategies and outlook for 2021 and beyond, emphasizing the growth potential in NEV sales, the spin-off of its semiconductor business, and the potential for improved financial performance.

Main Points

• NEV Sales Growth:

  • In December 2020, BYD delivered 56K units of total auto sales, with 29K units of NEV sales, representing a +120% YoY increase.
  • The Han EV model continued to gain traction, with 12K units shipped in December, up 19.6% MoM.
  • Annual cumulative NEV sales for 2020 reached 427K units, aligning with CMBI's expectations.

• 2021E Outlook:

  • CMBI expects NEV sales in China to grow at a high rate in 2021E, with a 7% penetration rate and 1.92mn units of sales.
  • BYD's NEV market share is projected to rebound to 20%, leading to a 99% YoY increase in NEV sales volume to 364K units.
  • The company is expected to shift its business focus towards NEV, with NEV sales accounting for 61% of total sales and ICE for 39% in 2021E.

• Target Price & Rating:

  • CMBI has revised the target price (TP) for A-shares to RMB293.2, up 31% from the previous RMB223.8.
  • The BUY rating is maintained, with a +28.9% upside from the current price of RMB227.5.

• Earnings Forecast:

  • CMBIS revised 2020E net profit to RMB5.3bn, up 1% from the previous forecast.
  • 2021E net profit is revised to RMB7.7bn, up 11%.
  • The report outlines the expected increase in revenue, operating profit, and net profit for 2021E compared to the old forecast.

• Valuation Adjustments:

  • The power battery segment valuation multiple was increased from 25x to 35x for 2025E, reflecting optimism about LFP battery adoption.
  • CMBIS estimates the total valuation of BYD at RMB799.9bn after applying a 15% conglomerate discount, with a TP of RMB293.2 for A-shares and HK$300.0 for H-shares.

• Semiconductor Spin-off:

  • BYD plans to spin off its semiconductor business in 2021E, which includes IGBT modules and 3rd-generation semiconductor products (SiC).
  • The company is expected to build its own SiC production line by 2021E, with full replacement of IGBT by 2023E to improve vehicle mileage by ~10%.
  • CMBIS believes the spin-off will allow the semiconductor business to operate independently, expanding its product matrix and valuation potential.

• H-Share Placement:

  • BYD has submitted application materials for an additional H-share issuance to the CSRC.
  • The H-A discount is close, suggesting a limited pricing discount and dilution impact on EPS.
  • The placement is expected to accelerate power battery capacity expansion, further boosting the segment's value.

Key Financial Metrics

Segment Valuation

Sales Mix

P&L Breakdown

Market Position & Competitors

Conclusion

CMBI maintains a BUY rating for BYD, citing strong NEV performance, the potential of the spin-off of its semiconductor business, and a revised valuation that reflects increased confidence in the company's future. The company is expected to continue its growth trajectory in the NEV segment, driven by new models, the DiDi cooperation, and the adoption of LFP batteries. The valuation model incorporates a 15% conglomerate discount, leading to a target price of RMB293.2 for A-shares and HK$300.0 for H-shares.