DOCSLIB.ORG

After a Series of Successes, BYD Faces Risks

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
After a Series of Successes, BYD Faces Risks :: Corporations After a series of successes, BYD faces risks Li Wan-Yong Business Analyst of POSCO Research Institute hinese manufacturer BYD Auto’s third-quarter results for 2011 sent the market into shock. BYD’s net profits decreased 86% year-on-year. BYD sold 520,000 vehicles in 2010, far C below its target of 800,000. This is in stark contrast to the increasing sales trend in China’s auto market in 2010. In late August 2011, BYD shed 70% of its sales staff from its auto unit, up to 1,800 layoffs out of 2,600 workers. There is a rumor going around that BYD will lay off 7,000 employees in its manufacturing unit. In early August, BYD’s vice president and general sales manager, Xia Zhibing (夏治氷), one of the early members of the company, suddenly resigned. Just two years ago, BYD was enjoying its heyday. Whatever happened to the poster child of China’s new energy vehicle sector? ○● “BYD model” bolstered by the “Buffett effect” BYD started as a battery manufacturer in Shenzhen in 1995. When it 113 Winter 2012�POSRI Chindia Quarterly acquired a Xi’an-based car manufacturer in 2005, BYD took its first step into the car manufacturing industry. Up until 2009, BYD grew by over 100% each year. Only three years after getting involved in the car manufacturing business, BYD became China’s number one company in the low-end compact car sector. BYD Chairman Wang Chuanfu (王傳福) announced bold plans to become the largest automaker in China by 2015, and number one in the world by 2025. Many things factored into the success of BYD. First, from 2005, when BYD entered the automotive industry, China’s automotive market grew at double-digit rates. The demand for small and medium-sized cars was particularly high; BYD’s compact car and low-cost strategies worked. BYD’s vertically integrated business model, once called the“ BYD model”, and a production method that relied more on workers than on machines were effective for producing imitation models at lower prices. The“ BYD model”was considered a role model in China’s auto industry. In 2006, BYD set out to expand the market with its F3 sedan, a copy of an older Toyota model, and sold 100,000 units within two months after the new model was released in the market. This was an unprecedented outcome in China’s automotive history. The“ Buffett effect”also played an important role in the success. BYD attracted global attention when an investment fund run by Berkshire Hathaway bought 9.9% of Hong Kong-listed BYD’s shares for USD 230 million in September 2008. With Warren Buffett’s visit to BYD in Shenzhen in September 2010, BYD showed off the trust it had received from the legendary investor. There was, of course, an ulterior motive to the visit, which came at a time when BYD was agonizing over its deteriorating performance. BYD also benefitted from the government’s support through policies for the development of electric vehicles, which included subsidies for buyers of electric cars. 114 POSRI Chindia Quarterly�Winter 2012 :: Corporations ○● BYD’s failure to build its own brand Government subsidies for consumers of small and medium-sized cars, given to increase consumption of these products, provided a golden opportunity for BYD. However, this opportunity did not last long. In mid- 2010, when the subsidies ended, BYD’s performance started to decline. Factors that had led to BYD’s success ended up putting pressure on BYD. With a lineup that consisted of copied small and medium-sized, low-cost models, BYD failed to build its own brand. The Chinese carmaker never rolled out a notable new model after the F3 sedan; it merely released models with slightly altered engine displacement and exteriors. While major global carmakers were setting their strategic priority on the Chinese market and concentrating their resources, BYD sat on their hands. In 2010, the F3 accounted for 51% of the 520,000 units sold. No carmaker could survive five years with only one model. The vertically integrated business model and the production method that relied on workforce, the two representative characteristics of the“ BYD model”, also played a role in BYD’s poor performance. Relying on in-house production for most of the parts, BYD could not benefit from economies of scale. This led to poor quality and rising production costs. The labor costs in Shenzhen, where BYD’s major production facilities are located, were the highest and fastest growing in China, but BYD had a reputation for low-cost vehicles at home and abroad. BYD had no way to improve its profitability. ○● Failure to build a mass production system for electric cars BYD showed little sense of urgency in its changing environment. It only focused on sales and profits, disregarding relationships with suppliers. With sales deteriorating, BYD chose to consign its inventories to dealers in March 2010. However, dealers in Hunan, Zhejiang, Beijing, Chengdu, and Zhengzhou responded by leaving the BYD sales network, and BYD sales deteriorated further. 115 Winter 2012�POSRI Chindia Quarterly As BYD failed to build a mass production system for electric vehicles, BYD’s future became bleaker. Since 2008, BYD has invested RMB 5 billion in research and development of electric cars (including fuel cells), but it has invested little in traditional vehicles. So far, BYD has sold only 1,000 electric cars. Another problem for BYD is its substandard technologies. BYD was lagging far behind Korea and Japan in fuel cell technology, which is the foundation of BYD’s business and the core technology of electric cars. BYD has almost no patents related to electric vehicles in the USA, the largest automotive market. With high prices and a lack of infrastructure, the commercialization of electric cars has been delayed. BYD’s management responded poorly to risks. About a year ago, when a great number of dealers left the BYD sales network, the chairman of BYD gave a vague explanation that reducing the number of dealers was meant to improve the profitability of the remaining dealers. BYD management gave an equally vague explanation for the laying off of its sales workforce: that BYD’s excessive expansion strategy had led its sales division to become disproportionately large. Other companies rushed to scout workers discharged from BYD, which gives the impression that the BYD chairman’s remarks were mere excuses. When unfavorable public opinion did not seem to be recovering, BYD opened its fuel cell plant to the public for the first time in order to improve its image. However, this had the reverse effect, because BYD disallowed press release of any news stories or photos. The rumor of Buffett’s withdrawal of BYD shares also became a burden on the company. Whenever BYD shows poor performance, Buffett’s potential withdrawal of BYD shares becomes a hot issue. The price of BYD shares once rose to HKD 85.5, but nosedived to HKD 15.36 as of the end of October 2011, an 85% fall from the record price, giving more credence to the rumor of Buffett’s withdrawal. 116 POSRI Chindia Quarterly�Winter 2012 :: Corporations ○● Delayed commercialization of electric cars as the greatest obstacle Beleaguered BYD Auto debuted its E6 full-electric crossover on October 26, 2011. BYD believes that the new model is better than any existing electric car in terms of driving range and fuel economy. The problem with the E6 is its price. The E6 is sold for RMB 370,000, which is equivalent to the price of an imported midsize sedan. Even with government subsidies, the price exceeds RMB 300,000. BYD claimed that this price would be offset by improved mileage, but this claim BYD is at the end of its rope. For the is questionable. For company to revive, it is imperative to every 100 kilometers, realize its commercialization policies the E6 costs RMB 14, for electric vehicles and create a profitable model. while a traditional internal combustion engine (ICT)-powered automobile costs RMB 70. The E6 gets five times better mileage, but in reality, it can save only RMB 56,000 after running 100,000 kilometers. Because BYD has failed to equip itself with mass production facilities, the price of its parts is also very high. The E6 also suffers from frequent malfunctions because of its low technology readiness level. Considering other problems, including insufficient infrastructure, and rising power prices, the E6 has little hope of cost-competiveness. For this reason, some claim that the E6 is a gamble for BYD, not a self-rescue measure. JD Power and Associates, a global marketing information services company in the USA, projected that sales of battery electric vehicles (BEV’s) and plug-in hybrid electric vehicles (PHEV’s) will reach 5.2 million units by 2020, just 7.3% of the 70.9 million passenger vehicles. JD Power asserted that the era of electric vehicles will not come within the next 117 Winter 2012�POSRI Chindia Quarterly decade without increased standards for tax systems and fuel economy, and the support of public policies. Germany’s Bosche projected that it will not be until 2020 that electric cars will become widespread in China, and that sales will account for only 5-10% of the total vehicle sales. The Chinese government has put all its efforts to nurturing battery electric vehicles in order to make up for China’s disadvantage as a latecomer in traditional ICT-powered vehicles. However, it has projected a change in policies in the face of BYD’s delayed commercialization and export plans for electric cars.
Load more

Recommended publications
  • CHINA CORP. 2015 AUTO INDUSTRY on the Wan Li Road
    CHINA CORP. 2015 AUTO INDUSTRY On the Wan Li Road Cars – Commercial Vehicles – Electric Vehicles Market Evolution - Regional Overview - Main Chinese Firms DCA Chine-Analyse China’s half-way auto industry CHINA CORP. 2015 Wan Li (ten thousand Li) is the Chinese traditional phrase for is a publication by DCA Chine-Analyse evoking a long way. When considering China’s automotive Tél. : (33) 663 527 781 sector in 2015, one may think that the main part of its Wan Li Email : [email protected] road has been covered. Web : www.chine-analyse.com From a marginal and closed market in 2000, the country has Editor : Jean-François Dufour become the World’s first auto market since 2009, absorbing Contributors : Jeffrey De Lairg, over one quarter of today’s global vehicles output. It is not Du Shangfu only much bigger, but also much more complex and No part of this publication may be sophisticated, with its high-end segment rising fast. reproduced without prior written permission Nevertheless, a closer look reveals China’s auto industry to be of the publisher. © DCA Chine-Analyse only half-way of its long road. Its success today, is mainly that of foreign brands behind joint- ventures. And at the same time, it remains much too fragmented between too many builders. China’s ultimate goal, of having an independant auto industry able to compete on the global market, still has to be reached, through own brands development and restructuring. China’s auto industry is only half-way also because a main technological evolution that may play a decisive role in its future still has to take off.
    [Show full text]
  • State of Automotive Technology in PR China - 2014
    Lanza, G. (Editor) Hauns, D.; Hochdörffer, J.; Peters, S.; Ruhrmann, S.: State of Automotive Technology in PR China - 2014 Shanghai Lanza, G. (Editor); Hauns, D.; Hochdörffer, J.; Peters, S.; Ruhrmann, S.: State of Automotive Technology in PR China - 2014 Institute of Production Science (wbk) Karlsruhe Institute of Technology (KIT) Global Advanced Manufacturing Institute (GAMI) Leading Edge Cluster Electric Mobility South-West Contents Foreword 4 Core Findings and Implications 5 1. Initial Situation and Ambition 6 Map of China 2. Current State of the Chinese Automotive Industry 8 2.1 Current State of the Chinese Automotive Market 8 2.2 Differences between Global and Local Players 14 2.3 An Overview of the Current Status of Joint Ventures 24 2.4 Production Methods 32 3. Research Capacities in China 40 4. Development Focus Areas of the Automotive Sector 50 4.1 Comfort and Safety 50 4.1.1 Advanced Driver Assistance Systems 53 4.1.2 Connectivity and Intermodality 57 4.2 Sustainability 60 4.2.1 Development of Alternative Drives 61 4.2.2 Development of New Lightweight Materials 64 5. Geographical Structure 68 5.1 Industrial Cluster 68 5.2 Geographical Development 73 6. Summary 76 List of References 78 List of Figures 93 List of Abbreviations 94 Edition Notice 96 2 3 Foreword Core Findings and Implications . China’s market plays a decisive role in the . A Chinese lean culture is still in the initial future of the automotive industry. China rose to stage; therefore further extensive training and become the largest automobile manufacturer education opportunities are indispensable.
    [Show full text]
  • How a Chinese Battery Firm Began Making Electric Buses in America
    Paulson Papers on Investment Case Study Series California Dreaming: How a Chinese Battery Firm Began Making Electric Buses in America June 2015 Paulson Papers on Investment Case Study Series Preface or decades, bilateral investment sectors, such as agribusiness or has flowed predominantly from the manufacturing—to identify tangible FUnited States to China. But Chinese opportunities, examine constraints investments in the United States have and obstacles, and ultimately fashion expanded considerably in recent sensible investment models. years, and this proliferation of direct investments has, in turn, sparked new Most of the papers in this Investment debates about the future of US-China series look ahead. For example, our economic relations. agribusiness papers examine trends in the global food system and specific US Unlike bond holdings, which can be and Chinese comparative advantages. bought or sold through a quick paper They propose prospective investment transaction, direct investments involve models. people, plants, and other assets. They are a vote of confidence in another But even as we look ahead, we also country’s economic system since they aim to look backward, drawing lessons take time both to establish and unwind. from past successes and failures. And that is the purpose of the case studies, The Paulson Papers on Investment aim as distinct from the other papers in this to look at the underlying economics— series. Some Chinese investments in and politics—of these cross-border the United States have succeeded. They investments between the United States created or saved jobs, or have proved and China. beneficial in other ways. Other Chinese investments have failed: revenue sank, Many observers debate the economic, companies shed jobs, and, in some political, and national security cases, businesses closed.
    [Show full text]
  • Electrifying the World's Largest New Car Market; Reinstate At
    August 31, 2016 ACTION Buy BYD Co. (1211.HK) Return Potential: 15% Equity Research Electrifying the world’s largest new car market; reinstate at Buy Source of opportunity Investment Profile Electrification is set to reshape China’s auto market and we expect BYD to Low High lead this trend given its strong product portfolio, vertically integrated model Growth Growth and high OPM vs. peers. A comparative analysis with Tesla shows many Returns * Returns * strategic similarities but BYD’s new energy vehicle business trades at a sizable Multiple Multiple discount, which we see as unjustified given its large cost savings, capacity Volatility Volatility utilization, and front-loaded investment. China’s new energy vehicle market is Percentile 20th 40th 60th 80th 100th poised to deliver c.30% CAGR (vs. 4% for traditional cars) over the next decade. BYD Co. (1211.HK) We have removed the RS designation from BYD. It is on the Buy List with a Asia Pacific Autos & Autoparts Peer Group Average * Returns = Return on Capital For a complete description of the investment 12-m TP of HK$61.93, implying 15% upside. Our scenario analysis, flexing profile measures please refer to the disclosure section of this document. sales volume and margin assumptions, implies a further 30% valuation upside. Catalyst Key data Current Price (HK$) 54.00 1) More cities in China are likely to announce local preferential policies in 12 month price target (HK$) 61.93 Market cap (HK$ mn / US$ mn) 110,705.4 / 14,270.1 the new energy vehicle (NEV) segment once the result of the subsidy fraud Foreign ownership (%) -- probe is announced.
    [Show full text]
  • Huizhou's Development in Smart City and Smart Automotive
    The Power Transforming the Automotive Industry from Below: NEV Battery Value Chains and Specialized Manufacturing Cluster in South China Wei ZHAO 赵巍 Boy Lüthje Senior Fellow, Sun Yat-sen University (Guangzhou) Institute for Social Research, Associate Professor, ESSCA School of Management (Angers) University of Frankfurt (Germany) 21 January 2020, Paris Outline I. Introduction: The Big Question II. The Structure of Battery Value Chain: Emerging Local Clusters in China III. Core Competence of NEV Battery Firms in South China IV. Strategy of Vertical Specialization and Impact on the Future of NEV Supply Chain V. Conclusions and Implications I. The Big Question What will be future structure of auto industry? Who will dominate the sector? New Value Chains in Auto New Players in Auto Autonomous vehicles and smart ride hailing firms, self-driving mobility vehicle firms, independent car and NEV makers, digital car and new start-ups, incumbent carmakers, electronics, semi-conductor, telecommunication, software and internet firms Electrification of cars and new oil producers, mining and chemical energy components firms, battery makers, incumbent carmakers, integrated new energy providers Digitalization of manufacturing car suppliers, electronics contract system manufacturers Three predicted scenarios 1. Refurbishing of the 2. Vertically disintegrated 3. Flexible specialization of vertically-integrated mass mass production with battery manufacturing production through battery makers as core clusters as core component suppliers of EV. integration
    [Show full text]
  • 2019 Byd Csr Report
    ABOUT THIS REPORT Table of Contents BYD Company Limited(hereinafter “BYD” or “we”) have been actively releasing corporate social responsibility 01 Letter from Corporate governance (CSR) reports, so that the general public will be informed of what we are doing and supervise our execution. 07 the President Legal and compliance Our annual CSR reports date back to as early as 2010, in the hope of showcasing BYD’s CSR philosophy as Operation and Social responsibility Management well as practice, facilitating understanding, communication, and interaction between BYD and its stakeholders 03 About us management as well as the general public, and ultimately achieve the goal of sustainable development. Scope of report This report covers BYD Company Limited. And its subsidiaries, with a time range from January 1 through Protecting shareholders’ December 31, 2019. Certain content may involve earlier dates. Data as the basis of this report has been interests 19 collected following our current management procedures. The unit for financial records featured in this report is Distributor management Partner Cooperation Renminbi (RMB), unless otherwise specified. Supplier management and Management Basis of report This report is primarily based on the ESG Reporting Guide and FAQs (Main Board Appendix 27) by the Stock Exchange of Hong Kong Limited, and Memorandum No. 2 on the SME Board Information Disclosure Business: Periodic Report Disclosure by the Shenzhen Stock Exchange. In the process, we also referenced Product responsibilities 29 G4 Sustainability Reporting Guidelines by the Global Reporting Initiative (GRI) and CASS-CSR guidelines. Customer interests Please refer to the indicator index at the end of this report for how disclosure for each specific indicator is and services Product Quality and Service covered in the report.
    [Show full text]
  • 3 Internetgestützte Innovationsprozesse
    New players in the automotive industry Waymo, Build Your Dreams and Sono Motors Jens Clausen │ Yasmin Olteanu 1 Impressum Autors: Jens Clausen (Borderstep Institut) │ [email protected] Yasmin Olteanu (Borderstep Institut) │ olteanu @borderstep.de Project Strukturwandel in der Automobilbranche. Transformation der Wertschöpfung in der Automobil- branche (Structural change in the automotive industry. Transformation of value creation in the auto- motive industry) Project Coordination: Fraunhofer-Institut für System- und Innovationsforschung ISI, Karlsruhe Citation suggestion: Clausen, J., Olteanu, Y. (2021): New players in the automotive industry. Waymo, Build Your Dreams and Sono Motors. Borderstep. Berlin. Title: The core founding team of Sono Motors, in front of the Sion © Sono Motors Translation: DeepL.pro Funding Body: Hans Böckler Foundation 2 Table of Contents 1 Summary ................................................................................................................................... 5 2 Introduction and methodology ................................................................................................. 7 2.1 Introduction .............................................................................................................................. 7 2.2 Impact of start-ups on markets and sectors ............................................................................. 7 2.3 The impact of electric mobility and digitisation on the natural environment.......................... 8 3 Overview of the development
    [Show full text]
  • Electric Vehicles | CHINA
    Electric vehicles | CHINA INDUSTRIALS / AUTOS & AUTO PARTS NOMURA INTERNATIONAL (HK) LIMITED NEW Yankun Hou +852 2252 6234 [email protected] THEME Action Stocks in focus We believe that various electric vehicles (xEV) are the ultimate solution for the We believe the EV theme will sustainability of the global auto industry. We think current EV technology is not support BYD’s share price, although sophisticated enough to compete with the internal combustion engine, but can be we find it difficult to see upside from applied to niche markets. Penetration in niche markets will probably depend on here without clearer milestones; CSR government policy. We are cutting our rating for BYD to NEUTRAL (from Buy) on could benefit due to its strong R&D possible slower sales of EV products in 2011 and a demanding valuation. We think ability in EV buses. WATG, Tianneng Power, A123, Ningbo Yunsheng and CSR (NEUTRAL) have exposure to the EV theme. Price Catalysts Stock Rating Price target BYD (1211 HK) NEUTRAL 42.75 40.00 Government policies on EV; auto sales volume. CSR (1766 HK) NEUTRAL 10.78 11.20 Anchor themes Downgrading from Buy. Cutting PT. We think the niche auto market, including buses, taxis, and LSEVs, provides the Closing prices as of 12 January 2011; local currency first entry point for EV producers. So near and yet so far Analysts Yankun Hou +852 2252 6234 Technology ready to take off as a niche product [email protected] We believe the current EV technology cannot compete with the conventional internal combustion engine (ICE) on driving experience, but that it is ready to be Ming Xu applied to niche markets, though the speed of penetration depends on government +852 2252 1569 commitment.
    [Show full text]
  • BYD COMPANY LIMITED (A Joint Stock Company Incorporated in the People's Republic of China with Limited Liability) (Stock Code: 1211) Website
    Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. BYD COMPANY LIMITED (A joint stock company incorporated in the People's Republic of China with limited liability) (Stock Code: 1211) Website: http://www.byd.com.cn 2012 ANNUAL RESULTS ANNOUNCEMENT The Board of Directors of the Company (the “Board”) is pleased to announce the audited results of the Company and its subsidiaries for the twelve months period ended 31 December 2012. This announcement, containing the full text of the 2012 Annual Report of the Company, is prepared with reference to the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in relation to preliminary announcements of annual results. Printed version of the Company's 2012 Annual Report will be delivered to the Company's shareholders and is also be available for viewing on the websites of Hong Kong Exchanges and Clearing Limited at http:// www.hkex.com.hk and of the Company at http://www.byd.com.cn. By order of the Board of BYD Company Limited Wang Chuan-fu Chairman COMPANY PROFILE 公司簡介 BYD Company Limited (“BYD” or “the Company” together with its subsidiaries, “the Group”; stock code: H Shares: 01211; A Shares: 002594) is principally engaged in rechargeable battery business, handset components and assembly services, as well as automobile business which includes traditional fuel-engined vehicles and new energy vehicles while taking advantage of its technical superiority to actively develop business relating to the area of new energy products.
    [Show full text]
  • A Case Study of BYD in China Abstract in This Paper We Have Used the Case
    Innovation in the local context – A case study of BYD in China Abstract In this paper we have used the case of BYD to examine firm innovation in the China context. From a historical perspective, with its strategic diversification from battery to mobile phone manufacturing to automobile manufacturing, we find that BYD has been innovative in its production method, vertical integration strategy, and design of product for local customers. The effective understanding and leveraging of local contextual factors including supply of labor (especially low cost-highly skilled labor), growing middle class, and local industry environments have played important roles for BYD’s innovation in China. Keywords: innovation, BYD, China, context, case study 1 1. Introduction China's share of global R&D investment grew to 13% in 2011 (compared with US with 34%, Europe 23%, and Japan 12%), and it surpassed the United States in 2011 in terms of patent application numbers filed through its intellectual property office (WIPO 2013). However, debates remain on the innovativeness of Chinese firms. Out of 1.2million patents that were granted domestically in China in 2014, invention patents, which have the highest level of innovativeness in patent evaluations, only accounted for about 13%. (Data calculated from Chinese government SIPO annual patent report) In comparison, utility patents in the Unites States, which are equivalent to invention patents in China, accounted for about 90% of total patents granted in 2014 (USPTO data). At firm level, one study on Apple's products (iPod and iphone) value-added at different stages from different vendors shows that Chinese manufacturers are only able to claim less than 2% of the entire gross margin (Dedrick, Kraemer, Linden, 2010; Dedrick 2012), which indicates a low level of technology innovativeness of those manufacturers.
    [Show full text]
  • (Qingjiu) Tao Assistant Professor of Management, Lehigh University
    Washington D.C. July 16, 2008 Dr. Tom (Qingjiu) Tao Assistant Professor of Management, Lehigh University Testimony before the U.S.-China Economic and Security Review Commission Regarding Research and Development and Technological Advances in Key Industries in China Overview of the Chinese Automobile Industry For automakers seeking relief from a global price war caused by overcapacity and recession, China is almost the only game in town. With just ten vehicles per 1,000 residents in China as of 2006 (as opposed to 940 in the United States and 584 in Western Europe), there seems to be plenty of growth opportunities. Not surprisingly, nearly every major auto company has jumped into China, quickly turning the country into a new battleground for dominance in this global industry. In addition, China has become a major auto parts supplier. Of the world's top 100 auto parts suppliers, 70% have a presence in China. China vaulted past Japan in 2006 to become the world’s number-two vehicle market (after the United States). In 2006, car sales in China were up 37%, and sales of all vehicles including trucks and buses (7.2 million in total) were up 25%. Reports of record sales, new production, and new venture formations were plenty. After China’s accession to the World Trade Organization (WTO) in 2001, the industry has been advancing by leaps and bounds. At the global level, China has moved to the third position in production behind the United States and Japan, and is slated to produce 8.5 to 9 million vehicles in 2007.
    [Show full text]
  • BYD Finally 1012-3.Pages
    CFA Institute Research Challenge Hosted in Chengdu Southwest University for Nationalities Student Research Manufacturing Sector: New Energy Industry This report is published for educational purposes only by students Hong Kong Exchange (HKEx) competing in The CFA Institute Research Challenge BYD Company Limited Date:31-Aug-2016 Closing Price: HKD54.00 Recommendation: BUY (20.17% upside) Ticker: BYDHK: Wind Database CNY1.00: HKD1.18 Target Price: HKD64.89 (CNY54.86) Executive Summary Table 1: Market Profile BYD Company (Hong Kong) Limited (BYDHK or the Company) is a Chinese manufacturing Market Profile company, which covers three main areas: Automobile Business (AB), Handset Components and Assembly Services (HC&AS), and Rechargeable Battery and Photovoltaic Business (RB&PB). Closing Price HKD54.00 Investment Recommendation 52-Week High/Low HKD54.00/HKD30.50 We issue a Buy recommendation on BYDHK with a four-month target price of HKD64.89, that is Average Volume(1Y) 6,122,016 20.17% over its August 31, 2016 closing price of HKD54.00. Our target price is primarily based on: Diluted Shares Out 2,728,142,855 Investment Thesis and Outline Market Cap(HKD in Backed by a promising industry outlook, BYDHK continues its leading position in new energy Millions) 16,436 industry. The combination of the Sum-of-The-Parts valuation and current market view of BYDHK’s Beta 1.19 every sector suggest that the stock price of BYDHK is undervalued. This represents an opportunity EV/EBITDA 24.52 to invest in China’s new energy industry. After determining BYDHK’s exposure and mitigants to P/B 3.88 investment risks and evaluate the corresponding impacts on valuation, we arrived a Buy recommendation.
    [Show full text]