Hong Kong Consumer Discretionary 11 July 2016 BYD (1211 HK) BYD Target price: HKD65.00 (from HKD50.00) Share price (11 Jul): HKD47.60 | Up/downside: +36.5% Upgrading: on track for a rerating Kelvin Lau (852) 2848 4467 We see strong SUV and bus sales leading to a margin improvement
[email protected] Subsidy cut should benefit strong players like BYD in the long run Brian Lam (852) 2532 4341 Upgrading to Buy (1) from Outperform (2); raising TP to HKD65
[email protected] What's new: Following our recent discussions with BYD management, we Forecast revisions (%) are turning more positive on the company’s long-term outlook. We see Year to 31 Dec 16E 17E 18E grounds for a multi-year rerating for BYD, and hence upgrade our Revenue change 18.5 2.7 6.9 Net profit change 82.4 46.6 52.0 recommendation by one notch to Buy (1). Core EPS (FD) change 82.4 46.6 52.0 Source: Daiwa forecasts What's the impact: Margin improvement from new energy vehicles (NEVs). As per the latest YTD May data, BYD’s Tang SUV (launched mid- Share price performance 2015) contributed additional average monthly sales of around 3,000 units. (HKD) (%) Management expects the Tang to record sales of 5,000 units/month by 50 150 end-2016. Orders for the K9 electric bus have been ramping up, with 44 133 around 6,000 in hand; we expect BYD to achieve 13,000 unit orders in 38 115 31 98 2016 (previous estimate: 10,000).