BYD’s biggest bull cuts price target by 23% on dimmer outlook

CITIGROUP’S analysts slashed their price target for BYD on expectations that sales growth and profit margins for the electric carmaker will come under pressure amid stronger competition in China.

The bank, which has the highest target price for BYD’s Hong Kong-listed shares based on data compiled by Bloomberg, cut it to HK$463 from HK$602, while maintaining a buy recommendation. The analysts also lowered their sales forecast for this year to 3.68 million units, from 3.95 million units earlier.

Shares fell as much as 1.4 per cent to HK$209 during early trade in Hong Kong before paring some of the losses.

“The stock may suffer due to uncertainty on valuation and earnings in the first quarter entering the low season with destocking,” analysts including Jeff Chung wrote in a note. New models from April should help improve sentiment, helping sales hit 4.18 million units next year, they said.

The move shows even the bulls are lowering their expectations for the sector bellwether as competition stiffens in the world’s largest electric vehicle market. BYD shares have dropped 15 per cent since mid-November while short interest climbed further to around the highest level since 2021, according to data from IHS Markit.

China’s electrified car market is projected to slow for a second year in 2024, with shipments forecast to rise 25 per cent, down from 36 per cent in 2023, according to the China Passenger Car Association. Tesla on Friday cut the prices of both its locally-made models in the country, potentially setting the stage for further discounting.

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Citigroup analysts also lowered their estimates of how much profit BYD makes per vehicle, an important matrix during a price war. Net profit per car may slow to below 7,600 yuan (S$1,450) this quarter due to low seasonality, compared with as much as 10,800 yuan last quarter, they said.

Investors who followed Chung’s recommendation on BYD’s HK-listed shares may have seen a loss of 1.7 per cent over one year, data compiled by Bloomberg show. BLOOMBERG