In 2022, BYD surpassed Tesla?

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BYD is so fierce, why can't it rise?

This article totals 3583 words and takes about 5 minutes

Author | Master Zi Nan

Source | Tiger Sniff APP

In the past 2021, the production and sales of new energy vehicles in China will be about 3 million. Some optimistic people believe that domestic new energy vehicle sales will reach 5 million in 2022. The market is expanding rapidly, and the capital market will continue to be fanatical. All new energy vehicle companies are facing huge market opportunities.

Who will be the new winner, most people will say Tesla, but some analysts think it is BYD.

"BYD's sales will surpass Tesla's in 2023," BYD's "iron fan" Citibank made such a prediction in 2021.

In Citibank's latest forecast, it believes that BYD's sales in 2022 will exceed 1.3 million units, and raise BYD's stock price target to 504 yuan. According to this target price, BYD's stock price (BYD's closing price of 253.2 yuan today, with a total market value of 685.92 billion yuan) can also double, at which time BYD's market value will surpass the Ningde era and rank third in A-shares.

Citibank has said that in the future market competition, new energy vehicles priced below $18,000 will quickly occupy the market. Tesla has not yet reached this price range, and no other opponent can play by BYD.

In addition to sales, Citibank's valuation rate for BYD is almost in line with Tesla's. At present, in terms of market capitalization, BYD is only about one-tenth of Tesla's. Most analysts give BYD a valuation multiplier (P/E ratio of 150 to 190 times) is lower than Tesla (Tesla P/E ratio of more than 300 times), including because the average price of BYD vehicles is lower than Tesla and there are shortcomings in intelligence and brand image.

However, according to Citibank's valuation rate (about 450 times according to BYD's Q3 net profit), BYD, which has shortcomings in intelligent fields such as automatic driving, will be on an equal footing with Tesla in future growth, or even higher.

Cowhide has helped BYD blow out, can BYD do it?

01

Who sells more, who is the boss

At present, the competition in the new energy automobile industry is still in the "first half", although some car companies have built barriers in terms of intelligence, but the competition in the first half is still the competition of market scale. At this stage, the biggest basis for the valuation of new energy vehicle companies is the sales data of car companies.

Citibank once again fine-tuned ITS price target for December as sales exceeded expectations. IND sold 99,000 units in December, including 92,800 new energy vehicles, up 236.4% year-on-year.

In December 2021, some of BYD's production capacity was delayed due to the impact of the epidemic in Xi'an. In the full year of 2021, BYD has not delivered about 200,000 units due to production capacity constraints. Citibank believes that BYD, which is already hot on the demand side, will perform better than originally expected in 2022 due to the delay in delivery of orders for about 200,000 vehicles.

Due to the explosive growth of BYD's sales in the second half of 2021, Citibank has repeatedly raised ITS valuation. In September 2021, Citibank raised BYD's target price from 352 yuan to 461 yuan, an increase of more than 30%. The increase in the target price is mainly due to the surge in demand for BYD's new energy vehicles and its long-term cost structure advantages.

The main reason for Citibank's increase in the target price is that BYD is performing well on the demand side, and the production capacity situation is gradually improving, and in 2022, when the penetration rate of new energy vehicles is gradually increasing, BYD's delivery volume will be steadily released. Citibank expects BYD to deliver 1.3 million, 1.75 million units in 2022-202, respectively.

That goal is slightly higher than BYD's own sales forecast, which has previously said it expects to sell about 1.2 million units in 2022.

"The target of 1.2 million vehicles is slightly conservative compared to BYD", a new energy vehicle analyst believes that BYD has stepped on the two markets of hybrid and pure electricity, and self-sustaining power battery and semiconductor production capacity, in the case of unchanged demand, IT is not difficult to complete the target of 1.3 million vehicles in 2022.

Domestic institutions such as Anxin Securities are estimated to sell 1.4 million vehicles in 2022. But the reports of such analysts have given BYD a valuation of between 350 and 400 yuan, far lower than Citibank's 504 yuan. The difference is that institutions such as Anxin Securities believe that BYD's valuation logic is different from pure electric vehicle companies such as new car-making forces.

"Citibank's perspective is to completely benchmark BYD's valuation multiples against Tesla, and in 2022, only Tesla and BYD can really break the capacity hell and have the ability to deliver orders on a large scale," a brokerage analyst told Tiger Sniff.

In terms of capacity expansion, BYD recently said that it will open three new plants and increase production capacity by 500,000 units by the second quarter of 2022. According to the incomplete statistics of Tiger Sniff, after adding the production capacity of 500,000 vehicles, BYD's annual production capacity of pure electric plus hybrid will exceed 1.4 million vehicles. According to Morgan Stanley analysts, Tesla will have an annual production capacity of more than 1.8 million units in 2022, including the Berlin factory.

Although BYD's production capacity expansion rate is not as fast as Tesla', in terms of product iteration, BYD has advantages in the short term. "Tesla will not have a new model in 2022, but BYD's Ocean series and new hybrid models will be available in 2022, and BYD's models are priced lower than Tesla's and have higher potential in sales performance," U.S. stock analyst Ed Carson said in his review article.

At present, there is still a big gap between the gross profit margin of BYD and Tesla. But the industry believes that this gap is being narrowed. "The new investment in DMI technology is very small, coupled with the scale effect of BYD's new models began to appear, the cost of bicycles fell and other factors, and the gross profit margin of the whole vehicle will continue to rise." Because most of the sales come from hybrid models, the impact of the decline in new energy subsidies against ATD will be less than tesla.

02

Although BYD's future growth is not inferior to Tesla's, IND's performance in the secondary market in recent years is far worse than Tesla's, and it is not as good as the Ningde era.

After the market value briefly crossed the threshold of 900 billion yuan in 2021, some institutions shouted the slogan of "BYD will be trillions tomorrow". However, as of press time, BYD's market value has fallen again to 700 billion yuan, far from the threshold of trillion yuan market value.

"From the perspective of price-to-earnings ratio, BYD's valuation is already very high, citibank uses the valuation method is the price-to-sales ratio, referring to revenue rather than net profit", the aforementioned person said, because BYD contains mobile phone assembly, fuel vehicles and other low valuation businesses, and the capital market valuation of stocks is more reference to the price-earnings ratio, so BYD's stock price has been too high in the eyes of some institutions.

The first is the gap in earning power. In 2021, BYD once fell into a situation of increasing revenue and not increasing profits. In the first three quarters of 2021, BYD's revenue was 145.19 billion yuan, and its net profit was only 2.44 billion yuan. For comparison, Tesla's 2021 Q3GAAP operating profit is $2 billion, and the net profit in one quarter is about 6 times BYD's net profit in three quarters.

"The gap between BYD's gross vehicle gross margin and Tesla's is about 5%, but the net profit margin gap is very large, mainly because BYD's self-sustaining supply chain business has not begun to supply, which has caused GREAT cost pressure to BYD," a power battery company insider once told Tiger Sniff.

The second is the gap in intelligence. Previously, some Wall Street analysts even said that 60% of Tesla's valuation came from software revenue, insurance, charging services and other fields. Some of the bullish Tesla analysts even valued Tesla's software revenue at more than $400 billion.

And this extra $400 billion is almost blank in BYD, which has not launched a similar charging self-driving service.

"Tesla's valuation logic has long been not a simple car company, but BYD's valuation logic should not be a car company", Ed Carson believes that if the timeline is extended to 10-20 years, Tesla's imagination space is in software, and BYD's imagination space is in the power battery, semiconductor and other hardware fields.

CITIC Securities also said a few days ago, "We believe that the company's subsequent greater investment value is as a one-stop solution provider for neutral new energy vehicles, including lithium batteries (blade battery technology, etc.), semiconductors (IGBT), three-in-one motor/electronic control technology, etc."

Under such a premise, Tesla and BYD will go to two completely different end points.

"From the perspective of the company's business layout, Citibank's valuation multiplier is reasonable, but the difference between Tesla and BYD is that Tesla has begun to turn expectations into reality, but BYD has not made particularly big progress in the supply chain business in addition to the progress of the vehicle business," the person said.

Optimistic people will see these businesses as "Tesla" + "Ningde era" + "Foxconn" + "Infineon", which is almost BYD's ceiling, but it also means that BYD will win the competition with these industry leaders.

In addition to the possibility of new energy vehicles surpassing Tesla in sales and the lowly valued mobile phone foundry business comparable to Foxconn, BYD's other segments still have a long way to go.

END

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