As one of the companies on the "Growth 50" list of Flying Whale Investment Research, BYD, which has the reputation of "Moutai in the Car", has been paid long-term attention to us.
On January 4, BYD announced its December 2021 production and sales report. According to the data, BYD's single-month sales of new energy vehicles in December reached 928.23 million units, an increase of 236.4% over the same period last year; compared with other car companies, BYD's single-month sales also rode the dust, even exceeding the sum of the new car-making forces "Wei Xiaoli". Looking back on the whole year, BYD's sales of new energy passenger cars can be described as a straight rise, constantly refreshing the sales record of new energy passenger cars.
In the words of Wang Chuanfu, chairman of BYD, "In 2021, BYD's development is great luck, or it is to keep the clouds open and see the moon." So today we continue to analyze BYD (002594).
First, the accumulation of profound technology for sales "fuel"
From a macro point of view, 2021 is the first year of the outbreak of new energy vehicles - in the first half of the year, the domestic retail penetration rate of new energy vehicles soared from 5% to 15%; in many months in the second half of the year, it reached 20 percentage points. People's acceptance of new energy vehicles is increasing, and it is not difficult to understand that rising demand is driving high sales.
But digging deeper into the reasons behind it, we have to mention BYD's deep technical accumulation. BYD has a comprehensive layout in the industrial chain, which involves vehicle production, power batteries, vehicle-grade semiconductors and other fields, and its core technologies include vehicle-grade chips, blade batteries and DMI hybrid technology.
Flying Whale takes the above core technologies as an example to talk about BYD's efforts and achievements:
1. Vehicle specification grade chip
BYD is one of the few car companies that can develop and manufacture chips on its own. In the case of the spread of the global chip crisis, some car companies have reduced production or even stopped production, but BYD has not been affected too much. In terms of supply, BYD has an efficiency advantage that other car companies do not have.
Take the car specification grade IGBT chip, before 95% of China relied on imports, for a long time by Japan's Mitsubishi, Fuji Electric and Germany's Infineon monopolized nearly 90% of the high-end market. But in 2020, BYD successfully broke the monopoly of international giants on the IGBT market. In November last year, BYD successfully developed a 90nm high-end IGBT chip, which has reached the industry's leading level in terms of transmission efficiency and stability, becoming one of the world's most high-end automotive chips.
2. Blade battery
At present, the new energy vehicles on the market mainly use ternary batteries and lithium iron phosphate batteries. Ternary battery is chosen by most car companies due to its high energy density, but its disadvantage is high cost. Conversely, lithium iron phosphate has a lower cost but a lower energy density. BYD blade batteries are a good blend of the advantages of both.
If you compare the CTP of the Ningde era with the blade battery, the blade battery has advantages in the following aspects:
First of all, the blade battery flattens the battery cell, uses moduleless technology to form a battery pack, and the internal space utilization rate is increased to about 60%, and the efficiency of the cell group is greatly improved;
Secondly, blade batteries have a higher discharge rate than traditional lithium iron phosphate batteries. The charging cycle life is long, the cost is reduced, and the energy density of the battery volume is greatly improved.
Finally, the blade battery has no open flame and smokeless after needle puncture, and the surface temperature is also lower, and the safety performance is better.
3. DMi super hybrid technology
DMi hybrid technology is popularly speaking, the car uses electricity through the motor when driving at low speeds, and uses the engine to save fuel at high speeds. If you have to use a constituency to indicate, it is "DMi super hybrid technology = fuel vehicle advantages + pure tram advantages".
However, for new energy vehicles that use ternary batteries as the main power source of the motor, the impact of multiple charge and discharge on battery life has become the main constraint of oil-electric hybrid technology; and the long charge and discharge life of BYD blade batteries solves this problem very well, contributing to the mature appearance of BYD DMi technology, which can be described as complementary.
To sum up the DMi super hybrid technology in one sentence is "low-speed electricity and high-speed oil, smooth start and power foot, and strong endurance".
Second, increasing income without increasing profits becomes a "problem"
In the first three quarters of 2021, BYD achieved total revenue of 40.992 billion yuan, 49.893 billion yuan and 54.307 billion yuan, respectively, and deducted non-net profit of -81.65 million, 451 million yuan and 518 million yuan, respectively.
Although BYD's sales have soared in 2021, it is also difficult to escape the strange circle of "increasing revenue without increasing profits". BYD pointed out that this phenomenon is mainly caused by the rise in raw materials, increased R&D expenditure, and expansion of automobile production capacity:
1. Raw material costs are rising
Domestic commodity raw material prices soared. Taking the materials for manufacturing lithium batteries as an example, the cathode material rose to a maximum of 30,000 yuan / ton, and the peak electrolyte reached 110,000 yuan / ton. Although the cost of raw materials has risen sharply, the production cars of BYD's e series and Dynasty series have not raised prices.
From the perspective of the trend of gross profit margin changes, BYD's gross profit margin in the first three quarters of 2021 has declined significantly compared with the same period in 2020. Of course, in addition to the rising cost of raw materials to reduce the gross profit margin, part of the reason is also due to the reduction in the proportion of BYD's mask sales business in 2021, resulting in a decline in the contribution to profits.
2. Increased R&D expenditure
BYD invests huge R&D expenses every year to support its research and development of various technologies. From 2018 to 2020, BYD's R&D expenses were 4.989 billion, 5.629 billion and 7.465 billion yuan, respectively, and its R&D expenses and R&D expense ratios showed an upward trend year by year. BYD invested more than 5.2 billion yuan in research and development in the third quarter of 2021, approaching the R&D investment in the whole year of 2019. Among them, R & D projects include three-electric system, OS, radar, chip, etc. Even compared with other automotive independent brands, BYD's research and development expenses are at a high level.
3. Expansion of automobile production capacity
According to BYD's semi-annual report, the first half of 2021 increased by about 1.206 billion yuan compared with the same period in 2020, and depreciation and amortization will be directly reflected in the cost expenses of enterprises, thus affecting the profits of enterprises.
The sharp increase in depreciation is the result of BYD's massive expansion in recent years. Although BYD's sales of new energy vehicles have increased by leaps and bounds, due to insufficient production capacity, BYD's car supply is tight and the pick-up time is correspondingly lengthened. In order to solve the problem of insufficient production capacity, BYD has successively invested in the construction of vehicle bases in Hefei and Zhengzhou; power battery factories in Bengbu, Changchun and other places are also accelerating construction. At present, BYD has 9 production bases in Guangdong, Beijing, Shaanxi, Shanghai, Tianjin and other places, with a total area of nearly 7 million square meters.
According to the data released in the third quarterly report, the change rate of BYD's other non-current assets was 7998%, which BYD explained was mainly due to the increase in advance payments for assets such as engineering and equipment. From a trend point of view, BYD's expansion is still continuing.
3. Summary
Overall, BYD seems to be facing a situation of "selling the most cars and making the least money", which is really confusing.
But this may be the most brilliant place - high sales to the market to release BYD has a technological leadership signal; while investing more money in technology research and development and increasing production capacity, the later stage will be more conducive to BYD cost reduction and efficiency. The small profits of the fly head cannot be big, which seems to be BYD's efforts to make a more long-term layout.
Flying Whale Investment Research believes that although BYD's trend is not as short-term explosive as Tesla, its long-term muffled big things have formed a steady style and deep technical accumulation, but it has always made it a darling of the capital market, which is very suitable for long-term holding for value investors.
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