After the revenue hit a new high of 200 billion, where is BYD going?

BYD handed over a financial report that did not surprise investors.

According to the financial report, BYD's revenue in 2021 reached 216.142 billion yuan, a record high, an increase of 38.02% year-on-year; the net profit margin attributable to the mother fell by 28.08% year-on-year to 3.045 billion yuan.

This performance has once again tested the faith of the market. The day after the earnings report, BYD's stock price fell by 3.8%, followed by a large influx of buy orders, and closed up 2.58%. Pessimists and optimists say goodbye to each other.

15 years ago, BYD Chairman Wang Chuanfu proposed to be the world's first in the automobile industry. In the past two years, BYD's soaring stock price and nearly one trillion market value have also proved the value of his dream.

Admittedly, IND's faith will continue when sales still have explosive potential; but what about this belief when the story of future sales and production capacity is over?

On the way to compete with Tesla for the king of new energy vehicles, BYD has a lot to do.

Revenue is at a new high

For many investors who have been following BYD for a long time, this earnings report is not a surprise.

But investor attitudes are divided. Pessimists only stare at net profits, believing that BYD's increase in revenue does not increase profits, and the current valuation is too high.

Optimists turned over the details of the financial report, and after calculating the data such as orders in hand and expansion expenditures, they had confidence in BYD's further increase in the market share of new energy vehicles and the expansion of IGBT, batteries and other businesses.

Investors are willing to give BYD a high valuation of hundreds of times PE because they are optimistic about its auto business. However, at present, in the core of BYD's performance, consumer electronics still occupies a pivotal position.

According to the financial report, the annual revenue of automobiles, automobile-related products and other products in BYD's three major businesses is 112.5 billion yuan, the revenue of mobile phone parts, assembly and other products is 86.45 billion yuan, and the revenue of secondary rechargeable batteries and photovoltaics is 16.47 billion yuan. The three major businesses accounted for 52.04%, 40% and 7.62% of the total revenue, respectively.

The decline in net profit is compared to the high base in 2020. The consumer electronics boom in 2020 receded, especially in 2021, global mobile phone shipments were high and low, causing BYD's profit in the mobile phone components and assembly business to fall back to a thin profit.

However, with the expansion of BYD Electronics' market share in major North American customers, as well as the expansion of its product range. BYD Electronics is still guaranteed in terms of revenue in the next one or two years.

For investors who are willing to give BYD a high valuation, excluding the financial report data of BYD Electronics (mainly mobile phone components and assembly business) is the focus of their concern.

From the financial report, it is true that of the 125.3 billion yuan in revenue in the second half of last year, the automobile business accounted for the majority, accounting for 58.53% of the total revenue, an increase of about 41% year-on-year to 73.332 billion yuan. The growth rate of mobile phone components and assembly business slowed down significantly in the second half of the year, slightly increasing by 0.44%.

Recently, due to the impact of rising raw material prices, the automotive industry has encountered challenges, and many car companies have faced pressure to increase the price of models. Some industry insiders analyzed that in the face of rising costs, BYD has also been affected to a certain extent.

In the face of rising raw material prices, BYD needs to improve its profit situation by raising volume and price.

However, in terms of sales structure, BYD has some room for improvement this year. BYD said that this year will launch a high-end brand, the price range is expected to be more than 50-100 million yuan, in the brand, products, sales and service network, operation team, are new and independent, the first model is a hardcore off-road vehicle.

Brand high-end will be an important starting point for BYD's sprint this year. By recreating a "Han" like a blockbuster, BYD's profitability will improve this year.

According to the minutes of the meeting obtained from investors by Wall Street Insights, management said that the current growth trend of raw material prices has slowed, prices have basically stabilized, and the cost pressure of taking over new energy vehicles is expected to slow down.

Battle of Scale

At the recent electric vehicle 100-person meeting, BYD President Wang Chuanfu said that after the explosive growth of the market in the past year that exceeded expectations, the industry is facing severe challenges such as rising raw material prices and unstable supply chains.

"This year is a key year for new energy vehicles to take advantage of the momentum and accelerate change," Wang Chuanfu said.

This means that this year will be a year of life and death for many players of new energy vehicles. From the perspective of sales, several internet celebrity models last year have stopped taking orders due to "selling one and losing one" and gradually withdraw from the market battle.

BYD definitely hopes to be the one who can play to the end and even win the world number one. Scale and production capacity are the focus of BYD's current competition.

LAST YEAR, BYD spent a lot of money and energy on capacity expansion. In the annual report, BYD's construction in 2021 was 20.277 billion yuan, an increase of more than twice that of 6.112 billion yuan in 2020; the number of employees increased significantly from 224,000 in 2020 to 288,200; and the contract liabilities for mainly undelivered vehicles increased from 8.186 billion yuan in 2020 to 14.933 billion yuan.

At present, BYD is still very urgent for the increase in production capacity.

In the whole of last year, new energy vehicles accounted for about 81% of ATD's total model sales. In the first two months of this year, that percentage has risen to more than 97 percent.

Wang Chuanfu also said that the company's current delivery capacity depends on materials and IC chips.

"Wang Chuanfu is looking around at the factory, hoping to buy some production lines and quickly expand production capacity," revealed an investor close to BYD.

According to the minutes of the meeting, management said that the penetration rate of new energy vehicles in the first three weeks of March has reached 30%, and from the perspective of the whole year, the penetration rate may further reach 40% by the end of the year.

According to institutional sources familiar with BYD, BYD has set a conservative sales target of 1.5 million vehicles this year, and if the supply chain is done well, it will also hit a higher target.

This requires BYD to further accelerate its capacity increase. According to BYD's plan, starting from May this year, a number of automobile production bases including Changzhou, Hefei and Changsha will be put into operation, and Fudi Battery is also expanding production in many places.

With the release of capacity in these plants during the year, BYD's production will be further increased.

According to public information, after BYD's new production capacity is put into operation, the overall production capacity will be increased to 2.2 million units in 2022, and it will further rise to 3.6 million units in 2023.

In addition, BYD also continues to exert efforts in the upstream and downstream of the industrial chain. At the beginning of March this year, BYD locked in the procurement cost of lithium ore by increasing the new lithium energy, providing a guarantee for the stability of the power battery supply and the profit margin of the car.

At present, BYD's power battery business, the momentum of Fodi battery expansion is also booming. Domestic and foreign companies, including Hongqi, Changan Ford, Hyundai Motor and other companies, have reached purchase agreements with Fordy Battery. Weilai and Xiaomi are also negotiating cooperation with Fordy Battery.

In the business of its own split, BYD Semiconductor's split listing project is steadily advancing. Fordy Battery and BYD's powertrain division, Fordy Power, will also be listed at a ripe time.

Whether it can break the barriers of profits and break the image of "profit-piercing" in the hearts of some investors, BYD needs to prove itself with the next step. The steady advancement of the marketization of a number of businesses has also given BYD more imagination in the next business development space.