IT IS ALSO NOT EASY TO MAKE MONEY.
Written by / Zhao Chenxi
Editor / Li Xinma
Caption / IC Photo
On March 30, 2022, BYD (00259. SZ) (01211.HK) has released its 2021 annual report. According to the data of the A-share annual report, in 2021, BYD's revenue will be 216.1 billion yuan, an increase of 38% year-on-year. Q4 2021 revenue of 71 billion yuan, an increase of 38% year-on-year and a 31% increase from the previous quarter. Net operating cash flow was RMB65.5 billion, up 44% year-on-year, while net operating cash flow in the Q4 single quarter was RMB33.6 billion, up 51% sequentially.
From the perspective of revenue region, the Chinese market accounted for the highest proportion, rising from 61.48% in 2020 to 69.76%.
Image source: BYD earnings report
However, BYD's total revenue net profit, gross profit and gross profit margin have all declined sharply. In 2021, the net profit attributable to the mother was 3.05 billion yuan, down 28% year-on-year, and the net profit attributable to the mother in the single quarter of Q4 was 600 million yuan, down 27% year-on-year and 53% month-on-month. Gross profit decreased by 13.25% to RMB28.145 billion, and gross profit margin decreased to 13.02% from 19.38% in 2020.
After the release of the annual report, on March 31, BYD's A-share price closed at 229.8 yuan, down 7.93%. In 1995, BYD, which started with a second-charge battery, has become a "giant" of domestic new energy vehicles. Compared with the three new car-making forces of Weilai, Xiaopeng and Ideal, BYD "crushes" competitors in terms of revenue, market value, and automobile sales. From 2020, BYD's stock price has climbed all the way, and at the end of 2021, BYD's stock price has risen to an all-time high, with a market value of nearly one trillion. Compared with the issue price of 18 yuan / share, BYD's stock price has "soared" by as much as 17 times, and its market value is second only to Tesla and Toyota.
Image source: Network
Compared with Tesla and other single-business new energy vehicles, BYD has a diversified business structure, not only new energy vehicles, but also traditional automobile business, power batteries, mobile phone assembly and other businesses. Zhang Xiang, dean of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, believes that from the perspective of operating income, BYD is very close to Tesla. In the field of power battery and mobile phone assembly, it also poses a certain threat to competitors Ningde era and Foxconn. BYD exists like an "outlier" in the industry, with a variety of business categories, and each business is doing well in its own industry field.
So, what is the source of BYD's decline in profits and stock prices?
Cars sell well and make less money
BYD's business is mainly divided into four segments, namely new energy vehicles, traditional fuel vehicles including automobile business, mobile phone components and assembly business, secondary rechargeable battery and photovoltaic business, and urban rail transit and other businesses.
Among them, the automobile business is BYD's main revenue item, followed by mobile phone components and assembly business. According to the 2021 annual report, BYD's automotive business revenue was 112.5 billion yuan, an increase of 34% year-on-year, revenue accounted for 52%, and gross profit margin was 17.4%. In the whole year, BYD sold 590,000 new energy vehicles, accounting for 18.2% of the automotive market share of China's Ministry of New Energy, ranking first. Among them, Q4 sold the most new energy vehicles in a single quarter, reaching 263,000 units, and Q1 was the smallest, at 53,000 units. Fuel vehicle sales were 107,000 units, down 55% year-on-year.
Mobile phone components and assembly business revenue of 86.5 billion yuan, an increase of 44% year-on-year, revenue accounted for 40%, gross profit margin of 7.6%. Holding subsidiary BYD Electronics revenue of 89.1 billion yuan, an increase of 22% year-on-year, and net profit attributable to the mother of 2.31 billion yuan, down 58% year-on-year. The second-charge battery and photovoltaic business was 16.5 billion yuan, an increase of 36% year-on-year, and the revenue accounted for 7.6%.
In 2021, bydir's automotive, mobile phone parts and assembly, and secondary rechargeable batteries three business gross profit margins declined. Among them, the gross profit margin of the automobile business fell from 25.2% in 2020 to 17.39% in 2021, a decline of 31%; the mobile phone parts and assembly business fell by 32.4% from 11.2% to 7.57%, and the secondary recharge battery fell from 20.16% to 11.94%, the largest decline, down 41%.
Changes in gross margins across BYD's businesses
Source: BYD Earnings Chart: DoNews
BYD's new energy vehicle business is closely related to the second-charge battery business, the second-charge battery business provides power batteries for the automobile business, and most of BYD's new energy vehicle power batteries come from its own power batteries. On the whole, new energy vehicle products have become the most important reason for the decline in gross profit margin.
In its annual report, BYD said that the decline in gross profit margin was mainly due to changes in product structure. In terms of product structure changes, BYD adopts plug-in hybrid and pure electric common development path, DM-i super hybrid products, the price points directly to the same level of fuel vehicles, last January, DM-i super hybrid models Qin PLUS DM-i, Song PLUS DM-i and Tang DM-i, sales are in short supply; in December, Song Pro DM-i was listed. In the field of pure electric vehicles, Dolphin was listed in August last year, and Dolphin.com is another sales network of BYD Automobile, mainly for young users, and the product price is mainly low-end. In addition, in July 2020, the better sales of the Han product line launched also contributed to the business revenue.
In addition to the changes in the model and price structure, the decline in gross profit margin is also related to the increase in the price of raw materials for power batteries and the increase in production costs during the epidemic. Network public information shows that in 2021, lithium battery raw materials continue to rise, such as the cathode material LiCoO2 price increase of more than 200%.
BYD's revenue cost changes over the years
Last year, BYD's financial report disclosed that the raw materials required for the production of steel, plastics (mainly used in automotive products), metal raw materials such as lithium, cobalt, etc. (mainly used in power battery products), raw material price fluctuations directly affect the production costs of the group's main business. Cataline times insiders once told DoNews that the power battery manufacturers' ability to control upstream raw materials and industrial chains affects the net profit of enterprises, which is why the net profit of other power battery manufacturers has risen due to the price of raw materials, but the net profit of CATL times can achieve significant growth against the trend.
Of course, the obvious decline in net profit and gross profit margin does not mean that the strength of BYD's automobile business is not good. Compared with traditional car companies, SAIC Motor, the largest car company in China, has a gross profit margin of only 10.76% in 2020. In terms of horizontal comparison, the new domestic car-making forces Weilai, Xiaopeng and Ideal sold a total of 280,000 cars, less than half of BYD's new energy vehicle sales. Among them, WEILAI's net loss in 2021 was 4.02 billion yuan, Xiaopeng's net loss was 4.863 billion yuan, and the ideal net loss was 320 million yuan, still struggling in the quagmire of loss. Li Bin has said that he hopes that Weilai can achieve full-year profitability in 2024.
It can be seen that in the same industry, BYD is still the leader of domestic automobile companies.
Stable base disk
Compared with 2012, BYD's total revenue has increased by nearly 4.5 times, of which the automotive business and mobile phone components and assemblies are the most obvious contributions to overall revenue, both in terms of growth.
In the mobile phone components and assembly business, although BYD's gross profit margin declined in 2021, it is within the normal scope of the industry. Looking back at previous years, the gross profit margin of BYD's mobile phone components and assembly business was better, with 13.09%, 12.59% and 11.2% in 2017, 2018 and 2020, respectively. In contrast, Foxconn, the industry's 3C foundry leading enterprise, has a gross profit margin of 8.54%, 8.35%, 8.29% and 8.24% from 2018 to 2021, respectively, and does not exceed 9%. Although Foxconn mainly manufactures main products such as Apple's mobile phones, BYD is mainly oem for Huawei, Xiaomi, OPPO, vivo and other manufacturers, and the revenue of 3C business in 2021 is not as good as 20% of Foxconn's 3C business, but Foxconn has also been hovering in the dilemma of low gross profit and single business structure, which is difficult to get rid of.
In terms of technical strength. Cui Dongshu, secretary general of the National Passenger Car Association, once told DoNews that BYD's basic capabilities are better, the volume is larger, and the integration ability is constantly improving. An industry insider told DoNews that BYD's industrial chain covers a comprehensive range, such as cars including power batteries for new energy vehicles and IGBT chips for key components of automobiles, which are advantages that companies such as Tesla and Cataline Times do not have.
Zhang Xiang believes that a very important reason why BYD's automobile sales growth in 2021 is that it is not affected by the "lack of cores" and the insufficient supply of power batteries in the rising cost of raw materials, and in the control of key resources, such as chips, battery research and development, and production, BYD is stronger than Tesla.
"BYD's layout is stable and perfect, in 2019 and 2020, BYD has completely achieved business transformation after two years of business transformation of the pain of car sales decline. With a diverse range of automotive products, the Dynasty series, the Dolphin series, and the high-end car brands and commercial vehicle segments that are preparing to launch at prices between 500,000 and 1 million, BYD has transitioned from a traditional car company to a technology company. Zhang Xiang said.