Author: Jeff
On April 27, 2022, BYD officially released the first quarter of 2022 financial report, as the first financial report after BYD's "fire stoppage", which attracted widespread attention in the industry, because everyone wants to see what will happen to BYD, which is the first to eat crab (the first traditional car company in China to completely transform new energy).
Q1 Revenue soared and profit soared
ACCORDING TOD's financial report for the first quarter of 2022, its total operating income in Q1 reached 66.825 billion yuan, an increase of 63.02% year-on-year; its operating profit was 1.061 billion yuan, an increase of 64.24% year-on-year; and its net profit attributable to shareholders of listed companies was 808 million yuan, an increase of 240.59% year-on-year.
Image from BYD's 2022Q1 financial report
In the face of a sharp rise in revenue, BYD said that it was mainly due to the rapid growth of the new energy automobile industry.
How much has sales increased?
According to the data, IND's car sales in the first quarter of 2022 were 291378 units, an increase of 179.78% year-on-year, of which the sales of new energy vehicles were 286329 units, an increase of 422.97% year-on-year.
New energy vehicle sales reached a new high or to some extent hedged the profit pressure brought about by the rise in upstream raw material prices, so BYD's progress in net profit was very obvious, achieving more than 3 times growth in the case of subsidies and subsidies. According to the data, in the first quarter of 2021, BYD's main industry-related government subsidies were about 443 million yuan, and in the first quarter of 2022, BYD received government subsidies mainly related to automobiles of about 193 million yuan, down about 56.43% year-on-year.
After THE "cessation", BYD ushered in a sharp increase in revenue and a sharp increase in profits, and this was done in the context of economic downturn, epidemic sporadication, and rising raw material prices.
Therefore, people in the industry generally believe that BYD's comprehensive transformation of new energy is fast and accurate. Next, with the launch of BYD's high gross profit models and the increasing stability of raw material costs, the first quarter financial report may become an inflection point for BYD's profit margin. Perhaps this year, BYD will rely on new energy vehicles to completely jump out of the strange circle of "increasing revenue without increasing profits".
In 2022, can BYD jump out of the strange circle of "increasing revenue without increasing profits"?
In Q1 2022, BYD's financial report has many bright spots, such as the rapid growth of automobile revenue in the overall structure, and the profitability of the automobile sector smoothed the overall profit. However, some investors believe that compared with Weilai, the ideal gross profit margin of 20% and Tesla's gross profit margin of 30%, BYD's profitability advantage in the automobile business is not obvious, and it has been trapped in the strange circle of "increasing revenue without increasing profits" for more than a decade.
According to the data, BYD's gross profit margin in the first quarter created a new low in the past five quarters, slightly lower than the same period last year, only 12.4%, but according to Citibank's calculations, BYD's gross profit margin of auto business in the first quarter was about 15.6%.
In the view of Zhang Xiang, an automotive analyst and dean of the New Energy Vehicle Technology Research Institute of Jiangxi New Energy Technology Vocational College, BYD's overall gross profit margin has hovered around 13% in the past year, and the fluctuation is not large. In addition to the rising costs caused by the rise in raw material prices, the listing of new cars has also brought higher sales costs, and the expansion and investment of the factory have also put BYD under great cost pressure.
Image from BYD's 2022 Q1 financial report
According to the financial report, BYD's sales expenses, management expenses and research and development expenses in the first quarter of 2022 have increased significantly, reaching 58.58%, 46.38% and 93.94% respectively. In addition, the cost of construction in progress also increased by 37.91% over the same period last year to 27.964 billion yuan, mainly for battery and automobile business.
Zhang Xiang believes that BYD is in a stage of rapid expansion, so it has brought about the growth of related expenses, but the growth rate of related costs exceeding the growth rate of revenue is also one of the key points that enterprises need to pay attention to, adjust the product structure, increase the sales of high-margin models, and it is crucial for BYD to improve the overall profit level.
In the first three months of 2021, the average monthly sales of BYD's mid- and high-end models remained at more than 10,000 vehicles, and the Qin and Song series, which were priced at 100,000-160,000 yuan and were mainly cost-effective, were still the main sales force, with an average monthly sales of more than 20,000 vehicles. Models including Song Plus and Qin Plus continued to gain popularity, helping BYD further increase its market share, but failing to effectively improve its profitability.
Zhang Xiang believes that while BYD is impacting sales, it must simultaneously improve the overall profit level. So far this year, BYD has successively sold a number of models including destroyer 05, Han DM-i, DM-p, etc., and the Denza brand, which has returned from Mercedes-Benz, will also launch a new MPV product, and in the second half of the year, it has threatened to launch a luxury brand with a price of more than 500,000 yuan, which is the adjustment of BYD's automobile sales structure to improve profit levels. With the launch of a new generation of pure electric platform models Seal and new Denza high-end models, the increase in sales of these high-margin models will further improve BYD's profit structure and push up the overall gross profit margin.
The capital market is full of confidence in BYD, and the BOCOM International Research Report pointed out that BYD's gross profit margin decline is better than market expectations, and with the increase in sales volume and the increase in the retail price of products, the prospect of its gross profit margin is expected to improve.
Yuan Jiancong, chief analyst of the new energy automobile industry at CITIC Securities, believes that with the decline in the price of lithium carbonate and the rise in the price of models, coupled with the strong order volume, BYD's subsequent profit performance will be better quarter by quarter.
"Stop burning" bet on new energy with a target sales volume of 1.5 million
In April 2022, BYD announced that it would stop the production of fuel vehicles from March this year and focus on pure electric and plug-in hybrid vehicles in the future.
In the first three months, BYD's cumulative sales of fuel vehicles were only 5049 vehicles, and the cumulative output was only 4635 vehicles, both of which came from the first two months, and the production and sales of fuel vehicles in the third month were zero. It is not difficult to see that BYD is both decisive and resolute about abandoning fuel vehicles.
In terms of pushing new ones, BYD also does not dare to slacken off, and the pace of new car releases is very fast. In March, the new song MAX DM-i was launched, and in the same month, Ocean.com's first sedan destroyer, the 05, was launched, using DM-i supermix technology to enter the compact car market dominated by joint venture vehicles.
In April, BYD's new Han EV Genesis Edition, Han Qianshancui Limited Edition, Han DM-i and Han DM-p were launched together, and as of April 10, it had received nearly 50,000 cumulative orders for vehicles. In addition, in the pure electric vehicle market, BYD launched a meta-PLUS model, and the pre-sale order exceeded 20,000 units.
BYD related people told the media that as of the end of April, BYD still had about 400,000 vehicle orders to be delivered, of which dm-i models had about 300,000 units. Next, in addition to the release of new cars, we must also vigorously expand production capacity.
Perhaps it is a series of positive trends that have boosted BYD's confidence, and it is expected to sell a conservative estimated 1.5 million vehicles for the full year of 2022, and if the supply chain keeps up, it will hit 2 million vehicles.
Objectively speaking, BYD's goal is quite aggressive, to know that its annual car sales in 2021 are only 730,000 units, although the sales growth rate of BYD's new energy vehicles in the first quarter is much higher than the overall, but IT is difficult for BYD to complete the sales target of 1.5 million vehicles.
This is related to the major changes in China's new energy market in 2022 - in Q1 2022, China's new energy vehicle sales were about 1.257 million units, an increase of 138.6% year-on-year, and the penetration rate increased by 5 percentage points from 2021 to 19.3%. However, it is worth noting that the growth rate of new energy vehicle sales in the Chinese market is slowing down, coupled with the uncertainties brought about by the impact of the epidemic, many car companies tend to be conservative in their forecasts for this year.
At present, there is a bigger problem in front of BYD is delivery, Rhino Finance learned from some BYD 4S stores in Beijing that some of the models that sell better, the pick-up cycle is almost 3 months.
As mentioned earlier, BYD has about 400,000 vehicle orders in its hands, and as new products continue to be launched, sales continue to rise, and delivery pressure will continue to increase.
BYD's 2021 financial report shows that its passenger car capacity utilization rate has reached 99.5% - for BYD, expanding production capacity is a top priority. In addition to expanding production in xi'an, Shenzhen, Changsha and Changzhou, BYD also laid out five new production bases in Jinan, Zhengzhou, Hefei, Fuzhou, Shenzhen and Shantou last year, and the expenditure on construction projects in the first quarter increased by 7.7 billion yuan, and the inventory increased by 10.08 billion yuan compared with the beginning of the year.
2022 is not only a "big year" for BYD's products, but also a "big year" for capacity expansion, whether it can further expand its market share and get rid of the image of "increasing revenue without increasing profits" is BYD's main focus on the road to impacting scale, let us wait and see.