"Since mid-to-early February, the market's expectations for BYD have actually been rather pessimistic. ”
At an internal sharing meeting in March this year, securities analyst Zhang Ming said this.
BYD's stock price has experienced a correction for a short time. On January 11, 2024, BYD fell by 2.93%, and the intraday low fell to 237.8 yuan, hitting a new low since 2022.
This also forced BYD to revise market expectations through a series of means.
First of all, the dream day was held in January to announce the intelligent layout, and there was an industry-wide cognitive correction of "BYD is not intelligent".
Second, before the launch of the Honor Edition, BYD continued to adjust the terminal inventory sales status through terminal discounts and active production reductions. After the launch of the Honor Edition, BYD's inventory-to-sales ratio returned to a healthy level. By the end of 2023, BYD's overall channel inventory may exceed 500,000 units. After adjustments in January, February and March, BYD's inventory sales ratio returned to the range of 1.5-2.0.
Third, continue to focus on high-end and exports. In terms of premiumization, the Denza D9 will carry the banner in 2023, with monthly sales of nearly 10,000 units. Since then, Equation Leopard and Yangwang products have been launched one after another, and export sales have also been rising. There are still a lot of new product releases this year, such as the D9 replacement in early March and the new N7 in early April, etc., to maintain BYD's high-end popularity.
BYD has always positioned itself as a global car company, and in its bones it hopes to catch up with Toyota. From March 5 to 12, BYD's weekly sales reached 49,399 units, exceeding the combined sales of Volkswagen and Toyota in the same period.
However, how much money can be made by selling a car, BYD is far from doing enough for its idols: BYD's net profit margin is 5.5%, and Toyota's is more than 10%. If BYD wants to return to the peak of market value and even become a trillion-dollar car company, BYD still has a long way to go.
For the sake of market share, BYD had to sell it
In June 2022, BYD's A shares and H shares stood at a high of 357.61 yuan per share and 331.74 Hong Kong dollars per share respectively, and then began to fall mode. By February 2024, in more than a year, BYD's A and H share prices once fell to 162.77 yuan per share and 167.80 Hong Kong dollars per share, almost halved.
BYD's stock price peaked, the core reason is that the profit of a single car in the third quarter of 2022 reached a stage high of 10,000 yuan, and the decline is due to the impact of Buffett's multiple reductions - Buffett's Berkshire has reduced its holdings of BYD shares 13 times, and the shareholding ratio has dropped from 19.92% to less than 8%.
Combined with the industry trend in recent years, there are three main reasons for BYD's valuation:
One is that intelligence is dragging its feet. Especially in the fourth quarter of 2023, leading intelligent players such as Xpeng and Huawei have made new breakthroughs, causing investors to worry about BYD's ability in intelligent products. Some "extreme" investors frankly admitted: "Without intelligence, there is no future." ”
The second is the slowdown in market share and growth, and the growth rate of the new energy industry has slowed down significantly in the past 2 to 3 years.
The third is the long-term space, BYD is the domestic new energy sales champion, but Europe and the United States "can't beat it, give up" mentality, slowing down the electrification process.
In response to the capital market's doubts about market share, what did BYD do?
In the 2023 annual report analyst exchange some time ago, Wang Chuanfu said, "The next three years will be a decisive battle, the competition is very fierce, and the supply exceeds demand. This decisive battle must be a battle of scale, cost, and technology. Who will stay, I believe that scale is the most important thing. ”
On February 19, the BYD Qin PLUS Honor Edition was officially launched, and its DM-i model entered the 70,000 range for the first time, and the EV model entered the 100,000 range.
In mid-to-late March, Sun Xu, a BYD insider, told Leifeng.com that after the launch of the Honor Edition on February 19, online traffic increased by more than 200% in the first week. "From March 1st to 15th, the number of orders in the first half of the month was about 150,000, more than 80,000 for Dynasty Network, and more than 60,000 for Ocean Network, and the overall expectation was basically achieved. ”
According to the latest sales data on April 1, BYD Dynasty and Ocean Network sold 286,700 units in March, an increase of 151.4% month-on-month and 46.5% year-on-year.
However, orders from Dynasty and Ocean Network will be lower in April than in March, because there is a Qingming Festival holiday. At the same time, the popularity of the Honor Edition will decrease in April. However, the delivery volume in April will exceed that in March, which is caused by the serious shortage of some models such as the 55 kilometers (79,800 yuan) of the Qin PLUS Glory Edition.
(Mapping by Leifeng.com based on public data)
From the perspective of subdivided categories, the price of Qin, Song Pro, Yuan and Han DM-i is relatively in place, with a price reduction of about 2 to 30,000 yuan, and Qin is the biggest winner in the dynasty network. Dynasty Network does not have a model with a special crotch pull, and the performance is more balanced.
(Mapping by Leifeng.com based on public data)
In terms of ocean networks, the destroyer 05 has become the undisputed biggest dark horse. The Song Plus family has also become a strong model, selling 41,569 units in March, beating the Qin family by about 1,000 units, becoming the best-selling model of the BYD brand.
The growth performance of the two models of Seagull and Dolphin is not obvious, the former is because the actual price reduction of about 3000 yuan is slightly "perfunctory", and the latter belongs to the increase (upgrade independent rear suspension) and the price reduction sincerity is insufficient.
The same is true for the Seal family, which is not as good at price cuts and facelifts as its siblings.
The reason why the performance of the Dynasty Network is more balanced is because there are two "difficult brothers" in the Ocean Network - the Frigate 07 and the E2 Glory Edition.
The two models were more "marginalized", with 1,170 and 1,300 units sold, respectively. The two models are basically lying flat, lacking attention and topicality.
On the day of the release of BYD's 2023 financial report (March 26), BYD also launched Yuan UP.
The Yuan UP focuses on a range of 300 to 400 km. According to industry estimates, the monthly sales volume of Yuan UP should be around 20,000 after its launch, and it has the potential to become a hit. However, Meta UP may have a certain squeeze on Dolphin and Meta PLUS.
Judging from the data, Dynasty Network and Ocean Network are still the main force of the group's sales, accounting for 94% of the total sales. The performance of the two networks is related to the final result of BYD's large-scale battle. (How does BYD deal with the price war with dealers, how to motivate sales channels, interested readers can add the author's WeChat Gru1993 exchange)
The DM-i 5.0 may be seen at the Beijing Auto Show, and there will be surprises at the end of the year
In the second quarter, there are several more noteworthy points: one is the release of the new car of Qin L, which is a hybrid model based on the DM-i 5.0 platform, with a fuel consumption of less than 3 liters per 100 kilometers and a range of more than 2,000 kilometers.
The Qin L is expected to be unveiled at the Beijing Auto Show on April 25, covering the A+ class sedan market, with major competitors in the market including Volkswagen Sutar, Toyota Asia Lion and other models.
Securities analyst Liu Guo revealed to Leifeng.com, "The release of Qin L is delayed, and BYD will consider delivering the order for the Glory version." ”
Qin L's target is expected to be around 10,000 units per month, but it will be discussed mainly depending on the price. Qin L is a large sedan, and after its launch, it will have an impact on the seal, and the high configuration of the Qin L will overlap with the low configuration of the seal and Han.
In terms of price, because of the launch of the Honor Edition model, the price band of the model has moved down by 1-20,000 yuan, and the original price band has been given to the DM-i 5.0 product.
This also means that BYD gives consumers two choices: buy last year's configuration model at a discount of 1-20,000 yuan, or buy a newer, larger space, and better performance model at last year's price.
Sun Guo said, "In addition to Qin L, Han L and Tang L will also be listed one after another. Song L uses the Horizon J5 chip, and there are two options for the follow-up L series - Horizon J5 or Nvidia Orin, and the intelligent driving ability will be significantly improved. ”
Therefore, in the market of less than 200,000 yuan, BYD will further squeeze the sales of joint venture fuel vehicles and second- and third-tier echelon models.
At the technical level, the DM-i 5.0 product will reduce the fuel consumption of electric vehicles to 2.9 liters/100 kilometers, and the range of full fuel and battery will reach 2,000 kilometers.
Wang Chuanfu said at the analyst meeting, "BYD now has a very large amount of DM-i 4.0 a month, and the Qin PLUS and Destroyer 05 alone are already in short supply, and it is very difficult for us to switch." DMI 5.0 can keep our products hot for at least 1 to 2 years. ”
In addition to DMI 5.0, E4.0 under the E platform will be gradually unveiled at the end of this year or next year (the above-mentioned meta-UP is still based on the E platform 3.0).
Platform E 3.0 was released on September 8, 2021, and it has been 2 and a half years now. Under this platform, there are not only the dolphin, which is the best-selling small car in all categories, but also the seal, which can be called the "Model 3 killer", and the Denza N7.
Depreciation and amortization, the biggest pressure in the first quarter
BYD Glory Edition has harvested a number of competitors with a price butcher's knife, and the ultimate goal of reducing prices and increasing market share is to make more profits.
How to track BYD's overall profitability, and what is the core point that affects profitability?
Some people will think that BYD's price war will be BYD's "seven wounds" - the overall decline of the Glory version is 2-30,000, will it put pressure on the profitability of the terminal?
The conclusion is not necessarily.
The price reduction is not a rigid conduction, because the transaction price of the terminal is the guide price plus the terminal discount. For example, the 2023 Champion Edition and the 2024 Glory Edition, although the price of the Glory Edition will be 2 to 30,000 lower than that of the Champion Edition from the guide price level, there is no additional discount for the new Glory Edition terminal. The terminal discount of the Champion Edition model may be 1-20,000.
In addition, the Honor Edition has been delivered since March, and the duration of the margin weakening is also relatively short. Therefore, the price reduction of the bicycle price does not have a very large impact on the business.
Secondly, it is the cost reduction of the supply chain.
BYD's sales volume is large, and it has a certain pricing power for the procurement chain, and the cost will be lower and lower. The big change between the Honor Edition model and the Champion Edition model is that the materials used in the core products have been adjusted. The decline in the cost of product materials has given the Honor Edition room for pricing to decline, and it will not have a big impact on the profitability of the Honor Edition.
For new forces, the pricing and gross profit margin of car companies have received more attention. However, for a car company like BYD with a sales scale of 3 million vehicles, depreciation and amortization has a high impact on the profitability of a single vehicle, which is a very critical factor.
Some analysts told Leifeng that depreciation and amortization is an important indicator that affects BYD's profitability.
In the third quarter of 2023, BYD has fixed assets of 200 billion, and the annual fixed assets will reach 230.903 billion. If calculated according to BYD's depreciation policy, the depreciation ratio in a single quarter is about 5%, and the depreciation and amortization statement in a single quarter is close to 11.5 billion.
The overall sales volume in the fourth quarter of 2023 is 950,000 units, and BYD's cumulative sales in the first quarter of 2024 will reach 620,000 units. Combined with other depreciation factors, with a relatively rough algorithm, BYD's bicycle depreciation and amortization will reach about 18,000 yuan from 11,000 yuan. Therefore, BYD's greater pressure in the first quarter of this year lies in the rise in depreciation and amortization, which will bring new costs of 7,000 to 8,000 yuan per vehicle.
Combined with the statistics of "Late Finance", BYD can net 9,000 yuan for every car sold in the fourth quarter of 2023. If the amortization cost cannot be lowered, it will greatly affect the earning ability of BYD bicycles.
For BYD, the first quarter was a "stress test". If the sales volume returns to more than 900,000 units in the second quarter, the depreciation and amortization of bicycles will return to 11,000 yuan.
This also explains why Wang Chuanfu believes that "scale is the most important thing". Cars are a scale effect, only when the sales volume is high enough, can the investment in fixed assets be continuously diluted, and the gross profit and net profit can be increased.
How to increase the 5.5% net profit margin?
Dynasty Network and Ocean Network are responsible for BYD's sales. However, even with such strong sales revenue growth, BYD's net profit margin is only 5.5%, and the high-quality profitability brought by scale is not obvious. If you put it in China's new energy market, where subsidies are rampant and losses are everywhere, this data is already very impressive.
However, when comparing Toyota's net profit margin of 11.6% in fiscal 2023, this performance is still much worse.
Therefore, the profit role of high-end brands Denza, Yangwang and Equation Leopard is getting heavier and heavier, carrying the profit hope of the whole village. According to a leading securities analyst, "Yangwang is estimated to have a net profit margin of 20%, and Denza and Equation Leopard are nearly 15%. ”
The new Denza N7 was officially launched on April 1, with a total of four versions and an official guide price of 239,800 yuan to 329,800 yuan. Wang Chuanfu said frankly, "The original front face of the Denza N7 is ugly, and it will perform well after it is replaced." ”
On April 6, DENZA's new intelligent luxury flagship sedan Z9GT underwent road testing in Stuttgart, Germany. Spy photos of the new car's overseas tests have been circulated on the Internet, and combined with spy photos and official information, the Z9GT is directly aimed at the Porsche Panamera.
However, the sales volume of the high-end series "Denza" accounted for only 4.2%. Deliveries of the "Lookup" and "Equation Leopard" began in November 2023, and the performance contribution is yet to be contributed.
According to statistics from Guolian Securities, BYD's models with the highest market share in 2023 will have a price band of 8-120,000 and 12-150,000, accounting for 65.0% and 70.5% respectively, while the market share of 5-80,000, 15-200,000 and 20-250,000 models will be 32.9%, 26.0% and 38.4%.
BYD wants to rush high, but its body is still in the mid-range market. This has largely affected the upward pace of the BYD brand.
On the other hand, because the price range of the main models is located, intelligence is not the core selling point, which affects the market's valuation of intelligence to a certain extent.
BYD's stock price has a lot of pullbacks in the early stage, and a big reason is the shortcomings of intelligence. Objectively speaking, there is a gap between BYD's intelligent driving and manufacturers such as Xiaopeng in the first echelon.
Wang Chuanfu's view is, "We have to have what others have, and we have made more BYD features that are excellent for user experience, but there are not too many security risks and will not touch the bottom line of this regulation." ”
Starting from this argument, it can be judged that BYD's intelligent driving plan will not be as radical as the top echelon such as Xpeng and Huawei.
(BYD's intelligent driving research and development road began in 2015 with Baidu's cooperation, from 2019, BYD began to invest and foreign cooperation + self-research layout, has with Momenta, DJI Automotive, Heduo Technology and other companies, about the story of BYD's intelligent driving, interested readers can add the author WeChat Gru1993 exchange)
Since the beginning of this year, Xiaopeng's sales have been bleak, and Jiyue, which has Baidu's technical endorsement, has also responded mediocrely, which can actually illustrate a problem from the side: intelligence is important, but it is not a decisive factor.
According to Leifeng.com, Denza will soon launch urban NOA, and there will also be some BYD features such as valet parking.
According to BYD's internal experts, the first push for intelligent driving is still in high-end models, such as Han, seal, and frigate, which are above 150,000 yuan. But the follow-up BYD models of more than 100,000 yuan will also use the intelligent driving system of the Eye of the Gods.
Going overseas is another way for BYD to make big profits.
There are two main ways for car companies to go overseas: first, manufacturers export directly and sell through local dealers, and this goal must reach 500,000. The goal of exports should be the easiest to achieve, because exports are increasing relatively quickly;
Second, parallel exports, in the domestic license plate and then as a second-hand car export, this is relatively simple, the ideal is through this model.
(Leifeng.com will also launch the topic of "how Chinese car companies open up the Russian market", interested readers can add the author's WeChat Gru1993 exchange)
In addition, each region will have its own cycle of consumption characteristics, such as Eid al-Fitr. The period from before Ramadan to Ramadan and then to Hari Raya is the peak period for Ramadan market consumption.
Therefore, from January to April is the peak consumption season in the Middle East and Central Asia, which will fall from May to July, and pick up again from August to October.
Industry insiders estimate that "BYD will sell 500,000 units through dealers this year, and this target will definitely be exceeded, and the parallel export method can also do 4 or 50,000 units." ”
According to BYD's financial report, in 2023, BYD's new energy passenger vehicles have entered more than 50 countries and regions such as Japan, Germany, Australia, Brazil, and the United Arab Emirates, and have exported Han EV, Tang EV, Yuan PLUS, Dolphin, Seal and other models overseas.
In order to go to sea, BYD spent a lot of money to buy ro-ro ships. BYD's first car ro-ro transport ship has been delivered and made its maiden voyage, and on March 29, BYD's 9200 car ro-ro carrier held a groundbreaking ceremony in Jiangsu.
In the next two years, BYD will have another 7 ro-ro ships put into operation.
Wang Chuanfu said, "Going to sea is a good direction. But now, due to geopolitical problems, globalization has become an illusion, and going to sea must be localized in order to be able to go to sea in a more sustainable way. ”
According to BYD's 2023 financial report investor communication conference, BYD is confident in the expansion of overseas markets, and its overseas sales in 2023 will be about 250,000 units, but it is expected that the overseas sales target will reach 500,000 units this year and 1 million units next year.
There is a doubt: overseas sales will increase exponentially in the next three years. Is this goal a bit too aggressive?
How to be a model student who can "sell cars and make money at the same time"?
To sum up, how will the market value BYD in the long term?
Four key words: market share, high-end and going overseas, and bicycle profitability.
Wang Chuanfu said at the analyst meeting, "BYD's PHEV and EV account for 16% of the entire market, and the market share of new energy vehicles has reached 35%. ”
According to the latest data released by the Passenger Car Association, in 2023, the cumulative retail sales of domestic passenger cars will be 21.699 million units. If BYD's market share can reach 20%, it will correspond to 4.33 million units.
As the European and American markets have successively slowed down their new energy strategies, they have resumed the research and development of fuel vehicles. The market will be more worried that BYD will be difficult to enter the European and American markets. Southeast Asia and Eastern Europe have a share of nearly 30 million vehicles, and if BYD can get 10% of the volume, overseas sales will be 3 million.
Zhang Ming told Leifeng.com, "If it is 7 million, the market will believe in the possibility of BYD's single profit of 10,000 yuan, and the net profit of 70 billion yuan is 700 billion yuan to ten times the valuation." If the profit of a bicycle reaches 15,000 yuan, it can reach a performance of 100 billion yuan, and the valuation corresponds to 1 trillion yuan. In the long term, BYD's market value can be expected to be 7,000 to 1 trillion. ”
BYD's ultimate goal is to become a global car company like Toyota and Volkswagen.
Even if the results of electrification are not satisfactory, Toyota's sales in 2023 will reach a new high, with sales of 11 million units, an overall performance of nearly 30 billion US dollars, a unit price of about 180,000 yuan, and a profit of about 19,000 yuan. The market capitalization of the Tokyo stock market reached 48.7 trillion yen (about 328.8 billion U.S. dollars) at the close of trading on January 23, breaking the market value record of a Japanese company.
Volkswagen's total sales in 2023 will be 9.24 million units, with a unit price of about 270,000 yuan and a profit of 15,000 yuan, making it the world's runner-up in terms of sales. These two belong to the model students who can sell cars and make money at the same time.
How long will it take for BYD to reach their achievements?
(Sun Xu, Liu Guo, and Zhang Ming are pseudonyms in the article)