BYD: After the numbers – even better

The Chinese company BYD presented its preliminary figures yesterday. The stock market may have sent the share price further down for this reason. On Tuesday, the stock lost nearly 3% again (in the first hours of trading). It is now clearly in a downward trend – and yet I think you should take a closer look at the value. For a long time now, I have considered BYD to be interesting and increasingly lucrative. It is of no use to stubbornly hold onto such an assessment. Nevertheless, there is still room for BYD to grow.

BYD: The numbers are (not) a disappointment, but the Chinese have published their business figures for 2023 on the Hong Kong stock exchange „preliminarily“ by notification. This has prompted some comments. I do not consider these comments to be significant. They aim to suggest that BYD has disappointed expectations. This is not entirely correct.

Therefore, let’s take a closer look at the numbers together. According to Bloomberg, analysts expected a net profit of 31.5 billion yuan for the past year. BYD expects it to be between 29 and 31 billion yuan. I think this is a forgivable deviation. With a net profit of 30 billion yuan, there is currently a 5% difference to analyst expectations. The company can expect a net profit of almost 4 billion euros.

These are the values that at least I – and as I have noticed from estimates – other analysts have also expected in recent weeks and months. However, even with a small deviation, the market’s valuations in recent weeks and months are difficult to understand. The stock has lost more than 15% since the beginning of the year.

The low P/E ratio is a sign. Assuming a profit of 30 billion euros, the current market capitalization results in a price-earnings ratio (P/E) of over 16. The P/E ratio is not the only decisive key figure, but in this case it is a good point of reference. In the previous years, it was typically just below 30 or even significantly higher. In other words, relative to other companies, the stock is still cheap, or now also confirmed as cheap.

The P/E ratio is expected to decrease in 2024 based on current estimates. I consider 13 to be a realistic value, as net profits are expected to continue to grow. The question is, how high will the profit ultimately be? Analysts estimate net profits to be around 5 billion euros. This cannot be answered down to the decimal point.

However, it is likely that the P/E ratio will decrease and therefore improve because BYD continues to grow abroad, including in the EU. The Chinese have also opened an e-factory in Brazil, one of the largest countries in the world. The company continues to grow. Therefore, I believe that the current price development is wrong. By the way, analysts now estimate the potential for the stock to be around 70%, as is the consensus.

BYD: The numbers are in – are they disappointing? – WKN: 710000 – ISIN: DE0007100000

Source: https://fundamental.aktienscreener.com/CNE100000296/05/byd-co-ltd/data