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Core Pacific - Yamaichi 18/10/13
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BYD (1211 HK) Target price: N/A Previous TP: N/A Last price: HK$38.10 Potential Return: N/A China / Auto / Company Report
Forecast revision (%)
Year to 31 Dec 13F 14F 15F
Revenue change - - -
Net profit change - - -
EPS change - - -
Key Share Data
52-week High / Low HK$40.0/14.58
30D avg volume 5.42m
Issued share 793m
Market cap 30,217m
Major Shareholder Wang Chuanfu Non-H SHS# (24.24%)
Share Price Performance
Key Financials
Year to 31 Dec 2010 2011 2012
Revenue (RMB mn) 46,685 46,312 44,381
Growth (%) 18.3 -0.8 -4.2
Net profit (RMB mn) 2,523 1,385 82
Growth (%) -33.5 -45.1 -94.1
EPS (RMB) 1.11 0.60 0.03
Growth (%) -37.3 -45.1 -94.1
P/E (x) 27.5 50.8 1015.7
P/B (x) 3.9 3.4 3.4
DPS(RMB) - - -
Yield (%) - - -
Source: Core Pacific Yamaichi
� What’s New
� Leader in EV/HEV industry. We visited BYD (1211 HK)’s plant and discussed with the Management about its new EV/HEV models. BYD presently has three EV/HEV models, i.e. EV car e6, EV bus K9, and HEV F3DM. Model e6 is mainly employed in taxi fleet. The Company is the pioneering automaker in introducing EV taxi in selected cities in China. After three years of operation, EV taxi company in Shenzhen turned into profit for the first time in this year.
� Significant cost saving for EV bus. Model K9 is an EV bus mainly used in public transportation. With China’s government industry policy to support new energy car usage in major cities, demand for EV bus is expected to increase strongly in 2014. Though our major concern is about the execution risk as previous EV/HEV policy has not achieved satisfactory results, the commercial feasibility of EV bus bodes well for future growth in this field.
� New dual-power model Qin to launch in 4Q13. The Company is scheduled to launch a new dual-mode HEV Qin in 4Q13. Qin presents more interior space, longer range in EV mode, better acceleration time, and more gasoline engine power. The Management indicates Qin will be more attractive to private consumers for its improved features. Qin will be the major growth driver in EV/HEV business going into 2014.
� New EV/HEV models to hit the road in 2014. A new PHEV SUV model, Tang, is expected in 2014. The new 4WD PHEV SUV model will be equipped with higher powered battery and 2.0T gasoline engine. EV/HEV can deliver better driving experience than traditional fuel-powered cars in that it has relatively short acceleration time. Therefore, EV/HEV is expected to be more popular in SUV market.
� Our View � Positive on long-term growth in new-energy car business and
continuous improvement in traditional car business. We are positive on long-term potential of new-energy car market in view of the growing energy demand for transportation. Meanwhile, continuous improvement in traditional car business is expected to support near-term earnings growth. The share is trading at a premium to other automakers, which is justified by its leadership in EV/HEV technology, strong earnings recovery, and R&D in integrated new energy business, in our view.
NOT RATED
18 October 2013 Olive Xia CFA 夏夏夏夏 平平平平
Tel: 8621 6886 6902
Disclaimer: This report is for information only and is not to be construed as an offer to buy or sell securities. While the report is compiled using sources believed to be reliable, Core Pacific - Yamaichi International (H.K.)
Limited (“CPYI”) does not guarantee its accuracy or completeness. CPYI may update or change any information contained in this report without any notice. Neither CPYI nor any of the companies of Core Pacific Group nor any
individuals connected with the Group shall accept any legal responsibility arising from the use of or reliance upon the report. The copyright of this report belongs to CPYI and no person may reproduce or publish any part of this report
for any purpose without CPYI’s written consent. The authors of this report are Licensed Representative of Securities and Futures Commission and they guarantee that all the views expressed in this report accurately reflect their
personal views. CPYI, any of the companies of Core Pacific Group, its directors and/or its employees may have positions in, and may effect transactions in securities mentioned herein which may be opposite to the position you take.
Electrifying time � Leader in EV/HEV industry
� Significant cost saving for EV bus
� Qin and Tang to attract private consumers
� Continuous product improvement in traditional car b usiness
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Core Pacific - Yamaichi 18/10/13
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Leader in EV/HEV industry
Leader in EV/HEV industry. We visited BYD (1211 HK)’s plant and discussed with the Management about its new EV/HEV models. As the technology leader in EV/HEV industry, BYD presently has three EV/HEV models, i.e. EV car e6, EV bus K9, and HEV F3DM. Model e6 is mainly employed in taxi fleet. The Company is the pioneering automaker in introducing EV taxi in selected cities in China. In Shenzhen, there are 800 units of e6 taxi on the road. The taxi company operating e6 models in Shenzhen, Pengcheng Taxi, is a JV of BYD, Shenzhen Bus Company, and China Southern Power Grid. The major advantage of e6 is its low usage cost compared with traditional gasoline-driven cars. According to the Management, the maximum range of e6 is about 300km per full charging and the average cost per km for e6 is only RMB0.17 or about 76% lower than that of gasoline-driven cars. A taxi driver usually drives more mileage per day (about 450km per day) than private car users do (no more than 100km day). Therefore, EV is more attractive to taxi operators for its low usage cost. After three years of operation, Pengcheng Taxi turned into profit for the first time in this year. The Management is confident of the further commercial application of EV in taxi operation going forward. Significant cost saving of EV bus. K9 is an EV bus mainly used in public transportation. With China’s government industry policy to support new energy car usage in major cities, demand for EV bus is expected to increase strongly in 2014. Though our major concern is about the execution risk as previous EV/HEV policy has not achieved satisfactory results, the commercial feasibility of EV bus (Table 2) bodes well for future growth in this field. Table 1: Cost comparison: e6 vs fuel-driven car (RMB) E6 EV car Fuel-driven car E6 vs fuel-driven car Specification and price Gasoline/electricity per 100km 26 kwh 9 Liters - Gasoline price/electricity tariff RMB0.66/kwh RMB8/liter - Daily mileage 450km 450km 0 Annual driving days 353 353 0 Usage time 5 5 0 Retail price + purchase tax RMB227,732 RMB108,547 119,185 Usage cost Cost per km 0.17 0.72 0.55 Cost per day 77 324 247 Cost per month 2,230 9,396 7,166 Cost per year 26,761 122,752 95,991 Cost during 8-year usage 133,803 1,737,216 429,957
Source: Company data
Table 2: Cost comparison: K9 vs fuel-driven bus (RMB) K9 EV bus Fuel-driven bus K9 vs fuel-driven bus Specification and price Gasoline/electricity per 100km 130 kwh 40 Liters - Gasoline price/electricity tariff RMB0.3/kwh RMB7.8/liter - Daily mileage 200km 200km 0 Annual driving days 353 353 0 Usage time 8 8 0 Retail price RMB1,000,000 RMB500,000 500,000 Usage cost Cost per km 0.39 3.12 2.73 Cost per day 78 624 546 Cost per month 2,262 18,096 15,834 Cost per year 27,144 217,152 190,008 Cost during 8-year usage 217,152 1,737,216 1,521,064
Source: Company data
Core Pacific - Yamaichi 18/10/13
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Qin and Tang to attract private car buyers
New dual-power model Qin to launch in 4Q13. The Company is scheduled to launch a new dual-mode HEV Qin in 4Q13. The new model is an upgraded version of dual-mode F3DM. Qin presents more interior space, longer range in EV mode, better acceleration time, and more gasoline engine power (Table 3). The maximum range of Qin is 70km in EV mode, which is suitable for private users for daily drive. With the state government’s subsidy of RMB35,000 for HEV, the retail price of Qin is expected to be about RMB150,000. The Management indicates Qin will be more attractive to private consumers for its improved features. Qin will be the major growth driver in EV/HEV business going into 2014.
New EV/HEV models to hit the road in 2014. A new PHEV SUV model, Tang, is expected in 2014. The new 4WD PHEV SUV model will be equipped with higher powered battery and 2.0T gasoline engine. EV/HEV can deliver better driving experience than traditional fuel-powered cars in that it has relatively short acceleration time. Therefore, EV/HEV is expected to be more popular in SUV market. Additionally, BYD’s JV with Daimler is developing a new EV model Denza.
Table 3: Comparison of F3DM and Qin F3DM Qin Specification Length/Width/Height (mm) 4533/1705/1520 4740/1770/1480 Weight (kg) 1560 1720 0-100km/h time (s) <10.5 <5.9 Maximum speed (km/h) >=150 >=185 Range in EV mode (km) 60 70 Electricity per 100km (kwh) 16 19 Power battery type LiFePO4 LiFePO4 Gasoline engine displacement (L) 1.0 1.5
Source: Company data and Core Pacific – Yamaichi estimates
Continuous improvement in traditional car business. The Company delivered unit sales growth of 27.2% yoy in 9M13. Traditional car business remained the main near-term growth driver. The Management indicated they will continue to enhance product quality and improve product mix. With better product quality and brand image, ASP is forecast to remain upward trend in the medium term. Meanwhile, rising production cost will lead to stable margins. Positive on long-term growth in new-energy car busi ness and continuous improvement in traditional car business. We are positive on long-term potential of new-energy car market in view of the growing energy demand for transportation. Meanwhile, continuous improvement in traditional car business is expected to support near-term earnings growth. The share is trading at a premium to other automakers, which is justified by its leadership in EV/HEV technology, strong earnings recovery, and R&D in integrated new energy business, in our view.
Table 4: BYD: Unit sales breakdown (Units) 9M12 9M13 YoY e6 895 1,004 12.2% F3DM 906 916 1.1% F0 30,639 40,901 33.5% F3 95,702 64,540 -32.6% F6 592 493 -16.7% G3 25,205 5,089 -79.8% G6 26,640 21,578 -19.0% L3 49,036 71,938 46.7% Sirui - 7,333 - Surui 9,954 91,020 814.4% Total PV 239,569 304,812 27.2% Bus 206 421 104.4% Total PV + Bus 239,775 305,233 27.3%
Source: Auto Info
Core Pacific - Yamaichi 18/10/13
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Figure 1: BYD: EV charging station
Source: Company and Core Pacific - Yamaichi
Figure 2: BYD: e6 interior space
Source: Company and Core Pacific - Yamaichi
Figure 3: BYD: Hanging charger
Source: Company and Core Pacific - Yamaichi
Figure 4: BYD: e6 power battery
Source: Company and Core Pacific - Yamaichi
Core Pacific - Yamaichi 18/10/13
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Profit & loss(Consolidated) Yearto31Dec (Rmb mn) 2010 2011 2012
Revenue 46,685 46,312 44,381 COGS (38,421) (39,445) (39,254)Gross profit 8,264 6,867 5,127 Other income 532 988 423 Gov grants 354 301 550 Selling expenses (2,176) (1,800) (1,512)Admin expenses (1,918) (2,126) (2,055)R&D (1,403) (1,374) (1,150)Other expenses (255) (389) (205)EBIT 3,398 2,469 1,178 Investment income 26 (742) (862)Finance cost (281) 1 (25)Pre-tax profit 3,142 1,727 291 Income tax (224) (132) (78)Minority interests (395) (211) (132)NPATMI 2,523 1,385 82
Balance sheet(Consolidated) Yearto31Dec(RMB mn) 2010 2011 2012Non-current assets 35,322 44,101 46,684 PPE 24,877 30,723 33,650 Intangible assets 1,289 2,481 3,669 Interest in associates 59 572 949 Prepaid lease payments 4,387 4,208 4,313 Other 4,710 6,117 4,101 Current assets 18,553 22,780 23,324 Prepayments 1,869 2,296 2,226 Inventories 6,538 6,596 7,345 Receivables 8,153 9,782 9,937 Other 0 57 132 Cash 1,993 4,048 3,684 Total assets 53,875 66,881 70,008 Current liabilities 28,675 34,628 37,228 Payables 11,033 17,236 18,952 Advances from customers 2,865 1,871 2,714 Borrowings 11,003 11,342 11,288 Other 3,774 4,179 4,274 Non-current liabilities 4,048 8,273 8,635 Borrowings 3,049 7,079 7,341 Deferred income 999 1,193 1,294 Other liabilities 0 1 0 Total liabilities 24,627 42,901 45,863 Total equity 21,151 23,980 24,144 Share capital 2,275 2,354 2,354 Reserves 16,185 18,770 18,843 Minority interests 0 2,856 2,947 Total liabilities & equity 45,778 66,881 70,008
Cash flow(Consolidated) Yearto31Dec(RMB mn) 2010 2011 2012Pre-tax profit 3,142 1,727 291 Tax paid (441) (344) (299)Depreciation & amortization 2,182 2,678 3,256
Associates 26 (742) (862)Change in working capital (2,046) 1,179 1,132 Others 277 1,486 2,038 Operating cash flow 3,139 5,985 5,555 Capex (8,114) (7,245) (5,629)Addition to intangible assets (621) (1,427) (1,377)
Others (3,948) (250) 2,397 Investment cash flow (12,683) (8,923) (4,610)Share issues 0 1,368 0 Proceeds from bonds 0 1,000 3,000 Change in borrowings 10,391 3,733 (3,085)Others (1,208) (1,366) (1,132)Financing cash flow 9,183 4,736 (1,217)Free cash flow (9,544) (2,938) 946 Net cash flow (361) 1,798 (271)
Sources: Company data and Core Pacific – Yamaichi
I, Olive, Xia, the author of this research report and the license holder of Type 4 Regulated Activity registered with Hong Kong Securities and Futures Commission (“SFC”), hereby declare that all the views expressed in this research report accurately reflect my personal views and that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. Besides, I confirm that (a) neither I nor my associates serve as an officer of any of the Hong Kong listed companies covered in this research report; and (b) neither I nor my associates have any financial interests in the stock(s) covered in this research report.
Definitions of Recommendations: For stock recommendations: Buy: +15% or above of expected return over the next 12 months. Hold: Between +15% and –5% of expected return over the next 12 months. Sell: Potential downside of more than 5% over the next 12 months.
Kevin Tam, a licence holder of Type 4 Regulated Activity registered with the Hong Kong Securities and Futures Commission ("SFC") and a member of the research team that has prepared this research report, hereby declare that he currently holds shares of BYD (1211 HK).
