2023 results announcement: 2023 revenue +42.0% YoY to $602.32 billion, automotive business revenue +48.9% YoY to $483.45 billion (accounting for 80.3%), net profit to mother +80.7% YoY to $30.4 billion, net profit without deduction +82.0% YoY to $28.46 billion. Among them, net profit for 4Q23 was +18.6% /-16.7% month-on-month to 8.67 billion yuan, and net profit after deduction of net profit to mother +25.3% YoY/-5.6% month-on-month to 9.11 billion yuan. The 2023 results fell within the disclosed performance forecast range. The main reasons for the month-on-month decline in 4Q23 net profit were 1) the increase in 4Q23 terminal discounts, corresponding to gross margin of +2.2 pcts/month-on-month -0.9 pcts to 21.2%, and the bicycle profit of the automobile business is expected to drop by more than 25% month-on-month. 2) In order to increase technical reserves, the company recruited technical R&D personnel on a large scale, corresponding to +112.2% of R&D expenses in 2023 to 39.57 billion yuan.
The mainstream market achieved remarkable results in exchanging price for volume, meeting high-end market needs with differentiation and personalization: in the first 2 months of 2024, the company's NEV sales volume was -5.6% to 323,000 units; among them, pure electric sales volume was -1.1% to 160,000 units, and plug-and-mix sales volume was -9.6% to 163,000 units. 2024E's mainstream market facelift and price reduction guarantees the scale of sales while hedging the impact on profits through a high-end and personalized market. 1) Mainstream market: On 2/19, the entire Qin PLUS series took the lead in reducing the price by 20,000 yuan and launched the slogan “electricity is lower than oil”. Benefiting from the significant price-volume exchange effect of the company's mainstream models and the acceleration of the replacement process for joint venture fuel models, the cumulative number of orders in the first week of launch exceeded 20,000 units. 2) High-end: Consumer demand insight+technology improvement is the key to driving the company's brand forward.
a) 3/6 The content of the Tensei D9 upgrade mainly focuses on the aspects of ride comfort and intelligence that consumers are concerned about, continuing the advantages of the product. b) With the support of technology such as Yi Sifang and Yunnian, it can achieve various personalized functions including in-situ U-turned+take-off. Among them, the Looking Up U8 also set a record for the fastest sales of million-class SUV models in China, with sales exceeding 5,000 units more than 130 days after launch.
Implementing overseas localization development, the pace of overseas production capacity expansion increased: BYD's export sales volume increased +134.0% year-on-year to 59,000 vehicles in the first 2 months of 2024. 1) In the context of increasing global regulatory risks, the company adheres to the development strategy of overseas localization. At present, BYD has 5 overseas production bases covering key sales areas, and all of them can achieve a cumulative annual production capacity of close to 1 million vehicles. 2) We judge that, relying on overseas production bases, the company may weaken the impact of negative factors such as local taxes, transportation costs, and trade protection policies, and effectively enhance the local brand image and product competitiveness. 3) The company relies on advantages such as brand power/competitiveness+R&D/technology iteration to accelerate overseas market layout, and is optimistic about medium- to long-term growth space in the export market.
Maintaining the “Buy” rating: Considering recent price cuts for mainstream models and expectations of continued intense competition in the domestic market, we lowered the 2024-2025E net profit by 12.9%/22.2% to 337.3/37.02 billion yuan, and added the 2026E net profit forecast to 40.27 billion yuan. The target price for A shares was lowered to $238.91 (corresponding to 21x2024E PE), and the target price for H shares was lowered to HK$237.05 (corresponding to 19x 2024E PE). We are optimistic that the company will maintain a medium- to long-term steady development trend through its existing scale, industrial chain, and technology, and maintain a “buy” rating for A/H shares.
Risk warning: mixed penetration rate falls short of expectations, industry demand falls short of expectations, overseas market expansion falls short of expectations.