Incidents:

On October 18, 2024, BYD released the 2024 Employee Stock Ownership Plan (draft).

Executive holding+employee shareholding plan. The company is optimistic about its own development prospects, BYD released the 2024 employee shareholding plan (draft), with a total number of no more than 150 people and an amount of no more than 0.22 billion yuan; the unlocking time period was 12/24/36/48/60 months, respectively, and the unlocking ratio at each point was 20%. Historically, BYD has carried out two rounds of employee stock ownership plans, in 2015 and 2022, respectively. Among them, 97 people were involved in the 2015 shareholding plan, and the total number of company shares involved was no more than 32.66 million shares.

The 2022 employee stock ownership plan has no more than 12,000 participants, involving an amount of 1.8-1.85 billion yuan.

DM5.0 empowers model product strength and further consolidates BYD's leading advantage. In May 2024, the company released fifth-generation DM technology. With leading technologies such as improved engine thermal efficiency, it achieved records such as 2.9 L of lost electricity and fuel consumption of 100 kilometers and comprehensive battery life of 2,100 km, effectively improving the product strength of the new model. In terms of sales, the first DM5.0 models, the Qin L and the Seal 06 DM-i, were very popular when they went on sale, and achieved sales of 0.02 million units and 14,000 units respectively in June. In terms of pricing, the Qin L increased by 0.014-0.02 million yuan compared to Honor models in the same series. Song Plus and Song L Dmi went on sale in July, and the price increased by 0.006 million yuan compared to the Honor Edition. With the continuous launch of models equipped with DM5.0 technology, the company's ASP is expected to increase, leading to improved profitability.

High-end plus overseas continues to gain strength, which is expected to boost the medium- to long-term performance level. From January to September 2024, the cumulative sales volume of high-end brands was 0.127 million vehicles, up 37.4% year on year, accounting for 4.6% of sales, up 0.2 pct year on year, and the cumulative overseas sales volume was 0.297 million vehicles, up 104.7% year on year, accounting for 10.9% of sales, up 3.9 pct year on year. In terms of high-end brands, the price of all Fangchengbao models was lowered by 0.05 million yuan on July 29, effectively boosting sales. In August and September, the Equation Panther brand achieved sales of 4,876 vehicles and 5,422 vehicles, respectively, with a year-on-month increase of 164.7% and 11.2%. Overseas, the company's overseas production capacity has entered a climbing period. Overseas sales of 0.033 million vehicles this month, of which 0.031 million vehicles were exported, and 2,500 vehicles were manufactured overseas, an increase of 150% over the previous month. With the rapid growth of the company's high-end models and models sold overseas, it is expected to drive an increase in the company's overall profit level, and performance is expected to be further released.

Investment advice

The company is growing rapidly as a global leader in new energy. DM-i5.0 technology strongly empowers new products. Exports and high-end technology are expected to open up revenue and profit margins, and medium- to long-term profit levels are expected to increase. We expect the company's revenue for 2024-2026 to be 813.06/952.98/1162.64 billion yuan, respectively, with year-on-year growth rates of 35.0%/17.2%/22.0%, net profit to mother of 38.94/50.58/63.31 billion yuan, year-on-year growth rates of 29.6%/29.9%/25.2%, EPS of 13.4/17.4/21.8 yuan/share, respectively, and a 3-year CAGR of 28.2%, maintaining the “buy” rating.

Risk warning: Increased industry competition; risk of price increases for upstream raw materials; increased trade barriers in export target countries.