King Wai Financial News | CICC released a research report, stating that in the 3Q24, byd company (01211) gross margin increased by 3.2 percentage points to 21.9% compared to the previous quarter, exceeding the bank's expectation by 0.9 percentage points. The combined sales and management research expense ratio exceeded the bank's expectation by 2.2 percentage points, offsetting the better-than-expected performance in gross margin. The better-than-expected performance in government subsidies and VAT deductible offset by exchange losses, leading to byd company's 3Q24 net income of 11.6 billion RMB lower than the bank's expectation by 15%. Its gross margin performance has given the bank more confidence in the sales volume for 4Q24 and next year, believing that byd company remains the car company with the most cost advantage in the price war.

The bank raised its 2024 sales volume forecast by 4% to 4.02 million vehicles, as the competitiveness of the DM-i 5.0 model exceeded the bank's initial expectations. The bank also noticed that the growth in sales and new orders over the past few months has not come at the expense of gross margin, so it expects a 13% year-on-year increase in sales to 4.55 million vehicles in 2025. The bank believes that compared to the rapid growth in profit, byd company is more focused on market share, global expansion, and profit quality, making it difficult to predict three expenses, especially the slight variations in the capitalization rate of research and development expenses can lead to significant changes in net income. The bank raised its 2025 R&D expenditure to 51 billion and almost fully expensed to maintain byd company's profit quality.

The bank slightly lowered its 2024 net income forecast to 36 billion yuan and raised its 2025 net income forecast by 4% to 47.5 billion yuan, maintaining a 'buy' rating with a target price of HK$350, based on 20x FY25E P/E.