Incidents:

On October 30, 2024, BYD released its report for the third quarter of 2024. In the first three quarters of 2024, BYD achieved revenue of 502.25 billion yuan, an increase of 18.9% year-on-year, and net profit of 25.24 billion yuan to mother, an increase of 18.1% year-on-year.

Among them, revenue for the third quarter was 201.12 billion yuan, up 24.0% year on year; net profit to mother was 11.61 billion yuan, up 11.47% year on year.

DM 5.0 is selling well, and the company's volume and price have risen sharply

2024Q3 BYD achieved a total of 1.129 million passenger car sales, up 37.4% year on year, up 14.9% month on month; of these, pure electric models sold 0.443 million units, up 2.7% year on year, up 4.1% month on month; plug-in hybrid models sold 0.686 million units, up 75.6% year on year, up 23.2% month on month. After deducting 2024Q3, BYD Electronics achieved operating income of 157.57 billion yuan, up 24.9% year on year, up 17.5% month on month; bicycle revenue was 0.139 million yuan, down 0.014 million yuan year on year, up 0.003 million yuan month on month. After the launch of the DM5.0 in May, Dynasty Ocean hybrid models continued to be replaced, and the company's model product strength increased, which led to a rapid expansion in hybrid model sales. The 2024Q3DM 5.0 model achieved sales volume of 0.283 million vehicles, accounting for 26.5% of the company's domestic sales, an increase of 23.3 pcts over the previous month. After the replacement, the sales price of the model recovered compared to the Honor model. For example, the Qin L increased by 0.014-0.02 million yuan compared to the Honor model in the same series, which led to a month-on-month increase in the company's bicycle revenue.

Reduced raw material prices and scale-up led to an increase in gross margin. In 2024Q3, after deducting BYD Electronics, the total net profit to mother was 10.59 billion yuan, up 12.6% year on year, up 25.1% month on month; bicycle net profit was 9,332 yuan, down 2,082 yuan year on year, up 752 yuan month on month. The price of 2024Q3 lithium carbonate fell 24.5% month-on-month. Combined with the advantages of scale brought about by rapid sales growth, it achieved a gross profit margin of 21.9%, a year-on-year decrease of 0.2 pct, and an increase of 3.2 pct month-on-month. 2024Q3's sales/management/R&D/finance expense ratios were 4.8%/2.3%/6.8%/0.5%, respectively, +0.8/+0.2/flat/+0.6pct year over year, and +0.5/+0.1/+1.7/+0.3 pct, respectively. Fluctuations in financial expenses were mainly due to exchange gains and losses. In terms of cash flow, net operating cash flow for the third quarter was 42.095 billion yuan, up 164.9% year on year and 965.6% month on month, with significant improvements over the same period.

Investment advice

The company's growth as a global leader in new energy has accelerated, and DM5.0 technology has strongly empowered model product capabilities, driving the company's volume and price to rise sharply. Exports and high-end development 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 2024-2026 revenue 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 39.72/51.11/64.19 billion yuan, year-on-year growth rates of 32.2%/28.7%/25.6%, EPS 13.7/17.6/22.1 yuan/share, respectively, and a 3-year CAGR of 28.8%, maintaining the “buy” rating.

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