Description of the event

The company released its 2024 three-quarter report. In the first three quarters of 2024, we achieved operating income of 502.25 billion yuan, a year-on-year increase of 18.9%, achieved net profit of 25.24 billion yuan, an increase of 18.1% year-on-year, and realized net profit without deduction of 23.19 billion yuan, an increase of 19.9% over the previous year.

Incident comments

The performance was in line with expectations, and sales growth accelerated during the new vehicle and technology cycle. 2024Q3 achieved revenue of 201.12 billion yuan, +24.0% YoY, +14.2% month-on-month, and net profit to mother 11.61 billion yuan, +11.5% YoY and +28.1% month-on-month. Q3 wholesale sales continued to rise, and sales continued to reach new highs in a single month. The overall sales volume of the 2024Q3 was 1.135 million units, +37.7% year over year, +15.0% month on month, corresponding to the market share of new energy sources 34.8%, +0.8 pct year on year, and -1.3 pct month on month. Bike revenue in Q3 2024 was about 0.139 million yuan, an increase of 0.003 million over the previous month.

Gross margin increased significantly month-on-month, profitability increased, and bicycle profits were not afraid of competition. The 2024Q3 gross profit margin was 21.9%, +3.2pct month-on-month, and -0.2pct year-on-year. The gross margin of the vehicle business was about 25.6%, +3.2pct month-on-month. The increase in gross margin is mainly due to the price increase of the DM5 replacement price to varying degrees compared to the old model. Combined with Q3 production capacity release and increased sales volume, the increase in gross margin and bicycle revenue. Due to the increase in sales and R&D expenses, the cost rate increased during the period. Q3 was about 14.4%, +1.6 pct year over month, and +2.6 pct. Among them, the sales/management/R&D/finance cost ratios were +0.8 pct/+0.2 pct/-0.0pct/+0.6 pct, respectively. The increase in sales expenses was mainly due to the increase in advertising and exhibition fees and store depreciation and amortization. Excluding BYD Electronics, the 2024Q3 bicycle profit was 0.0093 million yuan, -18.3% year-on-year, and +8.8% month-on-month. After further depreciation, the bicycle profit was 0.0106 million yuan, -15.5% year-on-year, and +6.4% month-on-month. In terms of cash flow, net operating cash flow in Q3 was 42.1 billion, a significant increase from 3.95 billion in Q2. 2024Q3 inventories increased by 31.6 billion year-on-year and 11.6 billion month-on-month, mainly in preparation for Q4 impulse.

Overseas and high-end development continue to gain strength, and the release of DM5.0 production capacity is expected to continue to increase sales. Sales of overseas and high-end models increased. 2024Q3 exported 0.094 million units, +32.6% year over month, -10.5% month over month; Equation Panther + Look Up + Tensei sold 0.044 million units, +22.4% year over month, and -2.2% month on month. Overseas market development and localized production are accelerating the global electrification transformation. Currently, four major overseas factories in Thailand, Uzbekistan, Brazil, and Hungary have been formed, and newly entered countries such as Vietnam, Pakistan, and Tunisia. Looking ahead, as the overseas model matrix continues to be rich, and the DM5.0 plug-in hybrid model is launched overseas, monthly export sales are expected to increase. Currently, DM5 production capacity continues to be released, delivery is accelerated, sales are expected to continue to rise, and the DM5.0 technology cycle's double-rise logic of volume and price continues to be implemented. In terms of high-end technology, with the launch of intensive models such as the Z9GT, Z9L, N9, Panther 3, and Panther 8 in the second half of the year.

Technology and scale construction surpass the competitiveness of the industry, and advance overseas and high-end efforts to reach a new peak. The company will usher in a big year of new technology and new products in 2024. With the support of DM5.0 technology, Dynasty Ocean Network will usher in a facelift, continue to upgrade its product capabilities, and stand firm in the mainstream market. Tension, Looking, and Equation Panther are rich in model reserves to accelerate the deployment of the high-end market. Overseas travel continues to gain strength, and overseas channels and model matrices will be further improved. Supported by the scale effect, with overseas expansion and high-end expansion, profitability is expected to remain high without fear of competition. The company's net profit from 2024-2026 is estimated to be 38.5, 51.1, and 64.9 billion yuan, corresponding to PE 21.9X, 16.5X, and 13.0X, maintaining a “buy” rating.

Risk warning

1. Weak market demand caused sales of new energy vehicles to fall short of expectations; 2. The cost reduction of power batteries fell short of expectations.