BYD plans to establish a Market Cap management system.

On the evening of December 27, 2024, BYD announced that in order to effectively promote the enhancement of the company's investment value, strengthen and standardize the company's market cap management behavior, and safeguard the legal rights and interests of the company and investors, according to the China Securities Regulatory Commission's "Guidance No. 10 on the Regulation of Listed Companies - Market Cap Management" and other relevant regulations, and in conjunction with the actual situation of the company, the Board of Directors agreed to authorize the company's management to formulate the "Market Cap Management System", and will fulfill the information disclosure obligations as required by the Shenzhen Stock Exchange.

What measures will BYD take next to enhance the company's investment value? The impact of this event on BYD's stock price is still unknown, however, the company has already taken the first step towards Market Cap management, which may have a profound impact on the company's long-term development.

As of now, BYD is the largest Electric Vehicles company by Market Cap in A-shares, with the latest Market Cap being 832.9 billion yuan. The company's revenue for the third quarter of this year has exceeded Tesla's performance for the same period for the first time in history. However, BYD's latest Market Cap is only one-twelfth of Tesla's Market Cap.

BYD plans to establish a Market Cap management system.

As an important component stock in many broad-based indices and one of the larger companies in A-shares by Market Cap, BYD's strengthening of Market Cap management may have a positive effect on stabilizing the market and its own value. The company has already taken the first step towards Market Cap management, which may have a profound impact on the company's long-term development.

Recently, an increasing number of listed companies have released their Market Cap management systems. A rough Statistics by reporters shows that more than 30 listed companies have officially announced their Market Cap management systems this year. In addition to some state-owned enterprises, many private companies have also taken swift action to develop and publish their Market Cap management systems. Companies such as Guangdong KinLong Hardware Products, Gongniu Group, Jiangsu Yuyue Medical Equipment & Supply, and Yantai Jereh Oilfield Services Group have all recently announced their Market Cap management systems.

Since the beginning of this year, under the advocacy of regulatory authorities, the State-owned Assets Supervision and Administration Commission, and others, more and more listed companies have begun to pay attention to Market Cap management, making it a 'mandatory course' for listed companies.

On November 6, 2024, the CSRC officially released the "Guidance No. 10 for the Supervision of Listed Companies - Market Value Management" (hereinafter referred to as "the Guidance"). The Guidance requires listed companies to improve operational efficiency and profitability based on enhancing company quality and to lawfully and compliantly use methods such as mergers and acquisitions, stock-based incentives, employee stock ownership plans, cash dividends, investor relations management, information disclosure, and share repurchase, in accordance with actual conditions to promote the reasonable reflection of the listed company's investment value and quality. The Guidance clarifies the responsibilities of the listed company's Board of Directors, directors, senior management, and other related parties, and provides specific requirements for major index constituent stock companies to establish market value management systems and for companies that have been significantly undervalued for a long time to disclose valuation enhancement plans. At the same time, the Guidance explicitly prohibits listed companies from engaging in illegal activities under the guise of market value management.

On December 17, to further promote the central enterprises' high regard for the market value performance of controlling listed companies, regulate and orderly carry out market value management work, enhance the investment value of listed companies, effectively safeguard investors' rights and interests, and take more powerful actions to promote the healthy and stable development of the capital market, the State-owned Assets Supervision and Administration Commission of the State Council recently issued "Several Opinions on Improving and Strengthening the Market Value Management Work of Central Enterprise Controlling Listed Companies," consisting of nine main points. The State-owned Assets Supervision and Administration Commission stated that it will focus on the implementation of the aforementioned document and take enhancing the investment value of central enterprises' controlling listed companies and strengthening investor returns as a long-term task, guiding and promoting central enterprises to effectively use market value management tools, actively respond to market concerns, safeguard investors' interests, and make new and greater contributions to the high-quality development of the capital market.

Many investors indicate that market value management helps guide listed companies to improve company quality and focus on performance growth, achieving a virtuous cycle of market value growth and company development.

BYD's market cap is far lower than Tesla's.

BYD is currently the largest new energy vehicle company by market cap in the A-share market, with a latest market cap of 832.9 billion yuan and a rolling PE ratio of 24.6 times. After years of accumulation, BYD has accelerated its development, repeatedly setting historical records in both sales and performance.

The latest third-quarter report released by BYD has historically surpassed the well-known global New energy vehicle company - Tesla.

Tesla and BYD are the two largest electric vehicle manufacturers in China and even globally, holding crucial positions in the global electric vehicle market and maintaining growth amidst fierce industry competition.

BYD's third-quarter report shows that the company's revenue in the third quarter reached 201.1 billion yuan, surpassing Tesla's 179.4 billion yuan during the same period for the first time. In the first three quarters, BYD's revenue was 502.251 billion yuan, a year-on-year increase of 18.94%, with a net income of 25.238 billion yuan, a year-on-year increase of 18.12%. In comparison, Tesla reported a revenue of 504.4 billion yuan in the first three quarters, with a non-GAAP net income of 41.366 billion yuan. In terms of performance, BYD continues to maintain rapid growth while Tesla has experienced a decline this year. BYD's revenue is gradually catching up to Tesla's, and the gap in net income is also narrowing.

However, in terms of Market Cap, the gap between BYD and Tesla is immense. Tesla's stock price has risen by 82.76% this year, with the latest Market Cap approaching 1.46 trillion USD (approximately 10.48 trillion RMB), while BYD's stock price has increased by 46.37% this year, with the latest Market Cap being only 832.9 billion RMB. In comparison, BYD's Market Cap is merely one-twelfth of Tesla's.

BYD's rapid growth hasn’t stalled despite a high base. The company's November 2024 sales report shows that in November 2024, the company sold 0.507 million vehicles, a year-on-year increase of 67.87% and a month-on-month increase of 0.83%; from January to November 2024, the company's cumulative vehicle sales reached 3.757 million, a year-on-year increase of 40.02%.

It is worth noting that due to intense competition in China’s New energy Fund industry, many New energy Fund companies have experienced a decline in stock performance after a lot of speculation. Therefore, even leading companies in the New energy Fund sector have been affected, resulting in the market assigning a lower valuation to the industry.

Regarding Passenger Vehicles, China International Capital Corporation pointed out that technological innovation and policy support sustain domestic demand, the New energy Fund replacement, independent rise, and global expansion are mid-to-long-term highlights. In 2024, domestic Passenger Vehicle demand is expected to grow beyond expectations, reflecting the resilience of domestic demand and the effects of stimulating policies, with rapid New energy Fund penetration, intense price competition, and fast-changing patterns; however, the rise of Chinese independent brands is the most crucial investment variable. Looking ahead, it is anticipated that financial and tax support policies will remain strong, with stable demand growth expected, and the penetration of New energy Fund is likely to further accelerate and break through, opening up overseas sales opportunities. The intensity of price competition is expected to ease, uncovering more investment opportunities with differential expectations for leading automakers; also, attention should be paid to the pivotal moments in autonomous driving and the overseas expansion of leading automakers.

HuLong Securities' Research Reports indicate that BYD has a rich reserve of new products, supporting the company's high-end development process. Additionally, from 2024 to 2025, overseas production capacity is gradually being established, which is expected to support continuous growth in overseas sales. The company's sales base is solid, and with a rich reserve of high-end new products, it is expected to support BYD in advancing its high-end development; BYD's PE is lower than the average of comparable companies.

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