1Q24's performance was in line with expectations: 1Q24 revenue +4.0% YoY/-30.6% YoY to $124.94 billion, net profit to mother +10.6% YoY/-47.3% YoY to 4.57 billion yuan, net profit before net return +5.2% /month-on-month -58.8% YoY to 3.75 billion yuan, 1Q24 gross margin +4.0pcts/month-on-month +0.7pcts to 21.9%. The overall performance of 1Q24 was in line with our expectations. The month-on-month decline in net profit due to major model facelift and price cuts was mainly affected by major model facelift and price cuts.

All prices have a complete layout of models, and it is expected that the brand will improve during the year: 1Q24's sales of new energy passenger vehicles +14.0% YoY/-33.8% YoY to 624,000 units; among them, pure electric sales volume +13.4% YoY/43.0% YoY to 30,000,000 units, and mixed sales volume +14.5% YoY/22.1% YoY to 324,000 units. Based on the model unveiled by BYD at the Beijing Auto Show, we expect the company to hedge the impact on profits through new models in the mainstream market and the highest/personalized market while ensuring the scale of sales. 1) Mainstream market: In 1Q24, the company has basically completed the price reduction of major models and vacated the A+ sedan market by 10-15 thousand yuan to prepare for the SEAL 06 and Qin L, which are equipped with the new DM5.0 platform. The new models are expected to have significant advantages in fuel economy and comprehensive battery life, and achieve a rapid rise in sales. 2) High-end: 2024E is expected to complete product coverage in the high-end market. a) Tense: Its D9 and N7 have strengthened their product advantages through facelift. The new Tense Z9GT unveiled at this auto show will provide product coverage for the Tense brand's sedan market.

Equipped with the new “Easy 3 Square” technology, this model will have outstanding performance in terms of turning radius, safe driving control, and power performance. b) Look up: Look up U7 is the company's first million-class sedan to target business travel scenarios. It is supported by the Yunnian Z+ Sifang platform to better match the needs of business safety and comfort. c) Equation: Within the year, the company is also expected to list Panther 3/8 and SUPER9 to complete market segment expansion.

Implementing overseas localization development, the pace of overseas production capacity expansion increased: in 1Q24, BYD's export sales volume was +152.8% YoY/+0.7% month-on-month to 98,000 units. In 2024/3, the company ranked first in China's NEV exports. We believe that 1) With the development of overseas localization as the core, the company has 5 overseas production bases that have completed coverage of key sales areas. Among them, the Thai factory is expected to be put into operation in 3Q24. 2) Relying on overseas production bases, the company may weaken the impact of negative factors such as local taxes, transportation costs, and trade protection policies, and effectively enhance the local brand image and product competitiveness. 3) The company relies on advantages such as brand power/competitiveness+R&D/technology iteration to accelerate overseas market layout, and is optimistic about medium- to long-term growth space in the export market.

Maintaining a “buy” rating: We maintained 2024-2026E net profit to mother at 337.3/370.2/40.27 billion yuan. Maintain the target price for A shares to $238.91 (corresponding to 21x 2024E PE) and the target price for H shares to HK$237.05 (corresponding to 19x 2024E PE). We are optimistic that the company will maintain a medium- to long-term steady development trend through its existing scale, industrial chain, and technology, and maintain a “buy” rating for A/H shares.

Risk warning: mixed penetration rate falls short of expectations, industry demand falls short of expectations, overseas market expansion falls short of expectations.