1Q24 results slightly exceeded market expectations
The company announced 1Q24 results: 1Q24 achieved operating income of 129.44 billion yuan, +3.97% year-on-year, net profit to mother of 4.57 billion yuan, +10.62% year-on-year, after deducting net profit of 3.75 billion yuan without return to mother, +5.2% year-on-year. Improved product structure and supply chain cost reduction led to improved gross margin, and performance slightly exceeded market expectations.
Development trends
Total sales volume was steady and improving in 1Q24, and high-end brands and exports contributed increased. The company's total sales volume in 1Q24 was 626,000 vehicles, +13.4% year-on-year. By brand, the BYD brand sold 586,000 vehicles, +12% year-on-year, and Tension 24,000 vehicles, which is basically the same as the previous year; Equation Leopard/Yangwang sold 11,000 units/3,522 vehicles respectively. By region, the 1Q24 company exported 98,000 passenger cars under the China Federation's caliber, a year-on-year ratio of +152.8% /month over month. 1Q24 high-end brands (Looking Up/Tense/ Equation Bao) + overseas market accounted for 22% of total sales, up to +10ppt/month-on-month +7ppt. The increase in the share of high-end brands and export sales led to an improvement in the product structure.
Improved product structure+supply chain cost reduction led to impressive gross margin performance. Expenses increased, and bicycle net profit showed steady year-on-year performance. Excluding BYD Electronics, the 1Q24 bicycle revenue was 1.41 million yuan, a year-on-year -2.9/month-on-month -90,000 yuan. We believe that the decline in bicycle revenue was mainly affected by the increase in the launch and promotion of models such as the Honor Edition. Excluding BYD Electronics, the gross margin for 1Q24 was 28.1%, a significant year-on-year increase of +7.3/month-on-month +3.0ppt. We believe it was mainly driven by supply chain cost reduction and product structure improvement. Expenses for the three periods increased year-on-year. Sales/management/R&D expenses for 1Q24 were 68.0/37.7/10.61 billion yuan respectively, +46.4%/12.0%/70.1% year-on-year. The corresponding rates for the three categories were 5.4%/3.0%/8.5%, respectively, all of which increased year-on-year. The net profit of bicycles in 1Q24 was 6,654 yuan, or -280/month-on-month -1,832 yuan. The year-on-year decline was far lower than the decline in bicycle revenue.
Although the market competition is fierce, the trend of structural improvement and cost reduction is expected to continue, and the technology and product cycle is strong. Despite intense competition in the domestic passenger car market and high price competition pressure, we still recommend focusing on the following positive catalysts: On the cost side, we expect the company's quarterly sales to increase quarterly, leading to the release of scale effects; at the same time, there is still room for supply chain cost reduction. On the price side, we are optimistic about exports and a further increase in the sales share of high-end brands. At the same time, the company plans to launch new models such as the Qin L, Sea Lion 07, and Tense Z9GT one after another starting in May. The new models are expected to increase in volume and have a certain pricing premium capacity, all of which are expected to drive a steady increase in bicycle revenue and gross margin. Furthermore, the release of DM5.0/e platform 4.0 technology is worth looking forward to.
Profit forecasting and valuation
We are essentially maintaining our 2024/25 profit forecast. The current stock price corresponds to 2024E 16.4/14.3xP/E for A/H shares, maintaining the outperforming industry rating and the target price of 256/266 HKD for A/H shares, corresponding to 2024E 19x/17x P/E for A/H shares, with 16%/23% upside compared to the current stock price.
risks
Domestic price competition has intensified; exports face policy risks.