BYD, a prominent Chinese automaker, has garnered attention not only for its electric vehicles (EVs) but also as a significant player in the battery manufacturing sector. Analysts from Bernstein recently reaffirmed an outperform rating for BYD’s publicly traded shares, highlighting the company’s standing as the world’s second-largest battery manufacturer by EV installations. BYD reportedly ships 70% more batteries than its closest competitor, indicating a robust position in the market.
Concerns regarding the Chinese EV market have led to a perceived valuation compression for BYD, suggesting that the company’s battery segment has an intrinsic value nearly equal to its overall market valuation. Founded as a cellphone battery manufacturer in the 1990s, BYD transitioned into the automotive sector in 2020 with its “Blade” battery, which has contributed to substantial EV sales, even surpassing Tesla last year.
The release of a utility-grade energy storage system, “Haohan,” has further distinguished BYD in the energy sector, as it reportedly provides a more cost-effective manufacturing solution. The company’s battery shipments to energy storage systems have more than doubled, while shipments to external clients, including Xiaomi and Xpeng, have nearly tripled. In total, BYD’s battery shipments experienced a 47% increase last year and are projected to grow by 35% this year.
Additionally, reports have surfaced suggesting Ford Motor Company is in negotiations to procure BYD batteries for hybrid vehicles. Despite a recent decline in share prices amid heightened competition and sales slowdowns in China, Bernstein estimates the existing battery segment could be valued at around $110 billion.
The analysts anticipate a 10% increase in domestic vehicle sales and a 4.4% rise in international sales for BYD this year. A price target of 130 Hong Kong dollars ($16.67), approximately 30% higher than the recent closing price, has been set based on expected product launches and technological advancements.
Why this story matters
- Highlights the rapid growth and diversification of BYD in the automotive and battery markets.
Key takeaway
- BYD’s battery segment may hold significant value, potentially enhancing the company’s overall market position.
Opposing viewpoint
- While BYD’s prospects appear strong, its shares have recently faced volatility amid increasing domestic competition and market challenges.
