Citi says Tesla’s key EV rival BYD should see its stock re-rate higher in near term

Citi Research analysts are predicting their Top Pick, BYD (SZ:) will see higher ratings in the near term.

“..as the market consolidates into 2025, we expect BYD’s margin trend to recover on its scale advantages in battery and ADAS.” Wrote analysts in a note.

Citi added, “BYD will also launch L3 ADAS technology next week which we believe will trigger some positive NT catalysts.”

Citi revised their forecasts for NP/car for the years 2023-2025 to Rmb10.2k, Rmb9.1k, and Rmb10.3k, respectively. This adjustment is influenced by heightened competition, resulting in BEV GPM maintaining levels of 17-18%, and PHEV GPM hovering around 22%.

Despite this, analysts expect the NP/car for 2024 to remain robust, supported by export sales, high-end vehicle Net Profit Margins at 10-11%, and a battery cost saving of Rmb14.6 billion in 2024, assuming a gradual decline in NEV battery cell ASP to Rmb0.3-0.35 per Wh.

In the fourth quarter of 2023, Citi anticipates NP/car to be in the range of Rmb10.2-10.8k, factoring in an additional Rmb1.9 billion subsidy to dealers (Rmb666 per vehicle for the full year). However, due to the impact of the low season in the first quarter of 2024, NP/car to potentially decrease to below Rmb7.6k, with a total 1Q24 wholesale volume projected at around 638k units (16% YoY but -32% QoQ).

BYD plans to export 400,000 electric vehicles in 2024. Among them, 315,000 will be high-end models (Denza, Fangchengbao, Yangwang), and 2.96 million units will be mass-market products.

The expected distribution of PHEV volumes for 2024/25 is projected to improve to 57%/59%, up from 48% in 2023.