Among the famous Hong Kong stocks, analysts maintained their bullish outlook on BYD Co. Limited (HK:1211) following the release of its Q1 2024 results earlier this week. The company witnessed a notable slowdown in its Q1 net profit growth rate due to subdued vehicle sales during the typically sluggish season and the ongoing price war in the EV market. Nonetheless, analysts expect the company to meet its full-year targets.
BYD shares have traded up by over 12% over the last five days.
Based in China, BYD Co. is one of the leading global manufacturers of EVs (electric vehicles).
BYD’s Q1 Results Snapshot
In the first quarter, BYD’s revenue increased by 3.98% year-over-year to ¥124.94 billion. However, revenue was down by 30% compared to the previous quarter and fell short of the forecast of ¥131.71 billion. Meanwhile, Q1 net profit grew 10.6% to ¥4.57 billion, but decelerated compared to the 18.6% growth witnessed in Q4 2023. Further, net profit declined 47% compared to Q4 2023.
Additionally, the company sold 626,263 NEVs (new energy vehicles) in Q1, which marked a 13.4% increase year-over-year, but declined by 33.7% from Q4 2023. The growth was mainly hit by a slowdown in EV demand and the intense price war in China. Also, the first quarter coincided with the Chinese Lunar New Year holiday, traditionally a seasonal low point for vehicle sales.
BYD’s Recent Ratings
Following the results, analysts at Bernstein, CMB International, Macquarie, and Citi confirmed their Buy ratings on BYD’s stock.
Analyst Ji Shi from CMB International recommended buying BYD stock and predicts an upside of 21.5%. He highlighted that BYD’s strategy of implementing price cuts has been effectively balanced by cost reductions from suppliers, resulting in a robust gross margin. The analyst also believes the company will implement stricter fiscal discipline to manage the rising costs, underscoring the potential for higher profits.
Shi is confident that the company will achieve its sales target for the full year, driven by its overseas expansion. BYD is targeting a 20% growth in 2024 sales compared to the record numbers achieved last year.
Meanwhile, analyst Eunice Lee from Bernstein expects a much higher upside of 50% in the share price. She is impressed by BYD’s effective cost management, which led to a strong gross margin despite price cuts. Additionally, the analyst stated that the company’s attractive product range across segments and its advancements in technology further bolster the Buy rating.
Is BYD Stock a Good Buy?
According to TipRanks, 1211 stock has received a Strong Buy consensus rating, backed by 10 Buys, one Hold, and one Sell recommendation. The BYD Co. share price target is HK$263.16, which implies an upside of 22% from the current trading level.
