Market Brief

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馮兆山先生(Michael Fung)


BYD (1211.HK) – Strong NEV Cycle to lead the charge

Monday, June 24, 2019 Views1692


  • BYD reported 2019Q1 profit of RMB749.73M, up from RMB102.4M a year earlier.

  • Substantial surge of profit was buoyed by strong demand for its new energy vehicles (NEV).

  • NEVs are expected to continue to sell well in the second quarter, and NEV sales and revenues continue to maintain strong growth.

  • China's market for electric cars is booming, but profits in the sector have been squeezed by fierce competition between established firms and rival start-ups, as well as moves by the government plans to cut subsidies for the market to improve product quality and standards.

  • BYD sold over 117K vehicles in the first three months in 2019, up 5.2% y.o.y.

  • BYD popular models include its Tang-series electric cars – the company aims to sell 650K vehicles in 2019.


  • Margin pressure remains. The profitability of BYD's traditional vehicle segment faced pressure in 2018, given weakening consumer sentiment since the 2nd half of 2018.

  • Margin contraction for the handset business sets to continue, as we expect no great improvement in weak market demand and intensified market competition.

  • In the light of potential subsidy cut for NEV models in 2019, we expect the NEV segment's gross margin to fall below 20% to estimated 19% this year.

  • Based upon the above assumptions and forecast, we expect BYD's blended gross margin to narrow from 16.2% in 2018 to 15.8% in 2019.


  • BYD's shares closed at HK$47.25 on 21st June 2019.

  • PE Ratio = 44.533x.

  • PB Ratio = 2.207.

  • Dividend yield = 0.504.

  • Looking at BYD's daily price chart, BYD is making higher lows since 23 May (Low = HK$44.3), 6 June Low = HK$44.9 and 18 June Low = HK$45.1; after making successive lows, a solid base + support level has been formed.

  • BUY at support trend line = HK$45.3; target = HK$50.5, representing upside = 11.5%; cut-loss price = HK$43.5 (3% below the low of 6 June).



I, Michael Fung, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.




This report is produced and is being distributed in Hong Kong by Phillip Securities Group with the Securities and Futures Commission (“SFC”) licence under Phillip Securities (HK) LTD and/ or Phillip Commodities (HK) LTD (“Phillip”). Information contained herein is based on sources that Phillip believed to be accurate. Phillip does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The information is for informative purposes only and is not intended to or create/induce the creation of any binding legal relations. The information provided do not constitute investment advice, solicitation, purchase or sell any investment product(s). Investments are subject to investment risks including possible loss of the principal amount invested. You should refer to your Financial Advisor for investment advice based on your investment experience, financial situation, any of your particular needs and risk preference. For details of different product's risks, please visit the Risk Disclosures Statement on Phillip (or employees) may have positions/ interests in relevant investment products. Phillip (or one of its affiliates) may from time to time provide services for, or solicit services or other business from, any company mentioned in this report. The above information is owned by Phillip and protected by copyright and intellectual property Laws. It may not be reproduced, distributed or published for any purpose without prior written consent from Phillip.
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