31 Aug 2026 CMB International Global Markets | Equity Research | Company Update

BYD (1211 HK/002594 CH)

2Q26 earnings signal enhanced cost discipline

Maintain BUY. We view BYD’s 2Q26 earnings as resilient despite bottom-line performance missing by revenue drag and higher impairment losses. We believe tightening cost control, marked by stabilizing 1H26 R&D spend and slowing D&A growth, underscores long-term margin resilience anchored by superior scale and vertical integration.

 2Q26 GPM beat; net profit missed on revenue and impairment. BYD’s 2Q26 revenue fell 3.2% YoY to RMB195bn, or 8.6% lower than our prior forecast. GPM expanded 0.1ppts QoQ to 18.9% in 2Q26, the highest since 2Q25, and 0.5ppts higher than our projection. SG&A and R&D expenses were largely in line while impairment losses were about RMB1.1bn higher than our forecast. Net profit surged 30% YoY to RMB8.2bn, yet trailing our projection by 15%. Excluding impairment, net profit per vehicle was about RMB8,900 (RMB300 below our estimate).

 Stricter cost control unlocks earnings upside. Total R&D investment in 1H26 declined 6.5% YoY, signaling cost stabilization, while the R&D capitalization ratio rose from 4% in 1H25 to 19% in 1H26. Total depreciation and amortization only rose 5% YoY in 1H26, the slowest pace since 1H20. We expect cost reduction efforts to become increasingly pronounced in the next few years, as BYD’s production capacity, sales network and R&D resources have been well established, especially in China. We believe BYD’s greater economies of scale and vertical integration could result in more resilient profitability than most peers, as evidenced by its robust 1H26 GPM.

 2H26 and FY27 outlook. We maintain our FY26E sales volume forecast of 4.5mn units with overseas contributing 40%. We cut FY26E revenue forecast by 1% following 2Q26 ASP miss but raise FY26E GPM by 0.2ppts and trim R&D expenses by 9%. Accordingly, we raise our FY26E net profit by 3% to RMB36.1bn. We project FY27E sales volume to rise 11% YoY to 5.0mn units, aided by overseas markets. We expect stringent cost cuts to extend into FY27E and thus we revise up our FY27E net profit by 5% to RMB44.1bn.

 Valuation/Key risks. We maintain our BUY rating and H-share target price of HK$125.00, still based on 22x our revised FY27E P/E. Our unchanged A-share target price is based on the current A/H premium of 18%. Key risks to our rating and target prices include lower sales volume or margins than we expect, as well as a sector de-rating.

Earnings Summary - 1211 HK

(YE 31 Dec) FY24A FY25A FY26E FY27E FY28E Revenue (RMB mn) 777,102 803,965 825,103 902,415 966,157

YoY growth (%) 29.0 3.5 2.6 9.4 7.1 Net profit (RMB mn) 40,254.3 32,619.0 36,112.1 44,079.7 52,606.5

YoY growth (%) 34.0 (19.0) 10.7 22.1 19.3 EPS (Reported) (RMB) 13.85 3.61 3.96 4.83 5.77 P/S (x) 0.9 0.9 0.9 0.8 0.7 P/E (x) 5.7 21.8 19.9 16.3 13.7 Yield (%) 5.3 0.5 1.0 1.2 1.5 ROE (%) 24.8 15.1 13.7 14.8 15.6 Net gearing (%) (50.7) (1.1) (8.7) (13.7) (31.4) Source: Company data, Bloomberg, CMBIGM estimates

China Auto

12-mth Price Performance

Source: FactSet

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR OR http://www.cmbi.com.hk

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Figure 1: Quarterly results

Source: Company data, CMBIGM

Figure 2: Earnings revision

Source: CMBIGM estimates

Figure 3: CMBI estimates vs consensus

Source: Bloomberg, CMBIGM estimates

Financial Summary

INCOME STATEMENT 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Revenue 602,315 777,102 803,965 825,103 902,415 966,157 Cost of goods sold (490,399) (626,047) (661,305) (674,815) (741,866) (793,104) Gross profit 111,916 151,056 142,660 150,288 160,549 173,052 Operating expenses (78,757) (110,677) (117,943) (110,631) (115,107) (118,157) Selling expense (15,371) (24,085) (26,185) (26,780) (27,923) (28,657) Admin expense (13,462) (18,645) (20,200) (21,317) (21,315) (21,757) R&D expense (39,575) (53,195) (57,978) (50,400) (52,000) (53,300) Others (10,350) (14,752) (13,581) (12,134) (13,868) (14,444) Operating profit 33,159 40,379 24,717 39,657 45,443 54,895 Other income 5,965 15,303 14,932 14,100 13,500 11,200 Other expense (1,546) (2,057) (1,564) (800) (1,300) (1,400) Gain/loss on financial assets at FVTPL 258 532 364 350 500 550 Investment gain/loss 1,635 2,291 2,857 338 1,058 1,558 Other gains/(losses) (3,677) (5,552) (2,202) (3,747) (3,107) (3,320) EBITDA 82,649 118,681 122,830 138,373 160,758 181,222 Depreciation 37,718 56,922 72,048 81,806 93,468 102,843 Depreciation of ROU assets 1,390 2,643 2,655 2,922 3,327 3,777 Other amortisation 4,444 7,341 5,823 6,422 7,005 7,602 EBIT 39,096 51,774 42,305 47,223 56,957 66,999 Interest income 2,796 2,484 2,437 2,824 2,864 3,516 Interest expense (1,828) (2,094) (2,552) (3,760) (3,102) (2,364) Net Interest income/(expense) 1,475 (1,216) 649 (6,436) (2,239) 1,153 Foreign exchange gain/loss 639 (1,532) 1,034 (5,500) (2,000) 0

Pre-tax profit 37,269 49,681 39,753 43,463 53,855 64,636 Income tax (5,925) (8,093) (5,992) (6,911) (8,707) (10,447) After tax profit 31,344 41,588 33,761 36,552 45,148 54,189 Minority interest (1,303) (1,334) (1,142) (439) (1,068) (1,582) Net profit 30,041 40,254 32,619 36,112 44,080 52,606 Gross dividends 9,012 12,077 3,264 7,222 8,816 10,521

BALANCE SHEET 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Current assets 302,121 370,572 371,468 405,033 464,198 569,387 Cash & equivalents 108,512 102,257 68,395 86,000 95,000 154,678 Restricted cash 583 482 7,030 4,000 5,000 5,000 Account receivables 67,431 72,749 42,489 47,020 52,216 55,905 Inventories 87,677 116,036 138,421 133,114 142,276 152,102 Prepayment 2,215 3,974 5,025 5,399 5,193 5,552 Financial assets at FVTPL 9,563 40,939 54,533 69,683 99,883 130,133 Other current assets 23,481 32,725 54,411 58,372 62,999 64,270 Contract assets 2,660 1,411 1,165 1,447 1,632 1,747 Non-current assets 377,426 412,784 512,262 523,117 512,989 480,709 PP&E 230,904 262,287 292,776 303,972 288,505 248,664 Right-of-use assets 9,679 10,575 9,083 8,560 8,133 7,256 Deferred income tax 6,584 8,559 15,358 15,358 15,358 15,358 Investment in JVs & assos 17,647 19,082 21,781 23,481 25,081 26,881 Intangibles 37,236 38,424 41,485 43,181 44,716 46,078 Goodwill 4,428 4,428 4,428 4,428 4,428 4,428 Financial assets at FVTPL 2,696 2,655 3,080 3,380 3,780 4,180 Other non-current assets 68,252 66,773 124,271 120,757 122,988 127,865 Total assets 679,548 783,356 883,730 928,150 977,188 1,050,095

Current liabilities 453,667 495,985 468,451 474,656 492,491 523,495 Short-term borrowings 18,323 12,103 38,485 33,539 1,384 0 Account payables 194,430 241,643 186,742 191,352 214,023 228,805 Tax payable 7,852 10,097 10,716 10,612 11,382 12,168 Other current liabilities 198,363 188,412 181,037 191,085 214,889 228,199 Contract liabilities 34,699 43,730 51,471 48,069 50,813 54,322 Non-current liabilities 75,419 88,682 156,739 162,123 155,613 152,546 Long-term borrowings 11,975 8,258 60,706 55,706 44,706 33,706 Bond payables 0 0 4,998 5,998 6,998 7,998 Other non-current liabilities 63,444 80,425 91,036 100,420 103,910 110,842 Total liabilities 529,086 584,668 625,191 636,780 648,105 676,041

Share capital 2,911 2,909 9,117 9,117 9,117 9,117

Other reserves 135,899 182,342 237,157 269,925 306,701 350,410 Total shareholders equity 138,810 185,251 246,275 279,042 315,818 359,528 Minority interest 11,652 13,437 12,265 12,329 13,265 14,527 Total equity and liabilities 679,548 783,356 883,730 928,150 977,188 1,050,095

CASH FLOW 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec (RMB mn) Operating Profit before taxation 37,269 49,681 39,753 43,463 53,855 64,636 Depreciation & amortization 43,553 66,906 80,526 91,150 103,801 114,223 Change in working capital 91,094 18,291 (57,100) 13,491 21,788 19,382 Others (2,190) (1,424) (4,043) 2,143 (6,448) (6,463) Net cash from operations 169,725 133,454 59,136 150,246 172,996 191,777

Investing Capital expenditure (122,094) (97,360) (156,808) (108,600) (89,000) (77,700) Acquisition of subsidiaries/ investments (16,163) (3,792) (2,998) (16,100) (31,100) (31,100) Net proceeds from disposal of short-term investments

0 129 1,727 0 0 0

Others 12,593 (28,060) (39,385) 2,450 2,450 2,450 Net cash from investing (125,664) (129,082) (197,463) (122,250) (117,650) (106,350)

Financing Dividend paid (3,325) (9,012) (12,077) (3,264) (7,222) (8,816) Net borrowings 18,073 (9,480) 84,783 (3,162) (32,155) (11,384) Proceeds from share issues 0 0 40,075 0 0 0 Others (1,931) 8,225 (8,167) (3,966) (6,968) (5,549) Net cash from financing 12,817 (10,268) 104,614 (10,391) (46,346) (25,749)

Net change in cash Cash at the beginning of the year 51,182 108,512 102,257 68,395 86,000 95,000 Exchange difference 451 (359) (148) 0 0 0 Cash at the end of the year 108,512 102,257 68,395 86,000 95,000 154,678

GROWTH 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Revenue 42.0% 29.0% 3.5% 2.6% 9.4% 7.1% Gross profit 54.9% 35.0% (5.6%) 5.3% 6.8% 7.8% Operating profit 56.0% 21.8% (38.8%) 60.4% 14.6% 20.8% EBITDA 93.3% 43.6% 3.5% 12.7% 16.2% 12.7% EBIT 74.6% 32.4% (18.3%) 11.6% 20.6% 17.6% Net profit 80.7% 34.0% (19.0%) 10.7% 22.1% 19.3%

PROFITABILITY 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Gross profit margin 18.6% 19.4% 17.7% 18.2% 17.8% 17.9% Operating margin 5.5% 5.2% 3.1% 4.8% 5.0% 5.7% EBITDA margin 13.7% 15.3% 15.3% 16.8% 17.8% 18.8% Return on equity (ROE) 24.0% 24.8% 15.1% 13.7% 14.8% 15.6%

GEARING/LIQUIDITY/ACTIVITIES 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

Net debt to equity (x) (0.7) (0.5) (0.0) (0.1) (0.1) (0.3) Current ratio (x) 0.7 0.7 0.8 0.9 0.9 1.1 Receivable turnover days 52.0 45.0 30.9 32.0 33.0 33.0 Inventory turnover days 65.3 67.7 76.4 72.0 70.0 70.0 Payable turnover days 147.7 142.3 115.5 115.0 117.0 117.0

VALUATION 2023A 2024A 2025A 2026E 2027E 2028E

YE 31 Dec

P/E 7.6 5.7 21.8 19.9 16.3 13.7 P/B 1.7 1.2 2.9 2.6 2.3 2.0 P/CFPS 1.3 1.7 12.0 4.8 4.2 3.7 Div yield (%) 3.9 5.3 0.5 1.0 1.2 1.5

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.

Disclosures & Disclaimers

Analyst Certification

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CMBIGM Ratings

BUY : Stock with potential return of over 15% over next 12 months HOLD : Stock with potential return of +15% to -10% over next 12 months SELL : Stock with potential loss of over 10% over next 12 months NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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