BYD（1211 HK/002594 CH)

Overseas, R&D support 1Q26 earnings resilience

Maintain BUY. BYD's 1Q26 average selling price (ASP) and GPM both beat our prior forecast with overseas contribution, which echoed our previous report titled "overseas sales could be a positive surprise in FY26" (link). We expect FY26E GPM to sustain, as we estimate overseas vehicle GPM could be 6- 8ppts higher than that in China. BYD also becomes more prudent on expenses, especially on R&D, which could provide earnings resilience with higher capitalization ratio. We still believe BYD is one of the biggest beneficiaries from high oil price.

BYD's overseas potential could still be underestimated. We estimate that BYD's overseas vehicle GPM could be 6-8ppts higher than that in China, based on 1Q26 and 4Q25 data with assumptions of minimal QoQ changes in ASPs and GPMs. We maintain our FY26E total sales volume forecast of 5mn units but revise up overseas sales volume by 0.1mn units to 1.6mn units. Accordingly, we raise our FY26E revenue forecast by 2%. We also believe higher sales volume from overseas could sustain BYD's FY26E GPM, despite raw-material price hike and heavy capex. We project FY26 GPM to only narrow by 0.1ppt YoY to 17.6%.

1Q26 revenue, GPM beat on overseas. BYD's 1Q26 revenue fell by 12% YoY amid a sales volume decline of 30% YoY, or 13% higher than our prior forecast, as overseas accounted for 46% of BYD's total sales volume in 1Q26. That also lifted its GPM by 1.4ppts QoQ to 18.8%, 0.3ppts higher than our forecast. R&D expenses were more disciplined than we had projected while forex loss was higher than expected. All combined resulted in a net profit of RMB4.1bn in 1Q26, or about RMB0.7bn higher than our forecast.

R&D capitalization provides earnings resilience. We estimate that R&D capitalization ratio rose to about 17% in 1Q26 from 9% in FY25, which was one of the reasons for the net profit beat. As we noted a few times before, BYD's low R&D capitalization ratios in the past four years have minimized its amortization burden in the future, which could provide its earnings resilience. We raise its FY26/27E R&D capitalization ratio assumptions from 7%/7% to 15%/12%. Accordingly, we revise up FY26/27E net profit forecasts by 4%/6% to RMB37.9bn/46.3bn.

Valuation/Key risks. We maintain our BUY rating and A/H share target price of HK$125/RMB125, based on 22x (prior 23x) our FY27E P/E, to reflect the recent market volatility. Key risks to our rating and target price 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

888,026

966,928

1,017,597

YoY growth(%)

29.0

3.5

10.5

8.9

5.2

Net profit (RMB mn)

40,254.3

32,619.0

37,884.1

46,257.5

49,092.9

YoY growth(%)

34.0

(19.0)

16.1

22.1

6.1

EPS(Reported)(RMB)

13.85

3.61

4.16

5.07

5.38

P/S(x)

1.1

1.0

0.9

0.9

0.8

P/E(x)

6.5

25.0

21.7

17.8

16.8

Yield(%)

4.6

0.4

0.9

1.1

1.2

ROE(%)

24.8

15.1

14.4

15.4

14.5

Net gearing(%)

(50.7)

(1.1)

(12.2)

(16.7)

(18.6)

Source: Company data, Bloomberg, CMBIGM estimates

1211 HK 002594 CH

BUY BUY

TPHK$125.00 RMB125.00

Prior TP HK$125.00 RMB125.00

Up/Downside 20.5% 23.2%

Current Price HK$103.7 RMB101.5

China Auto

Ji SHI, CFA

(852) 37618728

shiji@cmbi.com.hk

Wenjing DOU, CFA

(852) 6939 4751

douwenjing@cmbi.com.hk

Austin Liang

(852) 3900 0856

austinliang@cmbi.com.hk

12-mth Price Performance



Source: FactSet

Stock Performance

1211 HK

002594 CH

Abs.

Rel.

Abs.

Rel.

1-mth

-2.6%

-5.4%

-3.6%

-8.1%

3-mth

0.9%

9.3%

8.7%

-0.2%

6-mth

-1.0%

1.5%

-2.2%

-2.7%

Source: FactSet

Stock Data

(LC)

1211 HK

002594 CH

Mkt Cap(mn)

945453.4

925213.21

Avg 3 mths t/o(mn)

3138.9

5521.86

52w High

155.07

135

52w Low

90

87.05

Issued Shares(mn)

9117.207

9117.2067

Source: FactSet



Figure 1: Quarterly results

RMB mn

1Q25

2Q25

3Q25

4Q25

1Q26

YoY

QoQ

Sales volume (units)

1,000,804

1,145,150

1,114,192

1,342,290

700,463

-30.0%

-47.8%

Revenue

170,360

200,921

194,985

237,699

150,225

-11.8%

-36.8%

Gross profit

34,185

32,681

34,346

41,448

28,252

-17.4%

-31.8%

R&D expenses

(14,223)

(15,373)

(14,152)

(14,230)

(11,344)

-20.2%

-20.3%

SG&A expenses

(11,087)

(11,710)

(10,979)

(12,608)

(10,910)

-1.6%

-13.5%

Operating profit

11,021

7,699

10,186

11,279

4,696

-57.4%

-58.4%

Net profit

9,155

6,356

7,823

9,286

4,085

-55.4%

-56.0%

Gross margin

20.1%

16.3%

17.6%

17.4%

18.8%

-1.3 ppts

1.4 ppts

Operating margin

6.5%

3.8%

5.2%

4.7%

3.1%

-3.3 ppts

-1.6 ppts

Net margin

5.4%

3.2%

4.0%

3.9%

2.7%

-2.7 ppts

-1.2 ppts

Source: Company data, CMBIGM

Figure 2: Earnings revision

New

Old

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

888,026

966,928

1,017,597

872,654

945,030

N/A

1.8%

2.3%

N/A

Gross profit

156,700

171,989

181,263

155,061

167,871

N/A

1.1%

2.5%

N/A

Operating profit

46,156

56,790

60,545

45,152

54,508

N/A

2.2%

4.2%

N/A

Net profit

37,884

46,257

49,093

36,305

43,828

N/A

4.3%

5.5%

N/A

Gross margin

17.6%

17.8%

17.8%

17.8%

17.8%

N/A

-0.1ppts

0.0ppts

N/A

Operating margin

5.2%

5.9%

5.9%

5.2%

5.8%

N/A

0.0ppts

0.1ppts

N/A

Net margin

4.3%

4.8%

4.8%

4.2%

4.6%

N/A

0.1ppts

0.1ppts

N/A

Source: CMBIGM estimates

Figure 3: CMBI estimates vs consensus

CMBIGM

Consensus

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

888,026

966,928

1,017,597

927,553

1,045,687

1,158,862

-4.3%

-7.5%

-12.2%

Gross profit

156,700

171,989

181,263

170,262

197,854

223,869

-8.0%

-13.1%

-19.0%

Operating profit

46,156

56,790

60,545

46,721

59,888

72,337

-1.2%

-5.2%

-16.3%

Net profit

37,884

46,257

49,093

41,921

52,319

62,962

-9.6%

-11.6%

-22.0%

Gross margin

17.6%

17.8%

17.8%

18.4%

18.9%

19.3%

-0.7ppts

-1.1ppts

-1.5ppts

Operating margin

5.2%

5.9%

5.9%

5.0%

5.7%

6.2%

0.2ppts

0.1ppts

-0.3ppts

Net margin

4.3%

4.8%

4.8%

4.5%

5.0%

5.4%

-0.3ppts

-0.2ppts

-0.6ppts

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

888,026

966,928

1,017,597

Cost of goods sold

(490,399)

(626,047)

(661,305)

(731,326)

(794,940)

(836,334)

Gross profit

111,916

151,056

142,660

156,700

171,989

181,263

Operating expenses

(78,757)

(110,677)

(117,943)

(119,502)

(128,408)

(132,013)

Selling expense

(15,371)

(24,085)

(26,185)

(28,213)

(30,215)

(31,795)

Admin expense

(13,462)

(18,645)

(20,200)

(22,032)

(23,502)

(25,504)

R&D expense

(39,575)

(53,195)

(57,978)

(55,250)

(59,840)

(59,500)

Others

(10,350)

(14,752)

(13,581)

(14,007)

(14,851)

(15,215)

Operating profit

33,159

40,379

24,717

37,198

43,581

49,249

Other income

5,965

15,303

14,932

14,500

14,500

11,500

Other expense

(1,546)

(2,057)

(1,564)

(1,600)

(1,400)

(1,400)

Gain/loss on financial assets at FVTPL

258

532

364

350

500

550

Investment gain/loss

1,635

2,291

2,857

1,938

1,958

2,358

Other gains/(losses)

(3,677)

(5,552)

(2,202)

(1,892)

(1,999)

(2,101)

EBITDA

82,649

118,681

122,830

143,796

168,058

185,639

Depreciation

37,718

56,922

72,048

84,972

97,968

111,468

Depreciation of ROU assets

1,390

2,643

2,655

2,922

3,327

3,777

Other amortisation

4,444

7,341

5,823

6,423

7,008

7,603

EBIT

39,096

51,774

42,305

49,479

59,755

62,790

Interest income

2,796

2,484

2,437

2,485

2,615

2,634

Interest expense

(1,828)

(2,094)

(2,552)

(3,422)

(2,865)

(2,145)

Net Interest income/(expense)

1,475

(1,216)

649

(4,437)

(250)

489

Foreign exchange gain/loss

639

(1,532)

1,034

(3,500)

0

0

Pre-tax profit

37,269

49,681

39,753

46,056

56,890

60,645

Income tax

(5,925)

(8,093)

(5,992)

(7,237)

(8,900)

(9,527)

After tax profit

31,344

41,588

33,761

38,819

47,990

51,118

Minority interest

(1,303)

(1,334)

(1,142)

(935)

(1,732)

(2,025)

Net profit

30,041

40,254

32,619

37,884

46,257

49,093

Gross dividends

9,012

12,077

3,264

7,577

9,251

9,819

BALANCE SHEET

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Current assets

302,121

370,572

371,468

421,501

479,885

525,808

Cash & equivalents

108,512

102,257

68,395

86,000

95,000

98,411

Restricted cash

583

482

7,030

4,000

5,000

5,000

Account receivables

67,431

72,749

42,489

50,605

55,949

58,881

Inventories

87,677

116,036

138,421

144,262

152,454

160,393

Prepayment

2,215

3,974

5,025

5,851

5,565

5,854

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

59,544

64,286

65,296

Contract assets

2,660

1,411

1,165

1,557

1,748

1,840

Non-current assets

377,426

412,784

512,262

538,093

548,679

546,360

PP&E

230,904

262,287

292,776

320,806

320,839

307,373

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

43,220

44,754

46,060

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

118,860

126,306

134,824

Total assets

679,548

783,356

883,730

959,594

1,028,564

1,072,168

Current liabilities

453,667

495,985

468,451

512,557

546,563

550,520

Short-term borrowings

18,323

12,103

38,485

26,689

22,699

0

Account payables

194,430

241,643

186,742

207,376

229,335

241,277

Tax payable

7,852

10,097

10,716

11,501

12,196

12,831

Other current liabilities

198,363

188,412

181,037

214,897

227,885

239,129

Contract liabilities

34,699

43,730

51,471

52,094

54,448

57,283

Non-current liabilities

75,419

88,682

156,739

153,398

148,311

146,693

Long-term borrowings

11,975

8,258

60,706

45,706

34,706

23,706

Bond payables

0

0

4,998

5,998

6,998

7,998

Other non-current liabilities

63,444

80,425

91,036

101,695

106,608

114,989

Total liabilities

529,086

584,668

625,191

665,955

694,874

697,213

Share capital

2,911

2,909

9,117

9,117

9,117

9,117


Total shareholders equity

138,810

185,251

246,275

280,814

319,413

359,174

Minority interest

11,652

13,437

12,265

12,825

14,276

15,781

Total equity and liabilities

679,548

783,356

883,730

959,594

1,028,564

1,072,168

CASH FLOW

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Operating

Profit before taxation

37,269

49,681

39,753

46,056

56,890

60,645

Depreciation & amortization

43,553

66,906

80,526

94,317

108,303

122,849

Change in working capital

91,094

18,291

(57,100)

33,910

23,049

19,529

Others

(2,190)

(1,424)

(4,043)

(375)

(7,987)

(6,981)

Net cash from operations

169,725

133,454

59,136

173,909

180,256

196,041

Investing

Capital expenditure

(122,094)

(97,360)

(156,808)

(125,750)

(114,160)

(116,500)

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)

(139,400)

(142,810)

(145,150)

Financing

Dividend paid

(3,325)

(9,012)

(12,077)

(3,264)

(7,577)

(9,251)

Net borrowings

18,073

(9,480)

84,783

(10,012)

(13,990)

(32,699)

Proceeds from share issues

0

0

40,075

0

0

0

Others

(1,931)

8,225

(8,167)

(3,628)

(6,879)

(5,530)

Net cash from financing

12,817

(10,268)

104,614

(16,904)

(28,446)

(47,481)

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

98,411

GROWTH

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Revenue

42.0%

29.0%

3.5%

10.5%

8.9%

5.2%

Gross profit

54.9%

35.0%

(5.6%)

9.8%

9.8%

5.4%

Operating profit

56.0%

21.8%

(38.8%)

50.5%

17.2%

13.0%

EBITDA

93.3%

43.6%

3.5%

17.1%

16.9%

10.5%

EBIT

74.6%

32.4%

(18.3%)

17.0%

20.8%

5.1%

Net profit

80.7%

34.0%

(19.0%)

16.1%

22.1%

6.1%

PROFITABILITY

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec

Gross profit margin

18.6%

19.4%

17.7%

17.6%

17.8%

17.8%

Operating margin

5.5%

5.2%

3.1%

4.2%

4.5%

4.8%

EBITDA margin

13.7%

15.3%

15.3%

16.2%

17.4%

18.2%

Return on equity (ROE)

24.0%

24.8%

15.1%

14.4%

15.4%

14.5%

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)

(0.2)

(0.2)

Current ratio (x)

0.7

0.7

0.8

0.8

0.9

1.0

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

8.7

6.5

25.0

21.7

17.8

16.8

P/B

1.9

1.4

3.3

2.9

2.6

2.3

P/CFPS

1.5

2.0

13.8

4.7

4.6

4.2

Div yield (%)

3.4

4.6

0.4

0.9

1.1

1.2

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



Disclosures & Disclaimers

Analyst Certification

The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the Hong Kong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.

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

CMB International Global Markets Limited

Address: 45/F, Champion Tower, 3 Garden Road, Hong Kong, Tel: (852) 3900 0888 Fax: (852) 3900 0800

CMB International Global Markets Limited ("CMBIGM") is a wholly owned subsidiary of CMB International Capital Corporation Limited (a wholly owned

subsidiary of China Merchants Bank)

Important Disclosures

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