BYD, the leading electric vehicle (EV) manufacturer in the world, experienced a sharp drop in its share price on Monday. This followed the release of its first-half earnings report on Friday, which revealed lower-than-projected profits and revenues for the second quarter.
Trading on the Hong Kong Stock Exchange (HK:1211), BYD shares fell 5.6%, reaching 108.00 Hong Kong dollars. Simultaneously, shares listed on the Shenzhen Stock Exchange (CN:002594) decreased by 4.0%. This downturn occurred despite a 2.0% rise in the benchmark Hang Seng Index (HK:HSI).
The disappointing results stemmed from a combination of factors. Softening domestic demand in July, coupled with Beijing‘s efforts to curb excessive price competition within the automotive sector, made it challenging for BYD to maintain sales momentum.
This pressure impacted profitability. The company’s gross margin for the first half of the year fell to 18.01%, down from 18.78% in the previous period. The second quarter’s gross profit margin was particularly concerning, reaching its lowest point since the third quarter of 2022 at 16.3%. Analysts at Nomura highlighted this as a key negative in the report.
Bernstein analysts attributed the lower-than-expected sales to the company’s promotional activities, which did not generate the anticipated volume increases. Increased competition, with rivals releasing new models and government restrictions on autonomous driving marketing, also contributed to BYD‘s challenges.
Despite these setbacks, some analysts retain a positive outlook on BYD‘s international prospects. Bernstein noted that BYD‘s overseas wholesale volumes more than doubled year-on-year in the second quarter, putting the company on track to surpass its overseas sales target of 800,000 units.
In response to the earnings report, Nomura maintained its “buy” rating on BYD shares but reduced its target price. Similarly, Bernstein kept its “outperform” rating but also lowered its target price. These adjustments reflect the analysts’ cautious assessment of the company’s near-term performance.
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