On the evening of October 28, BYD disclosed its financial report for the third quarter of 2021 as of September 30.The financial report shows that BYD achieved operating income of 54.307 billion yuan during the reporting period, a year-on-year increase of 21.98%; net profit attributable to shareholders of listed companies was 1.27 billion yuan, a year-on-year decrease of 27.50%.
In the first three quarters, BYD achieved operating income of 145.192 billion yuan, a year-on-year increase of 38.25%; net profit attributable to shareholders of listed companies was 2.443 billion yuan, a year-on-year decrease of 28.43%.
In the first three quarters of this year, new energy vehicles were still BYD’s sales pillar. From January to September, BYD’s sales volume of all vehicles was 452,744, a year-on-year increase of 68.32%; the sales of new energy vehicles were 337579, a year-on-year increase of 204.29%. New energy vehicle sales accounted for approximately 74.6% of all sales.
As of the close of October 28th, although BYD’s A shares closed down, its total market value still exceeded 880 billion yuan, making it China’s largest auto company by market value.
However, BYD’s net profit in the third quarter and the first three quarters has declined, which has triggered concerns from the outside world. Has BYD really hit the ceiling?
Is there a sign of BYD’s decline?
Generally speaking, due to the impact of the new crown epidemic, BYD’s financial base in 2020 should be relatively low, so that it can achieve growth in 2021.
But the actual situation is not the case. Through BYD’s 2020 financial report, it can be found that the third quarter of 2020 is a period of rapid increase in BYD’s revenue. The main reasons are:
The new models are very popular. BYD official data show that in September 2020, BYD Han delivered 5,612 vehicles, an increase of 3% from the previous month. This model, which was launched on July 12 of that year, had delivered more than 10,000 vehicles by the end of September. In November of that year, the monthly sales of this new model exceeded 10,000.
BYD Electronics has benefited from a full recovery in production. According to a report in September 2020, BYD Electronics, a subsidiary of BYD’s indirect holding company, has been OEMAppleThe NewiPad, And also successively undertookMillet,HuaweiAnd other manufacturers’ foundry needs. In 2020, BYD Electronics contributed 5.4 billion yuan in net profit.
The global spread of the epidemic has benefited BYD. In the first half of 2020, BYD relied on its mask business to earn more than 700 million yuan in revenue. With the strong growth in overseas demand for masks in the third quarter, this revenue has continued to increase.
The core automobile production and sales business and foundry business maintained strong growth, and new business income was stable, which directly drove the rapid growth of BYD’s revenue. BYD’s financial report for the third quarter of 2020 showed that BYD’s revenue was 44.52 billion yuan, a year-on-year increase of 40.72%; the net profit attributable to listed company shares was 1.751 billion yuan, a year-on-year increase of 1362.66%.
In the first three quarters of 2020, BYD achieved operating income of 105.023 billion yuan, a year-on-year increase of 11.94%; net profit attributable to shareholders of listed companies was 3.414 billion yuan, a year-on-year increase of 116.83%.
Looking back from this year to 2020, BYD’s current decline is inevitable. From BYD’s financial report, it can also be seen that the net profit has declined, mainly due to several aspects:
1. The price of upstream raw materials for power batteries has skyrocketed, which has affected BYD’s battery business. Data shows that since this year, the prices of upstream raw materials for power batteries have maintained an upward trend. Among them, the price of cathode material LiCoO2 has risen by more than 200%, and the price of electrolyte for lithium iron phosphate has risen by more than 150%.
According to a CCTV financial report, as of October 8, the domestic spot cobalt price has risen from a low of less than 240,000 yuan/ton in April last year to over 380,000 yuan/ton, an increase of nearly 60%.
In the third quarter financial report, BYD disclosed a data of concern: as of September 30, BYD’s payables were 26.61 billion yuan, an increase of 186.73% from the 9.28 billion yuan on December 31, 2020. BYD revealed that this is mainly due to the increase in power battery business. Trapped by rising raw material prices, BYD is seeking to increase the price of power batteries.
2. The DM-i super hybrid model has been delayed in large-scale delivery. In an external statement issued in May, BYD admitted that due to too many orders, the delivery of the DM-i super hybrid model was slow, and the average lead time for new orders was 3.5 months.
This has also led to the rapid growth of BYD’s contract assets. Compared with the 5.35 billion yuan at the end of 2020, BYD’s contract assets at the end of September 2021 increased by 57.03% to 8.39 billion yuan.
Cars lose money and make money yelling?
The automobile business is one of BYD’s core businesses, and new energy vehicles are half of BYD’s automobile business.
According to official data, from January to September, BYD’s sales volume of all vehicles was 452,744, a year-on-year increase of 68.32%; the sales of new energy vehicles was 337579, a year-on-year increase of 204.29%. New energy vehicle sales accounted for approximately 74.6% of all sales.
Among them, the Han series models are one of BYD’s main models. Official data show that in September this year, BYD Han EV sales were 7796 units, and Han DM sales were 2,452 units. In the third quarter of this year, the sales of Han models reached 27,805, a year-on-year increase of 157.0%. Over a year since its launch, the cumulative sales of this series of models have exceeded 120,000.
The biggest benefit to BYD from this is subsidies, which are also an important source of profit for BYD’s vehicle business.
According to the disclosed information, from 2016 to 2020, BYD’s subsidy income was 710 million yuan, 1.276 yuan, 2.073 billion yuan, 1.484 billion yuan, and 1.678 billion yuan respectively.
BYD Holdings’ financial report shows that in 2020, BYD’s net profit will be 4.234 billion yuan, and the subsidy will account for 39.6% of it. And also in 2020, BYD’s “automobiles, car-related products and other products” operating income was 83.99 billion yuan, accounting for 53.6% of revenue, and gross profit margin of 25.2%. It can be seen that BYD’s auto business has been facing two problems:
Given that BYD Electronics contributed 5.4 billion yuan in profits and received 1.678 billion yuan in subsidies, BYD’s annual net profit was only 4.234 billion yuan. It can be speculated that BYD’s automobile business suffered a relatively large loss. This situation will be in 2021. There will be no change.
Even if the gross profit margin of the auto-related business is at a relatively high level, it is still a loss-making business. It relies on subsidies to maintain profit levels and does not yet have the ability to self-generate.
BYD’s third-quarter financial report showed that BYD’s government subsidies included in the current profit and loss during the reporting period were 544 million yuan, and the government subsidies included in the current profit and loss in the first three quarters of this year were 1.5 billion yuan. This means that BYD has received 1.5 billion yuan in government subsidies in the first nine months of this year. According to the level of the third quarter, it is expected to exceed the subsidy income of 2018 in 2021.
Correspondingly, BYD’s approach is to launch the Dolphin series of new energy vehicles based on the e-platform 3.0 on the basis of the Han series and DM-i super hybrids. Maintain income from subsidies and new energy points.
On October 29, when the Hong Kong stock market opened, BYD shares fell by about 2.5%, which proved that the market also showed concern about the weak performance of BYD, especially the automobile business.
