Largest NEV Automaker in China With Proprietary Battery Technology; Initiating BYD With HKD 315 FVE

We initiate coverage on BYD with a no-moat rating and fair value estimate of HKD 315 per share (CNY 258). As the largest new energy vehicle, or NEV, manufacturer in China targeting the mass-market segment, BYD will continue to benefit from the vehicle electrification trend. Given significant growth opportunities, we forecast a 39.6 % 2021-24 revenue CAGR and 88.8% net profit CAGR. Our fair value implies a forward 2023 price/sales ratio of 1.7 times. Excluding its stake in BYD Electronics, the implied forward price/sales ratio for the combined automotive and battery business is 2.1 times, in line with Chinese NEV peers’ 2.0 times. With its share price up 75% from the 52-week low of HKD 165 in March, H-shares are in 3-star territory as of Aug. 18, 2022.