BYD Shares Down 15% as it Faces Earnings Test

BATS:BYD   Boyd Gaming Corporation
The Chinese biggest EV maker broke with its usual practice of not providing guidance ahead of its earnings report due later Monday. This month, the stock’s volatility jumped to the highest since October 2022, indicating increased investor demand for downside protection.

Last year, new competitors ramped up pressure in the Chinese EV market. Savvy investors will be scrutinizing BYD ’s results comments for plans for further actions after a move to cut prices on mass-market models ahead of peers this year scored success.

BYD has gained momentum lately taking market share from internal combustion-engine cars,” said Daisy Li, fund manager at EFG Asset Management HK Ltd.

Reduction in price helped BYD sell about 300,000 vehicles in March, rebounding from a pronounced weakness in the prior month. That helped the stock, which is down less than 1% in Hong Kong this year, while a gauge of global EV makers has declined more than 15%.

The resilience may leave the shares vulnerable to selling pressure if the results disappoint. BYD is expected to post sales growth of 10% for the seasonally slow first quarter, which would be its lowest in four years. Gross profit margin is estimated to decline to 19.6% compared with 21.2% in the fourth quarter.

While the price cuts for cheaper models have likely hurt its profitability, BYD ’s growth in higher-end models and overseas sales are among the key points traders will be watching for potential positives.

BYD ’s strategy is to leverage domestic mass products to maintain production utilization and operating leverage, and balance profit margins with premium models and exports,” said Bing Yuan, a fund manager at Edmond de Rothschild Asset Management.

BYD has been expanding its luxury lineup, including the Auto China show launch of the Denza Z9GT, a shooting-brake style design with a heavy emphasis on technology. It rolled out its $200,000-plus Yangwang U9 supercar to rival offerings from Ferrari NV and Lamborghini in February.

BYD has a target of selling 500,000 vehicles outside China this year and then doubling that in 2025. It also plans to build its first European car factory in Hungary.

Robert said: “Exports coming from a low base are expected to continue to show strong growth — this will remain a key supporting factor for BYD’s revenue growth and likely margin,” Mumford, a portfolio manager at GAM Hong Kong Ltd. “Outside the leaders, we have been fairly bearish on the sector given high levels of competition and pricing pressure.”

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