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MASTERS IN
FINANCE
MASTERS FINAL WORK
PROJECT
EQUITY RESEARCH:
BYD COMPANY LIMITED
LIU DONGTING
DECEMBER 2022
MASTERS IN
FINANCE
MASTERS FINAL WORK
PROJECT
EQUITY RESEARCH:
BYD COMPANY LIMITED
LIU DONGTING
SUPERVISOR:
PAULO FRANCISCO
DECEMBER 2022
i
Abstract
This equity research project is committed to the valuation of BYD and was written in
line with the research report format recommended by the CFA Institute. The research
data and information involved were based on public information disclosed before
September 30, 2022, any other information after this date has not be considered.
As a leader and forerunner in China EV industry, BYD has created a series of miracles.
It is great respect for this company not only for its deep commitment to the green
product, but also for its pioneering spirit of enterprise. The company's share price has
soared since 2020, becoming Chinese “Tesla”, which makes the company more
special and worthy for studying.
Four different methods are adapted to valuate this company. The benchmark method
is based on DCF model, using WACC method to discount the FCFF and the terminal
value to get the enterprise value of CNY 918.89 billion. A BUY recommendation is
concluded according to the predicted price target of CNY 315.14 per share at the end
of 2022, implying an upside potential of 25.1% compared to the closing price of CNY
252.1 on September 30, 2022, with medium risk. Other three supplementary methods
including equity method, APV method, and relative valuation methods initiate the same
buy recommendation.
JEL classification: G10 ; G17; G30; G34; G35; H56; L62.
Keywords: Equity Research; Valuation; Automotive industry; Discounted cash flow
method; Risk.
ii
Resumo
Este projeto de Equity Research é vocacionado para a avaliação da BYD e foi
concluído conforme o formato de relatório de pesquisa recomendado pelo Instituto de
CFA. Os dados da pesquisa e as informações envolvidas foram baseados em
informações públicas divulgadas antes de 30 de setembro de 2022, quaisquer outras
informações após esta data não serão consideradas.
Sendo o líder e a precursora na indústria de EVs da China, a BYD criou uma série de
milagres. Tenho grande respeito por esta empresa não apenas pelo seu profundo
compromisso com o produto verde, mas também pelo seu espírito empreendedor
pioneiro. O preço das ações da empresa tem disparado desde 2020, tornando-se a
“Tesla” da China, o que faz dela uma empresa mais peculiar e digna de ser estudada.
No total, existem quatro métodos para avaliar esta empresa. O método de referência
é baseado no modelo DCF, usando WACC para descontar o FCFF e o valor terminal
para obter o valor da empresa, que é de CNY 918,89 bilhões. Uma recomendação de
COMPRA foi realizada, de acordo com o preço-alvo previsto de CNY 315,14 por ação,
no final de 2022, implicando um potencial de valorização de 25.1% em relação ao
preço de encerramento de CNY 252,1 por ação, em 30 de setembro de 2022, com o
risco médio. Outros três métodos complementares incluem o método de Equity, o
método de APV e o método de avaliação relativa, indicando a mesma recomendação
de compra.
Classificação JEL: G10; G17; G30; G34; G35; H56; L62.
Palavras-chave: Equity Research; Avaliação; Indústria automobilística; Método de
fluxo de caixa descontado; risco.
iii
Acknowledgements
Throughout the completing of this equity research I have received a great deal of help
and support.
First I would like to thank my supervisor Paulo Francisco, whose expertise was
invaluable in offering guidance and comments. Thanks for his instant feedback and
instructive advice pushed me to sharpen my thinking and brought my report to a higher
level.
I would also like to thank my beloved parents, husband, and my lovely baby for their
loving considerations and great support.
Last my thanks would go to my friends and classmates who gave me their time in
listening to me and help me work out my problems.
iv
Index
Abstract i
Resumo ii
Acknowledgements iii
Index iv
List of Figures v
List of Tables vii
1. Research Snapshot 1
2. Business Description 2
3. Management and Corporate Governance 5
4. Industry Overview and Competitive Positioning 6
5. Investment Summary 14
6. Valuation 15
7. Financial Analysis 19
8. Investment Risks 20
Appendices 23
Appendix 1: Consolidated Statement of Financial Position 23
Appendix 2: Common-size Consolidated Statement of Financial Position 24
Appendix 3: Income Statement 25
Appendix 5: Cash Flow Statement 26
Appendix 6: Key Financial Ratios 27
Appendix 7: The New Vehicles Planning of BYD 27
Appendix 8: Corporate Bonds Information of BYD 27
Appendix 9: The Battery Production Capacity Planning of BYD (GWh) 28
Appendix 10: Perpetuity Growth Rate (g) 28
Appendix 11: The DCF valuation models 29
Method 1: The WACC method 29
Method 2: The equity method 29
Method 3: The APV method 30
Appendix 12: The Relative Valuation 30
Appendix 13: Income Statement Forecasting Assumptions 31
Appendix 14: Statement of Financial Position Forecasting Assumptions 32
Reference: 33
v
List of Figures
Figure 1 - Price target under different methods 1
Figure 2 - Revenue breakdown by locations of customers of BYD 2
Figure 3 - The total revenue (CNY thousand) and YoY growth rate of BYD 2
Figure 4 - The net profit (CNY thousand) and YoY growth rate of BYD 2
Figure 5 - Revenue breakdown by product categories of BYD 2
Figure 6 - Electric vehicle sales volume of BYD in China, by type 3
Figure 7 - World’s top 5 EV automotive groups ranked by passenger plug-in EV Sales in 2021 3
Figure 8 - The EV sales share of world’s Top 5 Automotive Groups in 2021 3
Figure 9 - The design sketch of “SkyRail” and “SkyShuttle” 3
Figure 10 - The net profit and growth rate of BYD Electronics (million) 4
Figure 11 - Total installed capacity of power batteries for EVs and energy storage batteries 4
Figure 12 - Breakdown of EV and power battery costs 4
Figure 13 - Number of R&D personnel and proportion of staff 5
Figure 14 - R&D costs of BYD (Billion) 5
Figure 15 - Remuneration of senior management 6
Figure 16 - Crude oil price 6
Figure 17 - Annual inflation rate, first quarter 2022 7
Figure 18 - The world GDP growth (annual %) 7
Figure 19 - Quarterly GDP growth rate in China 7
Figure 20 - The annual EV production and sales volume in China (million units) 7
Figure 21 - Global Passenger Vehicle Sales in 2018 and 2040F (%) 8
Figure 22 - Autonomous Semiconductor Market, $ billion 8
Figure 23 - Global E-hailing Market, 2021 to 2025F (in billions $) 8
Figure 24 - New passenger car registration and annual GDP growth in the EU (2008-2021) 8
Figure 25 - New commercial car registration and annual GDP growth in the EU (2008-2021) 9
Figure 26 - Household disposable income (gross adjusted, US dollar/capita, 2005-2020) 9
Figure 27 - Per capita disposable income ($) and Motor vehicles per 1000 people in China 9
Figure 28 - Global BEV & PHEV sales(‘000s) 9
Figure 29 - Market growth of the autonomous vehicle, for 2019 and 2024 (billions $) 9
Figure 30 - Average car by semiconductor content by powertrain 10
Figure 31 - Volume-weighted average pack and cell price split ($ per kWh) 10
Figure 32 - Porter's Five Forces 11
Figure 33 - Top10 number of patents of EV enterprises in China 12
Figure 34 - The percentage of IGBT application in Chinese downstream market 12
Figure 35 - Worldwide smartphone shipments, Q1 2020 to Q2 2022 13
Figure 36 - Worldwide personal computing devices forecast by product category 14
Figure 37 - Projected global battery demand from 2022 to 2035, by application (GWh) 14
vi
Figure 38 - The net income and profit margins 19
Figure 39 - The return ratios 19
Figure 40 - The efficiency analysis 19
Figure 41 - The liquidity analysis 19
Figure 42 - The solvency analysis 20
Figure 43 - The cash and cash equivalents 20
Figure 44 - The purchasing factors of EV users in China in 2022 21
vii
List of Tables
Table 1 – Market Data 1
Table 2 - The industry chain layout of BYD 4
Table 3 – The equity structure 5
Table 4 - The governance structure of BYD 5
Table 5 - The board of director’s information 6
Table 6 - BYD's Peer Group 10
Table 7 – The difference between traditional batteries and blade batteries 12
Table 8 – The valuation inputs 15
Table 9 - The inputs of cost of equity 16
Table 10 - The inputs of cost of debt 17
Table 11 - The Capital structure 17
Table 12 - The risk matrix 20
Table 14 - EV sensitivity to g and WACC 22
Table 13 - Investment recommendation on the basis of medium risk 22
Table 15 - Price target sensitivity to g and WACC 22
Table 16 – Monte Carol Simulation 22
viii
Abbreviations
ACEA- European
Automobile Manufacturers'
Association
APV- Adjusted Present
Value
BEV- Battery Electric
Vehicle
BoD- Board of Directors
BTU- British Thermal Unit
BYD- BYD Company Limited
CAAM- China Association of
Automobile Manufacturers
CAGR- Compounded
Annual Growth Rate
CCI- Consumer Confidence
Index
CNBS- China National
Bureau of Statistics
CO2 - Carbon Dioxide
DCF- Discounted Cash Flow
DM- Dual Mode
EBITDA- Earnings Before
Interest Depreciation and
Amortization
EPS- Earnings per Share
EU- European Union
EV- Electric vehicle
FCFF- Free Cash Flow to
Firm
GDP- Gross Domestic
Product
ICE- Internal Combustion
Engine
IDC- International Data
Corporation
IEA- International Energy
Agency
IGBT- Insulated Gate Bipolar
Transistor
IMF- International Monetary
Fund
kWh- Kilowatt hour
LFP- Lithium Iron
Phosphate
MPV- Multi-Purpose Vehicle
NBSC- National Bureau of
Statistics of China
NEV- New Energy Vehicle
NOPAT- Net Operating
Profit after Tax
NR- Natural Rubber
OECD- Organization for
Economic Co-operation and
Development
OEM- Original Equipment
Manufacturer
PHEV- Plug-in Hybrid
Electric Vehicle
R&D- Research and
Development
ROA- Return on Assets
ROE- Return on Equity
ROIC- Return on Invested
Capital
SAE- Society of Automotive
Engineers
SGR- Sustainable Growth
Rate
YoY- Year-on-Year
1
It is reached a BUY recommendation for BYD Company Limited with an end of
2022YE price target of CNY 315.14 using a DCF model, implying a 25.1% upside
potential from the closing price of CNY 279.7 on September 30, 2022, with medium
risk. With the company’s EV matrix is gradually improved, the sales is expected for
an explosion period in the near future. It is assumed that the full-year automobile
revenue growth will be 120% in 2022, considering the YoY growth rate of BYD
automobile sales is 162.03% in the first half of 2022; for the period from 2023 to
2027, the growth rate of 30.1% forecasted China's EV industry, according to Mordor
Intelligence, is considered in the valuation. It is estimated that the revenue growth
rate of battery business in 2022 will be double than last year due to the rapid growth
of EV sales, and then maintain a stable growth rate of 21.3% for the rest forecasted
years. The mobile components and assembly business is assumed with a steady
development trend with 28.1% annual growth rate in forecasted period.
Insist in independent R&D, multi-business coordinated development. The
company has developed a series of global leading core technologies through
independent R&D. The “Blade battery" leads a new revolution for power battery
safety worldwide. At present, the business area of BYD has already covered
electronics, automobiles, new energy, and rail transit. These businesses are
coordinated with each other and expanded simultaneously both at domestic and
abroad market.
Super strong vertical integration capability of industrial chain. BYD has an
independent and mature industrial chain in electric battery, electric machinery, and
electronic control system. For the necessary raw materials of batteries, the supply
and price are guaranteed by investing in shares or signing long-term contracts.
Precise positioning of market demand, PHEV models is beginning to show
strengths. Under the background of rising oil prices, the cost saving advantage of
hybrid models is further highlighted compared with fuel models, and it can also
compensate the mileage shortage of pure electric vehicles. BYD proposed a dual-
platform strategy for hybrid power systems, with DM-p mainly focus on customers
with higher standard demanding, with DM-i focus on daily users such as urban
commuter.
0
50
100
150
200
250
300
350
400
2017/9/29 2018/9/29 2019/9/29 2020/9/29 2021/9/29 2022/9/29
Close Price Price target
CNY252
CNY315
1. Research Snapshot
CNY 330.82
CNY 314.88
CNY 291.82
CNY 315.14
Relative
valuati on
APV
Method
Equity
Method
WACC
Method
25.1%
24.9%
15.8%
31.3%
Source: Author estimates
Figure 1 - Price target under different methods
Source: Yahoo finance
Table 1 – Market Data
25.1% Upside
BYD Company Limited
Close Price: CNY 252.01 (30/09/2022)
Price Target: CNY 315.14 (31/12/2022 )
BUY
Medium Risk
2
Company Overview
BYD Company Limited (hereafter BYD) was founded in February 1995, with
headquarters located in Shenzhen, China. After 20 years high-speed development,
BYD has established more than 30 industrial parks and realized strategic layout in
six continents. The business scope contains electron, automobile, new energy, rail
transport etc. BYD officially entered the automotive field by acquiring QinChuan
Automobile Company on 22 January 2003. Nowadays, the automobile business has
become major contributor to the development of the group. Furthermore, BYD was
listed on Hong Kong main board (stock code: 1211HK) in July 2002 and listed on
Shenzhen Stock Exchange (stock code: 002594) on 30th June 2011.
BYD’s primary market is in China, but the overseas market has been expanding in
recent years. Especially in the latest two years, the proportion of overseas revenue
increased significantly (Figure 2), which occupied 30.2% and 38.5% in 2020 and
2021 respectively with growth rate of 27.4%. In 2021, the electric passenger vehicles
entered European market formally, and 1500 units EV “Tang” have arrived in Norway
with 1000 units successful delivered.
The total revenue keeps rapid growth (Figure 3) in the past 5 years. In 2021, BYD
realized approximately CNY 211,299,918 thousand in total revenue, representing a
year-on-year increase of 37.68%, and CAGR of 19.78% from 2017 to 2021. The
revenue in the first quarter of 2022 is over CNY 66,825,185 thousand, 63% more
than in same period last year. In the aspect of net profit (Figure 4), the overall auto
market was depressed in 2018 and 2019 so that the net profit was low. With the
high-end vehicle model “Han” was launched in 2020, the profit was promoted to a
sharp increase. However, it was fluctuated in 2021 due to the rising raw material
prices.
Business Segments
BYD is principally engaged in three parts of business, including the automobile
business, the handset components and assembly business, and the rechargeable
batteries and photovoltaic business. Among these three segments, the automobile
segment and the handset components and assembly segment contributed main
revenue (Figure 5), which occupied 51.9% and 40.49% of the total revenue in 2021.
In 2021, the revenue from automobile business amounted to about CNY
109,659,458 thousand, representing a YoY increase of 33.8%. The revenue from
handset components and assembly business amounted to about CNY 85,545,672
thousand, representing a YoY increase of 44.13%. The revenue from rechargeable
batteries and photovoltaic business amounted to about CNY 15,402,042 thousand,
representing a YoY increase of 31.59%.
Automobile Segment | Depending on the advanced technology, cost advantage
and high-quality product, BYD rapidly grows up to be a leading independent brand
in Chinese market. Until now, it has built six automotive industrial bases in Beijing,
Shenzhen, Shanghai, Xian, Changsha, and Tianjin. Some high-level technologies in
the aspect of the whole vehicle manufacture, model research and development, and
EV have been achieved in the past few years. The automobile business involves the
passenger vehicle field, the battery electric bus field and the urban rail transit field.
2. Business Description
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
Source: Annual Report
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2015 2016 2017 2018 2019 2020 2021
China Overseas
Figure 2 - Revenue breakdown by locations of
customers of BYD
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
2017 2018 2019 2020 2021 2022Q1
Revenue YoY Grow th ra te
Figure 3 - The total revenue (CNY thousand)
and YoY growth rate of BYD
-100.00%
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2017 2018 2019 2020 2021 2022Q1
Net profit YoY Gro w th ra te
Figure 4 - The net profit (CNY thousand)
and YoY growth rate of BYD
0%
20%
40%
60%
80%
100%
120%
2015 2016 2017 2018 2019 2020 2021
Rechargeable Batteries and Photovoltaic
Mobile handset components, assembly service
Automobiles and related products
Figure 5 - Revenue breakdown by product
categories of BYD
Source: Annual Report
3
In 2021 BYD totally sold 721,300 vehicles, representing a YoY increase of 82.8%.
The sales of passenger car were 713,400 units, representing a YoY increase of
83.9%.
Passenger Vehicle Field: The representative passenger vehicle models include the
traditional fuel cars F3、F3R、F6、F0、G3、G3R、L3/G6 etc., the sports car S8,
the high-end SUV model S6, the MPV model M6, the dual mode electric vehicles
F3DM and F6DM, and the pure electric vehicle E6. In particular, BYD focuses on
developing EVs in recent years. In Chinese market, BYD sold 593,745 electric
passenger cars in 2021, reaching 3.3 times the sales of previous year. The market
share accounted for 17.1% of Chinese EV market in 2021, representing an increase
of nearly 8% with in the year. During the same period, the electric commercial vehicle
sales achieved 10,038 units, showing a decrease of 5.6% compared with 2020
(Figure 6). As a pioneer and leader in Chinese EV industry, BYD has been heading
for the automotive industrial transformation and upgrading by continuously
technological innovation. In 2021, BYD ranked fourth in the world ‘s top 5 EV
companies with 323,143 plug-in EV sales and market share of 7% (Figure 7 and
Figure 8). In this year, BYD realized a significant transition by announcing that it had
stopped manufacturing the traditional fossil-fueled vehicles since March 2022,
making BYD become the first traditional automotive manufacturer in the world which
break through the dependence on ICE vehicles. In the future, it will focus on
developing the BEV and the PHEV.
Battery Electric Bus Field: BYD is the first Chinese automobile brand that enters in
European, American, and Japanese market. Up to now, BYD’s battery electric bus
have been exported to more than 50 countries and regions, and the overseas orders
have broken through 70,000 units. This type of bus has typical characteristics with
little noise, quite inside and smooth driving. As the only Chinese EV manufacturer
which holds the core technologies of electric battery, electric machinery, electronic
control system, the battery safety, bus body safety and active safety have been
widely recognized in Europe. The market share of pure electric bus has exceeded
20% in European market. On May 27th, 2022, BYD and Alexander Dennis Limited
announced that their electric vehicle partnership reached a milestone that the
1,000th electric bus delivered to the well- known British bus operator Stagecoach.
Urban Rail Transit Field: The “SkyRail” and “SkyShuttle” (Figure 9) act as two
important components of comprehensive green solution that realize three-
dimensional coverage of urban public transportation system. This strategy not only
helps to solve traffic congestion and air pollution problem but also provides an urban
rail solution with high efficiency and low cost. In 2021, the world’s first autonomous
“SkyShuttle”, independently developed by BYD, was officially put into operation in
the Bishan District of Chongqing in China. Meanwhile, as the symbol of major
international cooperation to modernize urban transportation, the first overseas
version of the Bahia, Brazil “Skyrail” was launched in Shenzhen.
Handset Components and Assembly Segment | As a global leader in smart
phones and other smart components, BYD Electronics provide services including
new materials development, product design and development, components and
machine manufacturing, supply chain management, logistics and after-sales service
and other one-stop services. So far, BYD Electronics has established good
227,152 219,353
179,231
593,745
20,659 10,153 10,635 10,038
-50%
0%
50%
100%
150%
200%
250%
0
100000
200000
300000
400000
500000
600000
700000
2017 2018 2019 2020 2021
Passenger cars Commer cial vehicles
Total ele ctr ic v ehicles Total sales V olume growth ra te
Figure 6 - Electric vehicle sales volume of BYD
in China, by type
Source: BYD's official website
216,562
323,143
451,131
609,730
936,172
0200,000 400,000 600,000 800,0001,000,000
Hyundai Motor Group
BYD
Volks wagen Group
SAIC(incl. SAIC-GM-Wuling)
Tesla
Figure 7 - World’s top 5 EV automotive groups
ranked by passenger plug-in EV Sales in 2021
Source: INSIDEEVs
Hyundai
Motor Group
5%
BYD
7%
Volkswagen
Group
10%
SAIC(incl.
SAIC-GM-
Wuling)
13%
Tesla
21%
Others
44%
Figure 8 - The EV sales share of world’s Top 5
Automotive Groups in 2021
Source: INSIDEEVs
Figure 9 - The design sketch of “SkyRail” and
“SkyShuttle”
Source: BYD's official website
4
corporative relationships with Huawei, Apple, Xiaomi, HP, Asus and other domestic
and foreign first-line consumer electronics brands.
BYD Electronics follows the principle of diversified business layout and continuously
worked on new business field. In addition to commit to develop traditional sectors
such as smart phones, computers, automobile intelligence systems etc., the new
smart product sectors such as smart homes, game hardware and drones have
increased continuously, driving to a rapid growth in revenue. Furthermore, BYD
Electronics has overcome the key technical barriers for the electronic atomization
products and opened up a new growth channel. However, the net profit was only
about CNY 2,310,000 thousand in 2021, due to the impact of COVID-19 and
shortage of semiconductor, showing a decrease of 57.54% YoY (Figure 10).
Rechargeable Batteries and Photovoltaic Segment | The rechargeable business
areas involved in manufacturing and selling lithium-ion batteries, nickel batteries,
and iron batteries products, which principally are used for mobile phones, electric
tools, photovoltaic products, etc. As one of the leading rechargeable battery
producers in the worldwide, the main customers include famous mobile phone
manufactures such as Samsung and Huawei, as well as global reputable electric
tools and portable electronic equipment manufacturers such as Bosch and Cooper.
The battery production capacity is showing a rapid expansion trend. In 2021, the
total installed capacity of power batteries for EVs and energy storage batteries
reached to 37.92GWh (Figure 11), increased sharply with YoY of 145.6%. As of May
2022, the installed capacity was 27.18GWh, a YoY growth of 113.9%.
In the aspect of photovoltaic business, BYD improve the service life of solar modules
effectively by unique silica gel technology. In addition, the cost of solar cell is reduced
greatly due to advantage of battery production.
Company Strategy
Strategy is transforming from vertical integration model to combining "Vertical
integration" and " opening supply chain " model. In order to take the advantage
of synergy, BYD initially adopted the single vertically integrated model (Table 2)
which independently research and develop in vehicle components production,
assembly, and auto software system. For the upstream raw material, BYD entered
the area of battery raw materials by investing and M&A to guarantee the stability of
raw material supply and price. Moreover, BYD Semiconductor Co. LTD, which BYD
group currently holds 72.3% stake, is preparing to spin-off now. 63% of the
semiconductor company's products are supply to BYD Group. For the midstream
parts, BYD is the only EV manufacturer that independently master the core
technology of "three electricity” (electric battery, electric machinery, electronic
control system) in China. Especially, the vertical integration model can effectively
reduce whole vehicle costs by reducing the cost of power battery, which is the largest
single part (about 38%) of total costs (Figure 12).
However, it is difficult to keep advantages in segment market under this model. Then,
besides focusing on core technologies and whole vehicle manufacturing, BYD
started transition to the open supply chain model since 2017, by purchasing some
components from outside excellent suppliers, sale batteries to other external
company, and stripping edge business. Consequently, 341 interface data and 66
control permissions of automobiles are gradually opened for public since 2018. This
-100.00%
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
250.00%
300.00%
-
1,000
2,000
3,000
4,000
5,000
6,000
2017 2018 2019 2020 2021
Net profit Growth rate
Figure 10 - The net profit and growth rate of BYD
Electronics (million)
Source: Financial report of BYD Electronics
0
5
10
15
20
25
30
35
40
2018 2019 2020 2021 As of ma y 2022
Figure 11 - Total installed capacity of power
batteries for EVs and energy storage batteries
Source: BYD's official website
Table 2 - The industry chain layout of BYD
Source: BYD's official website
Power system
50%
Chassis
14%
Vehicle body
5%
Automotive
Interior
15%
Electron
9%
Others
7%
Breakdown of electric vehicle cost
Electric
battery
76%
Electronic
control
11%
Electrical
machinery
13%
Breakdown of power system cost
cathode
45%
anode
10%
Separators
10%
Electrolyte
10%
Others
25%
Breakdown of electric battery system cost
Figure 12 - Breakdown of EV and power battery costs
Source: Judalidian, cmsChina
Upstream
raw material
LiMnCoO_4
lithium iron
phosphate
Ternary
Material
Anode
Cathode mix
Lithium
titanate
Carbon
material
Graphite
materials
Silicon-carbon
cathode
Cathode Electrolyte
Lithium
electrolyte salts
Organic solvent
Additive
Separators
Polyethylene
Additive
IGBT chip BMS chip
Silicon
steel sheet
permanent
magnet Silicon
carbide
Power
battery BMS thermal
management
Electrical
machinery
motor
controller
vehicle
control unit
Whole vehicle Charging pile/
station
Midstream
parts
Downstream
vehicle
Processing
packaging
assemble
electronic control system Electric drive
system
Note: The blue parts are existing business layout of BYD
5
transition not only significantly improves the BYD’s vehicle quality by optimizing
components, but also makes it become the second-largest power battery supplier
ranking after the CATL in Chinese market.
R&D Strategy
As one of the leaders in global EV industry, BYD has a numerous R&D team
members and powerful innovation capacity. BYD had more than 40 thousand R&D
researchers in 2021 (Figure 13), which accounted for 14.01% of staff. In addition, it
has 11 research institutes for different professional technologies. The R&D costs
increased continuously (Figure 14) since 2016. The total amount of R&D
investments already reached to CNY 10.63 billion in 2021, accounting for 4.92% of
total revenue. In the aspect of R&D project, the main R&D costs invested in some
core technologies including the blade battery, the energy storage products, the DM-
i super hybrid, the e-Platform 3.0, and the DiLink 4.0(5G) intelligent network system.
Dividend Policy
The earnings per share was CNY1.06 on 31st December 2021, totally distributed
CNY0.105 (tax included) dividends per share. In 2020, the earnings per share was
CNY1.47 and the dividend was CNY0.148 per share (tax included). The dividend
distribution shall be decided by general meeting of shareholders, and the board of
directors need to complete the distribution within two months after general meeting.
With satisfied the capital demand for normal production, operation and development,
the yearly attributable profit distributed in cash way should not be less than 10% of
attributable profits of the year. The accumulated distribution of profits by the way of
cash dividends in three consecutive years should not be less than 30% of total
attributable profits of the three years.
Equity structure
The equity structure (Table 3) basically keeps stable. By the end of April 2022, the
top five institutional shareholders totally hold 46% stake, and the top five individual
shareholders totally hold 30% stake, among which Wang Chuan-fu is the largest
individual shareholder, holding 17.64%.
BYD follows two-tier corporate governance model (Table 4), with a separation
between directors and supervisors to enhance the effectiveness and transparency,
complying with all provisions of the Rules Governing the Listing of Securities on the
Stock Exchange.
Board of Directors
The BoD is consisted of six directors (Table 5): an executive director Wang Chuan-
fu, aged 56, the founder of the company, act as the chairman of the BoD; two non-
executive directors; three independent non-executive directors. All members are
male with 5 members are more than 55 years old. The BoD is responsible for
determining a series of corporate strategies and business direction, making
objectives for management, and representing shareholders to supervise the group’s
financial performance, management, and organization.
3. Management and Corporate Governance
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2016 2017 2018 2019 2020 2021
Number of R&D personnel Proportion of staff
Figure 13 - Number of R&D personnel and
proportion of staff
Source: Annual Report
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
0
2
4
6
8
10
12
2016 2017 2018 2019 2020 2021
R&D costs Proportion of total revenue Proportion of capitalizat ion
Figure 14 - R&D costs of BYD (Billion)
Source: Annual Report
Individual
shareholders
Institutional
shareholders
Others
HKSCC NOMINEES LIMITED: 29.97%
WESTERN CAPITAL GROUP LLC: 7.73%
Youngy Investment Holding Group Co., Ltd:5.33%
HKSCC Nominees Limited: 2.47%
Central Huijin Investment Ltd:0.41%
Wang Chuan-fu: 17.64%
Lv Xiang-yang: 8.22%
Xia Zuo-quan : 2.84%
Wang Nian-qiang: 0.63%
Li Ke: 0.38%
24.38%
Equity
structure
Table 3 – The equity structure
Source: BYD's official website
Board Of Directors
The Audit Committee
The Remuneration
Committee
The Nomination
Committee
The Strategy
Committee
General Meeting
Board of Supervisoes
Table 4 - The governance structure of BYD
Source: Annual Report
6
In 2021, totally fifteen BoD meetings were held to discuss quarter, semiannual, and
annual operating performance; the election and remuneration proposals of directors
and supervisors; recommendations of auditors; approval of major investment;
dividend policies; and other important financial and operational matters.
The BoD has set up four committees (refer to following) to assist to improve the
corporate governance quality. These committees regularly report to the BoD.
Audit Committee | The audit committee is consisted of three independent non-
executive directors and a non-executive director, which is mainly responsible to
review the accounting policies and financial reporting process, to discuss the risk
management, internal control, financial report, and auditing.
Remuneration Committee | The remuneration committee is consisted of an
executive director, a non-executive director, and three independent non-executive
directors, with major responsibilities including reviewing human resource
management regularly; to make suggestions on remuneration package,
compensation and welfare for directors, supervisors and senior executives; and to
make business objectives for senior managements.
Nomination Committee | The nomination committee is consisted of an executive
director, a no-executive director, and three independent non-executive directors. It
is authorized to review the structure and composition of the BoD, to make
suggestions about directors and senior managements selection to BoD, to appoint
directors and to assess the independence of independent non-executive directors.
In addition, the nomination committee devotes to adopt the Board Diversity Policy to
enhance the effectiveness of BoD.
Strategy Committee | The strategy committee is consisted of an executive director,
two non-executive directors, and two independent non-executive directors, which is
mainly responsible to consider and suggest the company’s long-term development
strategy and major investments.
Remuneration policy
The salary is mainly based on their personal performance, which is the principle of
remuneration for directors. The difference between executive and non-executive
directors is that the remuneration of executive director package contains basic salary
and discretionary bonus, but the remuneration of non-executive director mainly
composed by director’s fee. 8 managements remuneration is CNY 5 million to CNY
8 million, 5 managements remuneration is CNY 0 to CNY 5 million (Figure 15).
Global Macroeconomic Outlook
The ravages of the COVID-19 pandemic combined with the Russia-Ukraine war
create double headwinds for the world economy.
The Ukraine war | As the most significant event in 2022, the Ukraine war has great
impacts on the world economy, especially increasing the energy and metal material
prices. At first, Russia is the second largest crude oil exporter and the largest natural
4. Industry Overview and Competitive Position
Board of director Age Gender Qualification
Executive Director
Wang Chuan-fu 56 male mas t er
Non-executiv e Direct or
Lv Xiang-yang 60 male -
Xia Zuo-quan 59 male mas t er
Independent Non-executive Director
Cai Hong-ping 68 male bachelor
Zhang Min 45 male doctor
Jiang Yan-bo 56 male doctor
Table 5 - The board of director’s information
Source: Annual Report
RMB0 to RMB5
million
38%
RMB5 million to
RMB8 million
62%
Figure 15 - Remuneration of senior management
Source: Annual Report
Figure 16 - Crude oil price
Source: Bloomberg
7
gas exporter worldwide, supplying nearly half of natural gas to EU. Since the war
broke out on February 24, 2022, crude oil price has surged to highest level during
the recent 14 years (Figure 16), and gas price in Europe rose about 45% from
January to March to $41 per BTU. In addition, Russia is one the biggest metal
suppliers around the world, not only the aluminum cans and copper wires but also
EV components, such as nickel which is used in lithium-iron batteries. As a result,
the production cost of automobile could be increased.
The inflation rate | The inflation rates have been rising with different degree for each
country due to the pandemic and Russia war. According to Pew Research Center,
the inflation rate has doubled for 37 among 44 economies over the past 2 years
(Figure 17). Especially for Turkey, the annual inflation rate accelerated to 54.8% in
the first quarter of 2022, showing the highest level since 2005. Most of the central
banks have raised the interest rates trying to control to rising inflation. In
consequence, the household budgets for major purchases will shrink due to the
higher borrowing costs.
The world GDP growth rate | The world GDP growth rate is 6.1% in 2021(Figure
18), which shows a recovery trend after a large dramatic negative growth in 2020
due to the COVID-19 pandemic. However, the economic damage from the Ukraine
war seems to hold back the global recover. According to the World Economic
Outlook in April 2022 from IMF, the world GDP growth to be forecast to decrease
from 6.1% in 2021 to 3.6% in 2022 and 2023. After 2023, the growth rate is expected
to be stable around 3.3%.
China Economic Outlook
The domestic macro-economic environment is challenging, but the industry
prospects are still considerable
China macro economy | The downward pressure for China macro economy is
gradually enhancing. China’s GDP grew only 0.4% in the second quarter of 2022
compared with last year, which is less than expected. The quarterly GDP growth rate
is gradual slowing down since the first quarter of 2021, affected by the COVID-19
(Figure 19). Fortunately, the overall price level shows a generally stable trend, the
CPI rose by 1.7% YoY in the first half of 2022 according to data released by CNBS,
which is lower than anticipation around 3%. This growth rate of CPI is significantly
lower than the Eurozone and United States, which is 9.1 % and 8.6 % respectively
in June.
Chinese automobile industry | However, the Chinese automobile industry realized
a positive growth even if under the circumstance of repeated pandemic and
constrained supply chain. According to CAAM, the Chinese auto production and
sales volume was 26,082 million units and 26,275 million units respectively,
representing a YoY edged up of 3.4% and 3.8%, which terminate a three-year
decline since 2018. In particular, the EV market showed explosive growth with
annual production and sales of 3,545 million units and 3,521 million units
respectively in 2021 (Figure 20), up about 1.6 times YoY. The development
motivation in Chinese EV market has transformed from policy guidance to market-
driven. The EV market size is expanding, and the quality of EVs driven by
technological innovation is also improving continuously.
Figure 17 - Annual inflation rate,
first quarter 2022
Source: PEW RESEARCH CENTER
-15.0
-10.0
-5. 0
0.0
5.0
10.0
15.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Austr ali a China Germany
United Kingdom India United States
World
Figure 18 - The world GDP growth (annual %)
Source: The World Bank
-15.0
-10.0
-5. 0
0.0
5.0
10.0
15.0
20.0
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Q1 2021
Q2 2021
Q3 2021
Q4 2021
Q1 2022
Q2 2022
Compared with the same quarter of the previous year
Compared with the pr evious quarter (seasonally adjusted)
Figure 19 - Quarterly GDP growth rate in China
Source: CNBS
0
0.5
1
1.5
2
2.5
3
3.5
4
2015 2016 2017 2018 2019 2020 2021
Production Sal es Volume
Figure 20 - The annual EV production and
sales volume in China (million units)
Source: CAAM
8
Automotive Industry Overview
Key Drivers of Profitability
Electrification | In the past, cars with internal-combustion engines have dominated
the automotive industry. This trend however, due to consumer’s demand, is
expected to change in the next decades. Automakers will be able to follow this trend
thanks to the improvement in batteries, easier availability of charging infrastructures
and price-parity with ICE vehicles. By 2040F, EV car sales are expected to represent
57.14% of the total auto market, experiencing a CAGR of 16.35% from 2018 to
2040F (Figure 21). The increase in demand for these vehicles will present challenges
for automaker’s profitability. Currently, the main issue to disrupt automaker’s
profitability is about the cost of EV batteries, even though the average pack and cell
battery price has decreased from $684/kWh in 2013 to $132/kWh in 2021 (Figure
31). To remain competitive, automakers need to invest large amounts of money in
R&D, being expected to spend approximately $515 billion in the next 10 years, which
has impact on the profit margins of companies at least in the short-term period.
Automation | It is expected that by 2040F 66% of passenger-kilometers by travelling
will be done by autonomous vehicles, making up 40% of new vehicle sales in that
same year. Thus far, OEMs, start-ups and established companies have spent over
$16 billion on research. This investment is expected to give automakers the
opportunity to realize $4.3 trillion in revenues after 2030F.
Mobility Evolution | Another important driver regards the changes experienced
recently in mobility is e-hailing, which means the private vehicle is used to provide a
taxi service to riders ordered through electronic applications. The global e-hailing
market is expected to increase from $56.87 billion in 2021 to $108.15 billion in 2025F
at a CAGR of 16,93% (Figure 23). Knowing that vehicle sales is a key metric in this
industry, automakers will have to redesign their business plan if they want to maintain
a privileged position in this new market. The impact of this driver will depend on the
number of passengers that decide to switch from a private owned vehicle to ride-
hailing, as a mean of transportation, and the new demand seen from ride-hailing
companies for new vehicles. There is no real consensus on how this new market will
ultimately impact the automotive industry, but each car sharing vehicle can
potentially substitute 9 to 13 private vehicles.
Economic Situation | The CCI is a good indicator of consumer’s perspectives of
the future economic panorama. When consumers have bullish perspectives of the
future economic development, they tend to decrease savings and increase overall
consumption, including major purchases. The average CCI over the last 8 years
(excluding 2020) has remained above 100, showcasing positive expectations for the
future in the EU. These values mirror the percentual changes in the GDP of countries
in the same area, in the same period. According to this index, both private and
commercial vehicle demand, will eventually depend on these GDP changes (Figure
24 and 25).
Demand Drivers
Household Disposable Income | As household disposable income increases,
consumers have the opportunity to upgrade their cars to ones with better features,
especially for consumers who regard their cars as a status symbol, driving the overall
demand up (Figure 26). As a growing market, China has perfectly showcased this
(Figure 27).
Source: ACEA
Source: ACEA
Source: ACEA
Source: ACEA
Source: ACEA
2.30%
57.14%
97.70%
42.86%
0% 20% 40% 60% 80% 100%
2018
2040
Electrical Vehicles Conventionally Powered
Figure 21 - Global Passenger Vehicle Sales
in 2018 and 2040F (%)
Source: Statista
30
20
10
0
L4
L3
L2
L1
L0
+45.1%
-8.6%
+12.6%
-3.8%
-7.8%
Compound annual
growth rate from
2025 to 2030
Compound annual
growth rate from
2019 to 2030
2025 20302019
Figure 22 - Autonomous Semiconductor Market,
$ billion
Source: McKinsey & Company, 2021
L4 High Aut o mation
L3 Conditional Automation
L2 Partial Automation
L1 Driver Assist an ce
L0 No aut omat io n
57.86
108.15
0.00
20.00
40.00
60.00
80.00
100.00
120.00
2021 2025F
Figure 23 - Global E-hailing Market, 2021 to 2025F
(in billions $)
Source: Statista
-10
-8
-6
-4
-2
0
2
4
6
8
0
2
4
6
8
10
12
14
16
18
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
EU new passenger car registrations (million units)
EU GDP growth (annual % change)
Figure 24 - New passenger car registration and
annual GDP growth in the EU (2008-2021)
9
Policy Guidance | To solve environmental problems and reduce dependence on
petroleum energy, governments around the world have adopted policies to promote
electric vehicles by offering buyers tax breaks and subsidies to buy them. So far,
more than 20 countries have electrification targets. According to the EU policy, zero
emission vehicles expect reach 15% by 2025F and 35% by 2030F. Therefore, the
electric vehicle market has growth rapidly in recent years, and the demand for EV is
also increasing despite pandemic. The global EV sales reached 6,75 million units in
2021(Figure 28), showing an annual increase of 1.08%. The market share accounted
for 8.3% of global light vehicle sales, already doubled since 2020.
Automotive Safety | Every year, approximately 1.3 million people die as a result of
road traffic crashes. Another 20 million to 50 million suffered non-fatal injuries while
many of them get disabled. Due to this, consumers value safety when considering
the purchase of a new vehicle. The continuous technological development helps
automakers to produce safer cars (anti-lock braking systems, advance warning
systems, for example) and increases the trust consumers have in their product.
Oil Price | Oil and ICE vehicles are complementary goods, which have negative
cross-elasticity of demand relationship with each other. If the long-term trend of oil
price is expected to increase, it is expected to observe a reduction in the demand for
these vehicles. At the same time, a possible shift in demand can happen, where
consumers are more inclined to substitute their ICE vehicle for an EV, accelerating
this shift.
Vehicle Price | The industry is composed by market segmentation regarding vehicle
purchases, nevertheless consumers are price sensitive (luxury cars buyers may be
less responsive to price rises). The vehicles sales will normally vary inversely with
price. If an increase in the price trend is observable, consumers will have different
behaviors. The purchase can be deferred as buying a vehicle is a big event for most
households, and the proper timing is taken into considered. Another scenario is a
shift in demand, either for a cheaper model or for a different car type. As a last
outcome, households can move from the idea of having a car, considering alternative
ways of mobility which are always a cheaper solution.
Supply Drivers
1st Tier Supply Drivers
The 1st Tier Supplier regards global automobile manufacturing. The key factor
driving the development of the automotive industry is new technology and innovation,
especially in the area of EV. Technology has redefined the energy for cars. Electric,
hybrid and solar systems are replacing ICE as a consequence of its leading trend in
the future shaped by consumer preference.
2nd Tier Supply Drivers
The 2nd Tier Supplier regards the global auto parts and accessories manufacturing.
The main supply drivers are the following:
Semiconductors | One of the main drivers of supply is directly related to the
semiconductor industry. In 2019, the demand of automotive industry composed 9.79%
of the total semiconductor market. This share is expected to increase 1.08% in
2024F, occupying 10.87% of the total market. Semiconductors are essential in the
production of vehicles through four main aspects: vehicle electrification, safety,
Source: ACEA
-10
-8
-6
-4
-2
0
2
4
6
8
0
0.5
1
1.5
2
2.5
3
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
EU new commercial vehicle registrations (million units)
EU GDP growth (annual % change)
Figure 25 - New commercial car registration and
annual GDP growth in the EU (2008-2021)
0
10000
20000
30000
40000
50000
60000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Japan USA South Africa Euro area
Figure 26 - Household disposable income
(gross adjusted, US dollar/capita, 2005-2020)
Source: OECD
-30
20
70
120
170
220
0.00
1000.00
2000.00
3000.00
4000.00
5000.00
6000.00
2013 2014 2015 2016 2017 2018 2019 2020 2021
Per capita disposable income in China (Unit: US dollars)
Motor vehicles per 1000 people in China
Figure 27 - Per capita disposable income ($)
and Motor vehicles per 1000 people in China
Source: National Bureau of Statistics of China
125 208 321 543 792
1263
2082 2276
3240
6750
0.2% 0.2% 0.4% 0.6% 0.9%
1.3%
2.2% 2.5%
4.2%
8.3%
-1. 0%
1.0%
3.0%
5.0%
7.0%
9.0%
0
1000
2000
3000
4000
5000
6000
7000
8000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Total sale s v olu me EV mark e t share
Figure 28 - Global BEV & PHEV sales(‘000s)
Source: EV volumes
0
100
200
300
400
500
600
700
2019 2024F
Figure 29 - Market growth of the autonomous
vehicle, for 2019 and 2024 (billions $)
Source: Statista
10
driver assistance and connectivity. This relationship will become more dependent as
a shift in demand for electrical vehicles occurs. A BEV requires, on average, 2.3
times the number of semiconductors when compared to an ICE vehicle (Figure 30),
demanding an additional $7.4 billion worth of semiconductor material. The same
trend will be visible when addressing the production of autonomous vehicles.
In 2020, the semiconductors industry experienced a severe shortage of microchips,
initially due to Covid-19. This resulted in the increase of wait time, for the automakers
to receive microchips, to approximately 22 weeks (GM had to cut wholesale
deliveries by 200,000 vehicles in North America during the second half of 2021).
Disruptions in this supply chain affect not only the capacity to produce cars, but also
the average production time leading to temporary cuts in the total supply.
Battery Price | Batteries compose one of the biggest costs when producing EVs as
mentioned before. The current decreasing trend of battery prices since 2013 (Figure
31) fosters the rise in EV production. With the price of batteries declining, EVs have
the momentum to increase in the total volume of vehicle sales. This driver is helping
the process of decarbonization of the industry and stimulating the growth in the EV
supply as prices will be lower, both supply and demand of EV’s will increase.
Natural Rubber | NR is considered as another significant driver, and it constitute 65%
of tire manufacture. Newly planted rubber trees need 6-9 years to harvest. Due to
this lag, it is hard for NR producers to anticipate the car production quantity in
advance; consequently, they are conservative in expanding production scale. In
other words, rubber production is shaped by the vehicle sales of the automotive
industry, which is stabilized recent years. On the other hand, it is also hard for
automakers to foresee any aggressive growth in NR production. In addition, NR price
is stabilized due to the stable and diminishing consumption of it. Thus, NR is
regarded as a negative driver for the automotive industry since they restrain the
growth of each other.
Peers
Along with the current automobile industry development trend of electrification,
various automobile companies have joined the ranks of new energy vehicle
competition. Breaking through the limitation on some key technologies and
continuously innovation have become the key to improve the core competitiveness.
In consequence, R&D is a major cost in the structure of expenditure for most
corporates.
BYD is engaged in several business as mentioned before, and most of its current
business is in the Chinese market. The peer companies are selected from three
industries related to its business. The NIO, Li auto, and Xpeng were selected for
automobile peers because they are the representative companies specializing in the
production of EVs in China. For battery segments, the CATL, Gotion High-tech, and
EVE Energy were selected in the same industry. For handset Components and
Assembly Segment, three peer companies including luxshare Precision Industry,
Goertek, and Lens Technology were selected.
Figure 30 - Average car by semiconductor
content by powertrain
469 412
263 221 159 134 112 104 101
215
194
130
82
67 52 48 36 31
684
607
393
303
226
185 161 140 132
0
100
200
300
400
500
600
700
800
2013 2014 2015 2016 2017 2018 2019 2020 2021
Cell Pack
Figure 31 - Volume-weighted average pack and
cell price split ($ per kWh)
Source: BloombergNEF
Mark et Cap
Billion
9866.HK NIO 255.758
2015.HK Li Auto 228.825
9868.HK Xpeng 125.25
300750 CATL 1,237
002074 Gotion High-tech 68.006
300014 EVE Energy 192.347
002475 luxshare Precision Industry 274.207
002241 Goertek 116.428
300433 Lens Technology 55.355
Mobile segment
Stock code
Compa ny
Auto segment
Battery segment
Table 6 - BYD's Peer Group
Source: Author Analysis
Source: IDTechX Power Electronics for Electric
Vehicles 2022 – 2032, 2021
Source: BloombergNEF
11
Porter’s 5 Force
The main existing threat is the high intensity competition in the automobile industry
(Figure 32).
Threat of Substitute products ׀ Moderate (3)
No realistic substitute for personal vehicles.
• Alternative ways of transportation represent the main threat, especially in
urban areas;
• These alternatives are less expensive than owning a car and are more eco-
friendly;
• Increases in fuel price also play a role when assessing which are the better
options regarding public mobility.
Bargaining power of suppliers ׀ Low (2)
The power of suppliers is mitigated by their number.
• Existence of multiple options in the market;
• Low differentiation regarding the goods offered by suppliers.
Regardless of what is above, vehicles require specific inputs to operate, dependence
on suppliers exists in the industry.
Bargaining power of buyers ׀ High (4)
Large number of players in the industry.
• Buyers are price sensitive and have an abundance of options;
• Brand recognition can provide competitive advantages;
• Switching costs are very low for the buyers.
Threat of new entrants ׀ Moderate (3)
Entrance of new players in the industry is challenging given the following factors:
• High entry barriers due to the high capital investment required;
• Hard for new entrants to reach competitive pricing;
• Dominance of major competitors provides economies of scale and scope.
Despite what is above, software & IT firms may enter the industry in the near future
due to the technological features that are increasingly incorporated in cars (e.g.
Google’s self-driving car).
Industry rivalry ׀ Very high (5)
The industry is characterized by very high competition intensity:
• Large number of competitors;
• Newer markets present opportunities to increase market share and
competition;
• Products are becoming more differentiated (Combustion, electric & hybrid
cars), but switching costs remain low, which leads to further competition;
• High exit barriers (e.g., cost of factory shutdown).
R&D expense is a key indicator to observe. Firms spend huge amounts of money to
get a competitive advantage over their peers.
Figure 32 - Porter's Five Forces
Source: Group’s Analysis
12
SWOT Analysis
Strength:
Advanced battery technologies | BYD launched business with batteries from 1995.
After 27 years evolution and industry distribution, it has become the only automobile
manufacture in the worldwide with independent capability in research and
development and producing power batteries. BYD launched “Blade Batteries” in
2020 with advantages of more safety, more endurance and more strength compare
with the traditional power batteries (Table 7). The appearance of blade battery not
only reshaped the perception of lithium iron phosphate battery in EV industry but
also became another core competitiveness of BYD.
Table 7 – The difference between traditional batteries and blade batteries
Source: icauto
Robust R&D capacities | BYD pays attention to continuous technology iteration and
invests a huge number of employees to do research. In 2021, the number of R&D
employee is about 40 thousand with a YoY growth of 31.52%, which accounted for
14.01% of total staff. After years of efforts, several advanced technologies such as
“DM-i Super Hybrid”, “Blade Batteries” and “e- Platform 3.0” have become BYD’s
core competitiveness. In addition, with total 9,462 patents, BYD ranked NO.1 in The
Total Patents List of Top 20 EV Companies in China published by QCC (Figure 33).
Broad industrial chain layout | BYD is widely engaged in the core upstream and
downstream areas by continuous strategic investment, covering the whole industry
chain in the fields of electric battery, electric machinery, electronic control system,
solar energy storage, and photovoltaic power generation. Beyond that, BYD even
has layout in the power semiconductors IGBT area, the core component of electric
control system, car air conditioning system and charging station. The IGBT
successfully researched and developed in 2009 and has been developed to 4.0
version so far. After years of accumulation, the value of the whole industry chain has
begun to realize.
Weakness:
Technical bottlenecks of EV | The first bottleneck is the limitations of battery power.
There are still some problems needed to be settled, such as the maximum range of
electric vehicle, the battery power attenuation in low temperature, the fast charging
technology, etc.. The second one is the maintenance for EV, which is completely
different from traditional fuel vehicles and requires professional equipment. Most
repair shops do not have the technologies and conditions for maintenance except
4S shops. The last one is not only a large gap between supply and demand but also
373
479
642
779
1064
1471
1811
2391
2637
3997
01000 2000 3000 4000
Zhejiang Zerorun Technology Co., LTD
Beijing Che Hejia Information…
NIO Holdigns LTD
Great Wall Huaguan Automobile…
Beijing Borgward Automobile Co. LTD
Shanghai Automotive Corporation LTD
Dongfeng Motor Group Co.LTD
Beijing New Energy Automobile Co. LTD
Changan Automobile Company limited
BYD company Limited
Figure 33 - Top10 number of patents of EV
enterprises in China
Source:QCC
31%
27%
11%
20%
5%
4% 2% NEVs
Consumer electronics
New energy power
generation
Industrial control
Intelligent grid
Rail traffic
Others
Figure 34 - The percentage of IGBT application in
Chinese downstream market
Source: Trend force
13
the limited distribution about charting stations. As a result, EVs are mostly used for
short distance in urban area.
EV business is subject to policy | The government grants and subsidies as a
significant revenue item in the income statement. The total amount of this item is
CNY 2.26 million in 2021, which account for 57.1% of net profit. The subsidies for
EVs have been cutting by 10%, 20% and 30% YoY from 2020 to 2022 according to
the regulation from the state council in China. This policy making it clear that the
purchase subsidy policy for EVs will be expired on December 31, 2022. With the
coming of post-subsidy era, there would be a significant challenge for the profit
margin of company.
Opportunity:
The enhancement of international brand influence | In recent years, BYD
continually expand overseas market by electric bus and overseas version of Skyrail
vehicle. It is the second time that BYD was selected by TIME in March 2022,
becoming one of the 2022 TIME100 Most Influential Companies. As the only Chinese
company on the list, it was rated "Titans".
The coming era of electric and intelligent vehicles | Due to the huge changes in
the market environment with rising material and fuel price, the traditional automobile
model unable to satisfy the current consumer demand. The development guideline
transforming to electrification, microchips, and intelligence is the key for automakers
in the future. As a result, the strategy that BYD stops producing traditional fuel
vehicles and focuses on developing BEV and PHEV with concentrated superior
resources, is coincide with current social needs and policy guidelines.
Threats:
Increasingly fierce market competition | With the rapid development of EV
industry, numerous automobile enterprises increasingly invest in EV. There is not
only Tesla which is the industry giant, but also many traditional oil-fueled vehicle
enterprises such as Volkswagen, Geely and SAIC, which have started to design and
produce EVs. In addition, there are also many new professional EV enterprises such
as LEADING IDEAL, Xiaopeng, NIO in the market. It is foreseen that the EV
technology will be continually breakthrough in the future under the joint promotion of
those enterprises, the market capacity will expand rapidly, and market competition
will become more and more fierce.
Foreign exchange risk | With continuous expansion of BYD’s overseas business,
the scale of foreign income grows synchronously. Under the influence of
international political and economic, the volatility of exchange rates has been
increasing. As a consequence, the foreign exchange risk has been increasing
significantly.
Handset Components and Assembly Industry Brief Overview
The growth of mobile phone market continues to be driven by 5G. Global smartphone
shipments increased 5.7% YoY in 2021 to 1.35 billion unit. Nevertheless, the
shipments slowed down in Q1 and Q2 2022 (Figure 35), falling about 11% and 9%
YoY respectively. The main reason is the weakening demand because of regional
uncertainty and economic weakness. After two quarters consecutively decline, The
IDC predicted that global smartphone shipments will fall 3.5% to 1.31 billion units in
Figure 35 - Worldwide smartphone
shipments, Q1 2020 to Q2 2022
Source: Canalys
14
2022 and will achieve a five-year CAGR of 2.9% by 2026 with the challenging global
macroeconomic environment. In Chinese smartphone market, the shipments
maintained rapid growth of 351 million units in 2021, representing a YoY of 13.9%,
which including 266 million units 5G phones shipments with 63.5% YoY growth.
In the aspect of other smart products, the global PC shipments achieved 14% YoY
growth to 349 million units in 2021 (Figure 36), which is highest since 2012. The
tablet shipments were 169 million units with huge overall market size. However,
under the impact of pandemic, Ukraine war and inflation, IDC forecasted that the
global shipments of traditional PC will fall 8.2% YoY to 321.2million units in 2022.
Similarly, the shipments for tablet will decrease 6.2% YoY to 158 million units.
Rechargeable Batteries and Photovoltaic Industry Brief Overview
With the recovery of global economy in 2021 and increasing reliance on batteries for
portable consumer electronics, the consumption of rechargeable batteries has
increased YoY. In addition, with the popularize and continuous growth of EV, the
demand for batteries also increased. According to Statista projection, the global
demand for batteries is expected to increase from 420 GWh in 2022 to 2035 GWh
in 2030 (Figure 37), with CAGR of 21.8%. In the aspect of photovoltaic, the
requirements of sustainable development and environmental protection promote the
solar energy development rapidly. The IEA expects the new Photovoltaic
installations will reach to almost 200 GW in 2022. In China, under background of the
“double carbon” strategy, the government continues to introduce a series of policies
to support the expansion of photovoltaic applications.
Subject to the WACC method of discounted cash flow valuation (DCF), the
investment recommendation is Buy. The price target is CNY 315.14 by the end of
2022, representing an upside potential of 25.1% compare with the price of CNY
252.01 on September 30, 2022. The medium risk profile was confirmed by
investment risk analysis later.
Key-Value Drivers
The EV matrix is gradually improved, and the sales is expected to usher in an
explosion period. After announcing the end of the production of fuel vehicles, The
PHEV keeps pace with BEV to rapidly seize the market share in China. In terms of
plug-in hybrid vehicles, BYD lunched the “DM-i Super Hybrid” system, which has the
advantages of low fuel consumption and fast acceleration. As a result, the sales of
DM-i models such as “Qin PLUS DM- i”, “Song PLUS DM-i”, “Tang DM-i” and “Song
Pro DM-i”, are climbing rapidly. In terms of battery electric vehicles, the “e-platform
3.0” was lunched with the characteristics of intelligence, efficiency, safety, and
aesthetics. The application of CTB technology further improves the integration level
of the battery and the vehicle body. Equipped with “blade batteries”, realizing the
vehicle advantages of more safe, low cost and long endurance. At the same time,
the DENZA brand has achieved a breakthrough in the company's high-end vehicle
models. The shaping of the company's brand image is expected to bring further
improvement in profitability. At present, the company has formed the product matrix
about the website of “Dynasty” and “Marine”, covering the PHEV and BEV. The
complete product matrix combined with a healthy sales structure is expected to drive
BYD to seize more market share in China.
5. Investment Summary
Figure 36 - Worldwide personal computing
devices forecast by product category
Source: IDC
420
555 685
805
950
1180
1420
1710
2035
0
500
1000
1500
2000
2500
2022 2023 2024 2025 2026 2027 2028 2029 2030
Tr an spor tatio n Stati onary Consumer electronics
Figure 37 - Projected global battery demand from
2022 to 2035, by application (GWh)
Source: Statista
15
BYD gradually opens the supply chain, the batteries supply to outside
customers brings new growth points. BYD has adopted a vertically integration
strategy in the past long run, however the “closed” layout result in the company's
power battery market share was overtaken by CATL. With the independently
research and development of the leading technology of “blade battery”, the company
successfully establishes a technical barrier in battery manufacturing field. Now, BYD
is gradually opening up the supply chain, actively planning the battery production
capacity and expanding the external battery supply business. With the expansion of
power battery demand, the company is expected to achieve a breakthrough in the
blade battery installation volume, and the external supply business will bring new
revenue growth points.
Valuation Methods
There are totally four methods used to valuate this company. The basic method is
using WACC to discount the free cash flow and terminal value to get the enterprise
value of CNY 918.89 billion. Ended up with a price target of CNY 315.14 per share.
Other three supplementary methods are regarded as valuation references. The
equity method is based on the equity cash flow discounted at cost of equity. The
price target is CNY 291.82 per share, representing an upside potential of 15.8% on
the basis price of CNY 252.01. The APV method is discounted at unlevered cost of
capital plus value created by debt. The price target is CNY 314.88 per share,
representing an upside potential of 24.9%. The relative valuation adopts
departmental valuation method, using average PS ratio of 3.3x for auto segment, PS
ratio of 3.9x for battery segment, average PE ratio of 18.9x for mobile segment. The
corresponding price target is CNY 330.82 per share, which is an upside potential of
31.3%. All methods give the same buy recommendation.
Revenue Forecast
For the automobile business
Most auto sales growth was generated by new cars launch from historical operating
data. According to the company’s announcements, the new PHEV and BEV cars of
“Dynasty” and “Marine” serious are intensively lunched from 2022 to 2023 (Appendix
7). At the same time, the DENZA and other high-end brand was released to enter to
CNY 0.3 million to CNY 1 million market. In addition, many popular models launched
in 2021 only have a short-term sales time that result in the limited contribution to
sales. As a result, the overall sales will explode in 2022.
The production capacity was gradual released. BYD already has 3 whole vehicle
production bases in Shenzhen, Xian, and Changsha. In addition, other 7 bases are
constructing, 6 will be completed and begin to produce vehicles in this year. In terms
of staffing, BYD has amount of 217 thousand production personnel in 2021,
accounting for 75.2% of total personnel, representing a YOY growth of 45.9%.
In addition, The Chinese EV industry gradually shifted from policy guidance to market
driven. The Chinese government issued the latest subsidy policy for new energy
vehicles, making it clear that the subsidy policy will be terminated on December 31,
6. Valuation
Valuation Inputs
g (Perpetuity growth rate) 3.0%
Risk free rate 2.6%
Cost of equity 8.07%
Cost of debt 4.80%
E/(E+D) 91.19%
D/(D+E) 8.81%
WACC 7.73%
Unlevered cost of capital 7.82%
Table 8 – The valuation inputs
Source: Author estimate
16
2022. Even if some noted institutions predicted that the sales of BYD will be
significantly influenced due to this policy. However, the sales of PHEV and BEV
vehicles of BYD in the first half of 2022 presented an inverse growth trend, which
showed a double improvement in market scale and quality.
In summary, referring to the company’s sales growth of 162.03% in the first half of
2022, it is expected that the EV sales will keeps a rapid growth in the second half of
2022. The full-year revenue growth of 120% is forecasted for 2022. Moreover,
referring to the CHINA ELECTRIC VEHICLES MARKET - GROWTH, TRENDS,
COVID-19 IMPACT, AND FORECASTS (2022 - 2027) published by Mordor
Intelligence, the forecasted Chinese EV market CAGR is over 30.1% from 2022 to
2027. So, The YOY revenue growth of 30% is used for rest forecasted years.
For the handset components and assembly business
This business shows a steady development trend. In 2021, the revenue growth was
obvious comes from the increase of North American large customer order volume.
In addition, the automotive intelligent system business is expected to increase with
the rapid growth of the BYD group’s EV sales. Over the next 5 years, it is forecasted
the revenue will grow along with a historical 2019 to 2021 average growth rate, 28.1%
CAGA.
For the rechargeable batteries and photovoltaic business
The battery production capacity is continuously expanding. The market share of
battery installed capacity increased steadily from 16.2% in 2021 to 22.75% by June
of 2022. Under the strategy of forbid to sale fuel vehicles and overall develop the
EVs, BYD accelerate the layout of power battery capacity. Since 2021, BYD has
expanded 8 production bases including Jinan Shandong, Wuwei Anhui, etc.. In 2022,
BYD is continuously expanding 4 new production bases (Appendix 9). The battery
production capacity is predicted to reach 537GWh by 2023.
In addition, the blade battery sale scale for external customers has been enlarging.
BYD announced to found the Fudi Battery Co.,Ltd in March 2020 to accelerate the
external sales speed. In 2021, the revenue from outside customer was 16.47 billion,
representing a YoY of 36.27%, the revenue from internal sales was 22.94 billion,
representing a YoY of 121%. In the aspect of external cooperation, Toyota
announced that BYD would be included in its power battery supply system in 2019,
FAW set up a joint venture with BYD to cooperate in the field of power batteries on
Jan 15, 2022.
In summary, the battery business revenue will grow rapidly due to the rapid growth
of electric vehicle sales and battery external sales in 2022. It is estimated that the
revenue growth rate in 2022 will be double than last year, and then maintain a stable
growth rate of 21.3% for the rest forecasted years.
Cost of Equity
The CAPM model was used to estimate the cost of equity with the following formula:
!!"#"$%&
（
##'#"
）
The risk-free rate (Rf) is referred to current China 10 Years Government Bond Yield,
2.6%. The unlevered betas were selected from the three main business industries in
Chinese market, which are Auto & Truck industry with beta of 1.13, Electronics
Table 9 - The inputs of cost of equity
Source: Author estimates
Cost of Equity (CAMP model)
Rf2.6%
Corporate effective tax rate 12.5%
Unlevered β (Automobiles and related
products business)
1.13
Unlevered β (Mobile handset components,
assembly service business)
0.65
Unlevered β (Batteries and Photovoltaic
business)
0.57
Auto % of total revenue 51.90%
Mobile % of total revenue 40.49%
Battery % of total revenue 7.29%
Unlevered β 0.89
Levered β0.97
Equity risk premium 5.62%
Ke8.07%
17
(Consumer & Office) industry with beta of 0.65, Green & Renewable Energy industry
with beta of 0.57. The final unlevered beta, 0.89, which is weighted by different
business percentage of total revenue. Then, the levered beta with value of 0.97 is
calculated by following formula:
(%$"(%%&
（
)$
（
)'*
）
&+
,
）
For equity risk premium, considering BYD’s main business is in China, the market
return only takes into account the China region. Referring the data from Market-Risk-
Premia, the equity risk premium in China is 5.62% in August of 2022. As a result, it
is estimated that the cost of equity is 8.07%.
Cost of Debt
The cost of debt is estimated by three different ways, the first way is the average
value of the past five years effective interest rate, the cost of debt is 4.5%. The
second way is risk free rate plus estimated default spread released by Damodaran
Data. Considering BYD belong to a large manufacturing firm type, the estimated
company’s interest coverage ratio is 3.54 in 2022, the rating is A3/A-, the
corresponding spread is 1.33%. As a consequence, the cost of debt is 3.97%. The
last way is calculated by BYD’s weighted average corporate bond yield, 4.8%
(appendix 8). Total valuation models adopted 4.8% considering it represents for the
next few years level of cost of debt.
Capital structure
The capital structure is calculated in market value, the equity value is CNY 666.045
billion on the basis of Yahoo finance on September 30, 2022. The market value of
debt is estimated by following formula:
-.(/0(+12*"34*1516*&
7
)' )
8
)$!&
9
'!()*
!&
:
$+12*
8)$!&9'!()*
The years, 1.64, is weighted-average maturity of debt which is calculated according
to BYD’s corporate bond (appendix 8).
Weighted Average Cost of Capital
The WACC is estimated by above estimations, the effective tax rate is estimated by
historical 2019 to 2021 average ratio of 12.5%. Then the final value is calculated as
following formula:
;<==",
,$+&!!$+
,$+&!&&8)'*9
Finally, the estimated WACC is 7.73%. Then, the unlevered cost of capital is
calculated by Modigliani & Miller Model:
!%"!#8)'*&+ 8+$,99
>> , the value is
7.82%.
Perpetuity Growth Rate
The perpetuity growth rate (g) is estimated by following equation:
?5/@*A(5B*1"51C4D16*E14*(5B*1&51*F54(/4(1GFC*H
The reinvestment rate equals net capital reinvestment divided by NOPAT. The net
capital reinvestment is composed by CAPEX minus depreciation & amortization and
then plus the increase in non-cash working capital. At last, it is estimated that the
perpetuity growth rate is 3.43% (appendix 10). In addition, other three methods are
Cost of Debt
Method 1:
Kd4.5%
Method 2:
Interest coverage ratio 3.54
Rating A3/A-
Spread 1.3%
Kd3.97%
Method 3:
Weighte d av erage Kd4.8%
Table 10 - The inputs of cost of debt
Source: Author estimates
Table 11 -
The Capital structure
Source: Author estimates
Capital Structure (Market Values)
Market Value of Equity 666,045,000
Weighted-average maturity of debt 1.46
Market Value of Debt 64,383,038
E/(E+D) 91.19%
D/(D+E) 8.81%
D/E 9.67%
18
calculated as the reference of growth rate. The first one is the sustainable growth
rate (SGR) (appendix 10), also known as the PART model, which equal retention
rate times ROE, the Du-Pont analysis is used when calculate the ROE. The
estimated growth rate is 2.75%. The second one is simply referred to the forecasted
China GDP growth and inflation rate released by PWC in August 2022, the estimated
growth rate is in a range of 2% to 4.9% (appendix 10). The last one is the Fisher
equation that estimate the growth rate is 5.98%. In conclusion, considering all of the
consequence above, a middle value of 3% is estimated in valuation models.
Valuation Approaches
Two traditional methods including Discounted Cash Flow Valuation and Relative
Valuation were adopted. In DCF model, three different approaches according to
three dimensions were used for calculation, the WACC method, the equity method,
and the APV method.
In WACC method (appendix 11), the FCFF was calculated by net operational profit
after tax plus non-cash charges and then minus investments in working capital and
long-term investments. Assuming that this company will operate and generate
cashflow at a constant rate forever, the Gordon Growth Model was adopted to
estimate the terminal value with the formular as following:
I15EC4BJ(.BJF1"K=KK&8)$L9
;<=='L
Then, the present value of FCFF was discounted by WACC of 7.73% which was
estimated previously. As a result, the enterprise value of CNY 918.89 billion was
calculated and then adjusted cash & cash equivalents, debt, and other non-
operational items to get the equity value of CNY 899.48 billion. Finally, the price
target for the end of 2022YE is CNY 315.14 per share, representing an upside
potential of 25.1% on the basis price of CNY 252.01 on September 30, 2022.
The equity method (appendix 11) is based on the equity cash flow and discounted
by cost of equity. The calculated price target for the end of 2022YE is CNY 291.82
per share, representing an upside potential of 15.8% on the basis price of CNY
252.01 on September 30, 2022.
The APV method (appendix 11) is discounted by unlevered cost of capital and then
plus the value created by debt. The calculated price target for the end of 2022YE is
CNY 314.88 per share, representing an upside potential of 24.9% on the basis price
of CNY 252.01 on September 30, 2022.
In addition, the relative valuation (appendix 12) was performed as a supplementary
approach to assist to make a more objective investment recommendation. The
company's main business includes automobiles, batteries, mobiles, and other
businesses, it is considered that the departmental valuation method is more
reasonable. For auto segment, the EV business is in a high-speed growth period and
concentrate on expanding market share, the PS valuation was used. Three EV
companies in China including Lio, Li Auto, and Xpeng were selected as comparable
companies. The average PS ratio is 3.3x, corresponding to BYD's market value of
CNY 796.13 billion in the end of 2022YE. For battery business, it is in the period of
capacity expansion, there has an uncertainty for the profitability. Therefore, the PS
valuation was also used. The CATL, Gotion High-tech, and EVE Energy was
selected from battery industry. The average PS ratio is 3.9x, corresponding to BYD's
19
market value of CNY 98.86 billion in the end of 2022YE. The PE valuation was used
due to the mobile business is stably developing. The peer companies are luxshare
Precision Industry, Goertek, and Lens Technology. The average PE ratio is 18.9x,
corresponding to BYD's market value of CNY 49.27 billion in the end of 2022YE.
Totally, the equity value of CNY 944.25 billion is the sum of three segments value,
the corresponding price target is CNY 330.82 per share, which is upside of 31.3%
compare with the price of CNY 252.01 on September 30, 2022.
Profitability
Several profit targets dropped significantly in 2021 even though the total revenue
increased about 40% YoY growth. It is mainly because that the aggressive pricing
strategy was adopted to increase its market share and the raw material price
increased in upstream market. The gross margin and EBITDA margin is expected to
be steady in 3.1% CAGR and 6,8% CAGR respectively in the forecasted period. The
net profit margin is expected to surpass the peak ratio in 2020 by reaching 5.8% in
2027(Figure 38). In terms of the return ratios (Figure 39), the scale effect of
economies is becoming obvious due to continuously expanding in automobile and
battery reproduction. The ROA is expected to grow sharply with CAGR of 35.2%
from 1.6% in 2022 to 7.1% in 2027, while the ROE is expected to increase in 35.5%
CAGR. The ROIC is expected to increase from 5.4% in 2022 to 23.4% in 2027.
According to the financial results released in the first half of 2022: the net profit
attributable to owners of parent was CNY3.59 billion, representing a YoY growth of
206.35%; the net profit margin was 2.61%; the EPS was CNY1.24. Even though still
under the impact of COVID-19 and continuously increased raw material price, the
performance of BYD indicated that it gradually transformed from “increased sales
volume but not profit” to “increased in both sales volume and profit”.
Efficiency
It is the first time that the company’s cash conversion cycle reached negative 72
days in 2021, which is a milestone of efficiency management. It is the impact of
continuously shorting period of account receivable, from 289 days in 2017 to 61 days
in 2021, with CAGR of -25.1%. The whole cash conversion cycle is expected to keep
a negative level during the forecasted period, reaching negative 26 days in
2027(Figure 40). Moreover, it is expected that BYD will generate revenues from total
assets with more efficiency: the total asset turnover shows a sharp increase from
0.7x in 2021 to 0.9x in 2022, and then gradually reach to 1.2x in 2027, representing
the CAGR of 5.8%.
Liquidity
The current ratio is expected to decline from 0.97x in 2021 to 0.82x in 2023(Figure
41), showing a CAGR of -8%. On one side, the shrinkage of this ratio is expected to
continue in 2022 and 2023 because of the increasing short-term debt, in order to
guarantee the business expansion. On the other side, the trade receivable is
expected to remain at a low level under the assumption that the trade receivables
collection period will keep the same efficient level of 61 days in 2021. After 2023, the
current ratio is expected to continuously steady increase and reach to 0.97x by the
end of 2027. The cash ratio shows a similar trend with current ratio (Figure 41), but
the CAGR is -10%, lower than increase rate of current ratio.
7. Financial Analysis
25.9%
15.0% 17.5%
14.3%
6.9% 9.5%
3.9% 1.7% 5.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
A 2019 A 2 020 A 2 021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027
Net Income Gross margine EBI TDA Margin Net Profit Margin
Figure 38 - The net income and profit margins
Source: Author estimates
1.3%
7.1%
3.8%
26.8%
4.1%
23.4%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
A 2 019 A 2020 A 2 021 F 2 022 F 2 023 F 2024 F 2 025 F 2026 F 2 027
ROA ROE ROIC
Figure 39 - The return ratios
Source: Author estimates
84
19
-72
-42 -36 -32 -29 -27 -26
0.6
0.8 0.7
0.9
1.0
1.1 1.2 1.2 1.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-80
-60
-40
-20
0
20
40
60
80
100
A 2019 A 2020 A 2 021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027
Cash Conversion Cycle (Days) Total ass et turn over (x)
Figure 40 - The efficiency analysis
Source: Author estimates
0.97
0.92
0.82
0.97
0.29
0.21
0.05
0.12
0.00
0.20
0.40
0.60
0.80
1.00
1.20
A 2 019 A 2 020 A 2 021 F 2022 F 2 023 F 2 024 F 2 025 F 2 026 F 2 027
Current Ratio Cash Ratio
Source: Author estimates
Figure 41 - The liquidity analysis
20
Solvency
The company’s debt level has been decreasing year by year. The debt-to-equity ratio
decreased from 121.4% in 2019 to 32.4% in 2021. According to short-term debt
assumption mentioned above, it is expected the short debt will increase in 2022 and
2023 and then keep the same level in the rest forecasted years. The long-term debt
will be rolled over than previous 3-year average value. The net debt to EBITDA ratio
droped sharply from 4.1x in 2019 to -0.8x in 2021(Figure 42), then it is expected to
increase to 1.1x in 2023 mainly due to the increase of debt. The interest coverage
ratio is expected to decline from 0.28x in 2022 to 0.03x in 2027, representing a
CAGR of -37.9%. In conclusion, the ratios variation trend indicate that BYD is
expected to have a good solvency capacity to fulfill its financial obligations.
Operational Risks
Cash flow risk (OR1) | With the continuous expansion of company size and
business, BYD need more cash to invest in CAPEX. Past performance shows that
the cash flow increased quickly since 2020 (Figure 43). However it is expected to
decrease due to the business expansion in the near future. Moreover, the current
forecast is based on the assumption that the revenue will grow as expectation, so
that the cash flow will be significantly influenced if revenue growth is slower. In
addition, the cash flow risk is also reflected in the annual reports of 2021 and mid-
year report of 2022, saying that the cash and cash equivalents cannot cover the
short-term debt and payables due within a year.
R&D risk (OR2) | With the coming period of rapid technology iteration, there is a risk
that the company’s technological leadership could be surpassed by the other EV
automobile enterprises. Moreover, there is another risk that the outflow of core
technical talents. The number of company’s R&D personnel had reached 40
thousand by the end of 2021, representing a YoY growth of 31.52%. If the internal
incentives are inadequate, the core technical talents may consider the other
opportunities in rival companies. In consequence, the training, incentive, and
retention of core technical personnel will be the foundation of maintaining long-term
competition in the future.
Automotive quality management risks (OR3) | The quality is closely related to
automobile safety, because the EV area needs higher safety requirements
compared with traditional fuel vehicles. As is known, the charging issues and battery
technologies have posed some serious safety challenges to the industry. In addition,
BYD announced to recall about 22-thousand-unit defective cars in 2021 due to the
slow update of warning data question, resulting in the failure to warn timely possible
safety risks through the remote data platform.
Economic and Market Risks
GDP Growth (EMR1) | As mentioned before, the China’s GDP growth rate shows
an extremely unstable growth trend since first quarter of 2020 due to COVID-19,
which fell down to -6.9% in 2020 Q1th from normal growth rate of 5.8% in 2019 Q4th.
After that, in first quarter of 2021, the rate has reached over 18%, which is the highest
in nearly past 30 years, because of the different policy compared with lockdown in
8. Investment Risks
4.1
-0.8
1.1
-0.3
0.55 0.28 0.03
-2. 0
-1. 0
0.0
1.0
2.0
3.0
4.0
5.0
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
A 2019 A 2 020 A 2021 F 2022 F 2023 F 2024 F 2 025 F 2026 F 2027
Debt Net Debt-to-EBITDA (x) Inter est Coverage Ratio (x)
Figure 42 - The solvency analysis
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
2017 2018 2019 2020 2021 Mid-year of
2022
CASH AND CASH EQUIVALENTS Short-term debt and payables
Figure 43 - The cash and cash equivalents
Source: Author estimates
High
EMR3
Medium Hig h
OR3 OR1 EMR2 PRR1
Medium
PRR2 EMR1
Medium Low
OR2
Low
Low Medium Low Medium Me dium High High
PROBABILITY
IMPACT
Table 12 - The risk matrix
Source: Author analysis
Source: Author estimates
21
2020. However, the rate shows a continuously downtrend since then, and even down
to an ultra-low growth rate of 0.4% in second quarter of this year. In the future, the
specific state of China’s economic development is unknow, but overall it is expected
to face huge challenges.
Industry Competition (EMR2) | A number of companies have joined in EV industry
in order to take a share of the cake. Besides the sort of traditional fuel companies
are turning to produce EV as BYD, there have been many new some companies in
China, such as XPENG, NIO, and LEADING IDEAL etc., that are specialized in
manufacturing EV. Beyond that, some Chinese internet giants such as Huawei,
Alibaba, and Tencent etc. have directly or indirectly joined the battle. In addition, the
global industry giant TESLA should be noticed. In general, the competition of China's
EV industry is flourishing and the Matthew effect will be more and more significant.
The rising of upstream raw material price risk (EMR3) | If the cost pressure that
comes from the rising of upstream raw materials price cannot be transferred to
consumers, the company’s profit margin will be compressed. For example, the price
of lithium iron carbonate has risen more than expected in 2022, then the company's
cost pressure increases, leading to the less forecasted earnings than expected.
Political and Regulatory Risks
Government subsidies cut down risks (PRR1) | BYD booked CNY638 million in
government subsidies in the first half of 2022, accounting for 16.23% of total net
profit. However, as mentioned before, the subsidy policy is being cut down and will
be terminated by the end of this year. As a consequence, the termination of subsidy
will have an impact on profitability of BYD. In addition, a survey report by iiMedia
research (Figure 44) indicates that the subsidy acts as an important purchasing
factor for EV users, which means that the subsidy policy will possiboly has a
significant influence on automobile companies revenue in the near future, even if the
EV is shifting to marketization.
Chinese strict lockdown policy for pandemic (PRR2) | China has taken a series
of strict measures to prevent and control pandemic since 2020. However, these
measures indeed have enormous impact on China’s economy. For example,
Shanghai, a very important city in China, was locked down from April 1 to May 22
2022 due to suddenly serious of pademic. According to relevant analysis, the direct
and hidden costs is estimated up to CNY 4.07 trillion, which is close to the annual
GDP of Shanghai in 2021 (CNY4.32 trillion). Beyond that, the sharply decrease of
GDP growth rate in second quarter of this year is the another obvious evidence for
China's economic impact.
Risks to Price Target
The sensitivity analysis is performed to quantify possible scenarios in YE2022 for
enterprise value and price target, according to changes on WACC and g under DCF
valuation model (Table 14 and Table 15). If the g keeps constant, the price target
will decrease about 5% on the base of previous price target when WACC increase
20bp. Similarly, if the WACC keeps constant, the price target would increase by
about 7% with 30bp of increase in g.
Source: data.iimedia.cn
68.70% 67.10%
61.90%
50.10%
41.10% 38.60%
32.90%
13.60%
5.50%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Safety
Charging time
maxim um endurance
Price
Subsidy
Em iss io n
App ear ance
promotion strength
Fasion
Figure 44 -
The purchasing factors of EV users
in China in 2022
22
Table 13 -
EV sensitivity to g and WACC
Source: Author analysis
Table 15 - Price target sensitivity to g and WACC
Source: Author analysis
Monte Carol Simulation
The Monte Carol Simulation was performed as a supplementary method to test the
price target sensitivity. Variables of the g subject to uniform distribution and WACC
obeys normal distribution. A total of 50,000 simulation predictions were made by
Oracle Crystal Ball, and the result show that there has 67.41% certainty to
recommend buying this equity, which is consistent with valuation conclusions. In this
simulation, the mean price is CNY326.62, 29.6% upside potential compare with
close price of CNY 252.01 on September 30, 2022.
Table 16 – Monte Carol Simulation
Source: Author analysis
EV 1.8% 2.1% 2.4% 2.7% 3.0% 3.3% 3.6% 3.9% 4.2%
6.9% 882,538,334 935,118,440 994,709,226 1,062,812,981 1,141,394,237 1,233,072,370 1,341,419,253 1,471,435,513 1,630,344,276
7.1% 844,427,546 892,637,856 947,002,675 1,008,780,877 1,079,599,792 1,161,600,641 1,257,658,778 1,371,727,817 1,509,397,345
7.3% 809,121,074 853,459,347 903,226,795 959,485,650 1,023,594,577 1,097,319,843 1,183,000,558 1,283,801,400 1,404,112,081
7.5% 776,323,427 817,215,696 862,918,821 914,334,836 972,606,320 1,039,202,301 1,116,043,818 1,205,692,255 1,311,640,408
7.7% 741,075,232 778,425,073 819,977,764 866,484,995 918,889,079 978,387,461 1,046,525,338 1,125,331,780 1,217,525,220
7.9% 717,266,410 752,317,383 791,192,098 834,552,358 883,222,037 938,239,935 1,000,934,749 1,073,033,786 1,156,824,558
8.1% 690,591,381 723,156,233 759,148,964 799,140,888 843,837,744 894,121,706 951,110,198 1,016,239,902 1,091,389,560
8.3% 665,584,202 695,903,896 729,306,948 766,288,900 807,457,487 853,566,304 905,561,354 964,646,637 1,032,378,548
8.5% 642,095,271 670,381,168 701,449,284 735,731,344 773,753,264 816,162,329 863,764,341 917,575,311 978,894,789
8.7% 619,992,333 646,430,570 675,386,733 707,238,514 742,443,113 781,559,334 825,277,463 874,460,359 930,200,975
Perpetuity growth rate (g)
Cost of Capital (WACC)
Price per Share 1.8% 2.1% 2.4% 2.7% 3.0% 3.3% 3.6% 3.9% 4.2%
6.9% CNY 302 .4 CNY 32 0 .8 CNY 34 1 .7 CNY 365.6 CNY 3 9 3.1 CNY 425 .2 CNY 463.2 CNY 5 08.7 CNY 5 64.4
7.1% CNY 289 .1 CNY 30 5 .9 CNY 32 5 .0 CNY 346.6 CNY 3 71.4 CNY 4 00.2 CNY 4 3 3.8 CNY 47 3 .8 CNY 52 2 .0
7.3% CNY 276 .7 CNY 29 2 .2 CNY 30 9 .7 CNY 329.4 CNY 3 51.8 CNY 3 77.7 CNY 4 0 7.7 CNY 44 3 .0 CNY 48 5 .1
7.5% CNY 265 .2 CNY 27 9 .5 CNY 29 5 .5 CNY 313.5 CNY 3 34.0 CNY 3 57.3 CNY 3 8 4.2 CNY 41 5 .6 CNY 45 2 .7
7.7% CNY 252 .8 CNY 26 5 .9 CNY 28 0 .5 CNY 296.8 CNY 3 15.1 CNY 3 36.0 CNY 3 5 9.9 CNY 38 7 .5 CNY 41 9 .8
7.9% CNY 244 .5 CNY 25 6 .8 CNY 27 0 .4 CNY 285.6 CNY 3 02.6 CNY 3 21.9 CNY 3 4 3.9 CNY 36 9 .1 CNY 39 8 .5
8.1% CNY 235 .2 CNY 24 6 .6 CNY 25 9 .2 CNY 273.2 CNY 2 88.8 CNY 3 06.5 CNY 3 2 6.4 CNY 34 9 .2 CNY 37 5 .6
8.3% CNY 226 .4 CNY 23 7 .0 CNY 24 8 .7 CNY 261.7 CNY 2 76.1 CNY 2 92.3 CNY 3 1 0.5 CNY 33 1 .2 CNY 35 4 .9
8.5% CNY 218 .2 CNY 22 8 .1 CNY 23 9 .0 CNY 251.0 CNY 2 64.3 CNY 2 79.1 CNY 2 9 5.8 CNY 31 4 .7 CNY 33 6 .2
8.7% CNY 210 .4 CNY 21 9 .7 CNY 22 9 .8 CNY 241.0 CNY 2 53.3 CNY 2 67.0 CNY 2 8 2.3 CNY 29 9 .6 CNY 31 9 .1
Perpetuity growth rate (g)
Cost of Capital (WACC)
SELL
REDUCE
HOLD/NEUTRAL
BUY
STRONG BUY
Table 14 - Investment recommendation on
the basis of medium risk
Source: Author analysis
23
Appendices
Appendix 1: Consolidated Statement of Financial Position
2017
CNY’000
2018
CNY’000
2019
CNY’000
2020
CNY’000
2021
CNY’000
2022
CNY’000
2023
CNY’000
2024
CNY’000
2025
CNY’000
2026
CNY’000
2027
CNY’000
Actuals Actuals Actuals Actuals Actuals Forcast Forcast Forcast Forcast Forcast Forcast
Property, plant and equipment 47,830,718 49,484,582 55,296,009 58,201,882 75,545,128 100,392,774 131,878,283 133,796,506 142,412,246 158,630,378 183,798,270
Investment properties 66,707 90,066 96,902 94,217 87,500 87,500 87,500 87,500 87,500 87,500 87,500
Right-of-use assets - - 7,241,013 7,527,852 11,233,301 13,389,298 16,222,758 19,927,497 24,754,017 31,026,093 39,162,222
Prepaid land lease payments 5,844,857 6,277,475 - - - - - - - - -
Goodwill 65,914 65,914 65,914 65,914 65,914 65,914 65,914 65,914 65,914 65,914 65,914
Other intangible assets 8,217,623 10,272,067 11,887,635 10,107,776 10,049,904 12,904,348 16,590,189 21,347,886 27,488,391 35,413,739 45,643,707
Prepayments, other receivables and other
assets
3,372,240 4,233,402 5,303,154 2,670,118 18,378,849 16,238,394 20,917,768 26,954,555 34,744,425 44,798,811 57,778,869
Due from joint ventures and associates - - - - 174,762 - - - - - -
Long-term receivables 1,049,938 2,134,405 1,240,340 1,804,913 1,168,475 4,160,934 5,359,979 6,906,848 8,902,928 11,479,269 14,805,285
Investments in joint ventures 2,442,867 2,793,681 3,105,145 4,442,807 6,814,229 6,814,229 6,814,229 6,814,229 6,814,229 6,814,229 6,814,229
Investments in associates 622,044 767,199 955,030 1,022,781 1,090,772 1,090,772 1,090,772 1,090,772 1,090,772 1,090,772 1,090,772
Available-for-sale investments 4,185,460 - - - - - - - - - -
Equity investments at fair value through
other comprehensive income
- 1,620,969 1,922,304 1,420,080 2,913,836 2,913,836 2,913,836 2,913,836 2,913,836 2,913,836 2,913,836
Other non-current financial assets - 83,509 46,608 284,896 233,972 233,972 233,972 233,972 233,972 233,972 233,972
Deferred tax assets 1,580,032 1,388,314 1,514,934 1,768,975 1,913,316 1,913,316 1,913,316 1,913,316 1,913,316 1,913,316 1,913,316
Total non-current assets 75,278,400 79,211,583 88,674,988 89,412,211 129,669,958 160,205,288 204,088,517 222,052,830 251,421,546 294,467,828 354,307,892
Inventories 19,872,804 26,330,345 25,571,564 31,396,358 43,354,782 77,564,183 99,915,644 128,750,909 165,959,940 213,985,639 275,986,081
Contract assets - 6,300,286 6,986,619 5,346,105 8,493,382 17,340,530 22,337,503 28,784,019 37,102,605 47,839,404 61,700,448
Trade receivables 53,276,716 44,240,183 40,134,545 39,307,896 35,593,138 63,453,822 81,739,139 105,328,735 135,768,754 175,057,689 225,779,102
Receivable financing 6,211,017 13,436,836 7,009,379 8,862,340 8,743,126 8,743,126 8,743,126 8,743,126 8,743,126 8,743,126 8,743,126
Prepayments, other receivables and other
assets
6,609,997 7,823,768 6,078,455 5,911,685 15,038,908 21,715,784 27,973,563 36,046,624 46,464,104 59,909,945 77,268,321
Due from joint ventures and associates 256,941 224,854 5,135,699 3,434,820 2,137,183 2,137,183 2,137,183 2,137,183 2,137,183 2,137,183 2,137,183
Due from other related parties - - - - 49,006 49,006 49,006 49,006 49,006 49,006 49,006
Completed property held for sale 6,689,770 3,950,676 3,365,916 2,900,852 2,211,967 2,211,967 2,211,967 2,211,967 2,211,967 2,211,967 2,211,967
Derivative financial instruments 1,095 451 34,345 24 31,600 31,600 31,600 31,600 31,600 31,600 31,600
Pledged deposits 323,249 1,583,861 837,921 429,041 528,128 528,128 528,128 528,128 528,128 528,128 528,128
Restricted bank deposits 643,487 317,177 137,865 277,491 109,109 109,109 109,109 109,109 109,109 109,109 109,109
Cash and cash equivalents 8,935,954 11,151,057 11,674,297 13,738,498 49,819,860 57,077,367 15,877,431 20,915,164 33,507,256 57,068,335 96,329,072
Total current assets 102,821,030 115,359,494 106,966,605 111,605,110 166,110,189 250,961,804 261,653,399 333,635,571 432,612,778 567,671,132 750,873,142
TOTAL ASSET 178,099,430 194,571,077 195,641,593 201,017,321 295,780,147 411,167,093 465,741,916 555,688,401 684,034,324 862,138,959 1,105,181,033
Trade and bills payables 39,527,332 45,222,321 35,340,662 49,791,630 79,043,879 146,957,374 181,979,910 227,314,859 286,857,554 364,713,677 466,246,886
Other payables and accruals 11,942,702 13,012,545 10,648,738 15,536,057 49,410,880 48,646,887 62,665,329 80,750,298 104,087,146 134,208,017 173,093,600
Lease liabilities - - 219,040 168,507 248,428 442,886 570,511 735,159 947,620 1,221,843 1,575,861
Advances from customers 4,700,280 2,300 2,000 7,500 1,300 1,300 1,300 1,300 1,300 1,300 1,300
Derivative financial instruments 119,261 8,559 34,307 57,541 - - - - - - -
Contract liabilities - 3,469,114 4,502,139 8,185,888 14,721,038 26,243,995 33,806,656 43,563,125 56,152,874 72,402,464 93,380,436
Deferred income 512,900 615,367 - - - - - - - - -
Interest-bearing bank and other
borrowings
45,648,670 50,768,422 54,061,858 27,644,643 22,939,346 45,878,692 34,409,019 34,409,019 34,409,019 34,409,019 34,409,019
Due to joint ventures and associates 615,659 1,308,349 1,025,545 2,398,177 1,636,828 1,636,828 1,636,828 1,636,828 1,636,828 1,636,828 1,636,828
Due to other related parties 130,608 79,286 110,857 137,566 84,150 84,150 84,150 84,150 84,150 84,150 84,150
Tax payable 328,013 228,085 259,607 564,498 862,531 1,127,094 1,451,886 1,870,894 2,411,583 3,109,450 4,010,385
Provision 1,471,511 1,854,627 1,824,194 1,938,689 2,355,564 2,355,564 2,355,564 2,355,564 2,355,564 2,355,564 2,355,564
Total current liabilities 104,996,936 116,568,975 108,028,947 106,430,696 171,303,944 273,374,770 318,961,153 392,721,196 488,943,637 614,142,312 776,794,030
Interest-bearing bank and other
borrowings
10,862,346 13,924,380 21,916,487 23,625,954 10,789,958 18,777,466 18,777,466 18,777,466 18,777,466 18,777,466 18,777,466
Lease liabilities - - 548,680 843,286 1,415,291 2,523,116 3,250,196 4,188,190 5,398,577 6,960,824 8,977,661
Deferred tax liabilities 610,005 66,308 102,864 393,150 609,566 962,703 1,240,122 1,598,017 2,059,844 2,655,924 3,425,455
Deferred income 1,672,402 1,921,949 2,232,101 2,269,176 4,481,036 2,508,176 2,508,176 2,508,176 2,508,176 2,508,176 2,508,176
Other liabilities 254 1,395,486 211,094 3,001,147 2,936,143 2,936,143 2,936,143 2,936,143 2,936,143 2,936,143 2,936,143
Total non-current liabilities 13,145,007 17,308,123 25,011,226 30,132,713 20,231,994 27,707,604 28,712,103 30,007,992 31,680,206 33,838,533 36,624,901
Equity attributable to owners of the parent 55,004,194 55,198,289 56,762,289 56,874,274 95,069,671 99,602,858 105,783,238 117,271,238 140,717,395 179,760,983 239,443,246
Share capital 2,728,143 2,728,143 2,728,143 2,728,143 2,911,143 2,911,143 2,911,143 2,911,143 2,911,143 2,911,143 2,911,143
Reserves 48,380,251 48,574,346 49,639,554 53,051,539 92,158,528 96,691,715 102,872,095 114,360,095 137,806,252 176,849,840 236,532,103
Perpetual loans 3,895,800 3,895,800 4,394,592 1,094,592 - - - - - - -
Non-controlling interests 4,953,293 5,495,690 5,839,131 7,579,638 9,174,538 10,481,860 12,285,422 15,687,976 22,693,086 34,397,132 52,318,857
Total equity 59,957,487 60,693,979 62,601,420 64,453,912 104,244,209 110,084,719 118,068,660 132,959,214 163,410,480 214,158,114 291,762,103
TOTAL LIABILITIES AND EQUITY 178,099,430 194,571,077 195,641,593 201,017,321 295,780,147 411,167,093 465,741,916 555,688,401 684,034,324 862,138,959 1,105,181,033
Balance Sheet
24
Appendix 2: Common-size Consolidated Statement of Financial Position
2017
CNY’000
2018
CNY’000
2019
CNY’000
2020
CNY’000
2021
CNY’000
2022
CNY’000
2023
CNY’000
2024
CNY’000
2025
CNY’000
2026
CNY’000
2027
CNY’000
Actuals Actuals Actuals Actuals Actuals Forcast Forcast Forcast Forcast Forcast Forcast
Property, plant and equipment 26.86% 25.43% 28.26% 28.95% 25.54% 24.42% 28.32% 24.08% 20.82% 18.40% 16.63%
Investment properties 0.04% 0.05% 0.05% 0.05% 0.03% 0.02% 0.02% 0.02% 0.01% 0.01% 0.01%
Right-of-use assets 0.00% 0.00% 3.70% 3.74% 3.80% 3.26% 3.48% 3.59% 3.62% 3.60% 3.54%
Prepaid land lease payments 3.28% 3.23% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Goodwill 0.04% 0.03% 0.03% 0.03% 0.02% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01%
Other intangible assets 4.61% 5.28% 6.08% 5.03% 3.40% 3.14% 3.56% 3.84% 4.02% 4.11% 4.13%
Prepayments, other receivables and other
assets
1.89% 2.18% 2.71% 1.33% 6.21% 3.95% 4.49% 4.85% 5.08% 5.20% 5.23%
Due from joint ventures and associates 0.00% 0.00% 0.00% 0.00% 0.06% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Long-term receivables 0.59% 1.10% 0.63% 0.90% 0.40% 1.01% 1.15% 1.24% 1.30% 1.33% 1.34%
Investments in joint ventures 1.37% 1.44% 1.59% 2.21% 2.30% 1.66% 1.46% 1.23% 1.00% 0.79% 0.62%
Investments in associates 0.35% 0.39% 0.49% 0.51% 0.37% 0.27% 0.23% 0.20% 0.16% 0.13% 0.10%
Available-for-sale investments 2.35% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Equity investments at fair value through
other comprehensive income
0.00% 0.83% 0.98% 0.71% 0.99% 0.71% 0.63% 0.52% 0.43% 0.34% 0.26%
Other non-current financial assets 0.00% 0.04% 0.02% 0.14% 0.08% 0.06% 0.05% 0.04% 0.03% 0.03% 0.02%
Deferred tax assets 0.89% 0.71% 0.77% 0.88% 0.65% 0.47% 0.41% 0.34% 0.28% 0.22% 0.17%
Total non-current assets 42.27% 40.71% 45.33% 44.48% 43.84% 38.96% 43.82% 39.96% 36.76% 34.16% 32.06%
Inventories 11.16% 13.53% 13.07% 15.62% 14.66% 18.86% 21.45% 23.17% 24.26% 24.82% 24.97%
Contract assets 0.00% 3.24% 3.57% 2.66% 2.87% 4.22% 4.80% 5.18% 5.42% 5.55% 5.58%
Trade receivables 29.91% 22.74% 20.51% 19.55% 12.03% 15.43% 17.55% 18.95% 19.85% 20.31% 20.43%
Receivable financing 3.49% 6.91% 3.58% 4.41% 2.96% 2.13% 1.88% 1.57% 1.28% 1.01% 0.79%
Prepayments, other receivables and other
assets
3.71% 4.02% 3.11% 2.94% 5.08% 5.28% 6.01% 6.49% 6.79% 6.95% 6.99%
Due from joint ventures and associates 0.14% 0.12% 2.63% 1.71% 0.72% 0.52% 0.46% 0.38% 0.31% 0.25% 0.19%
Due from other related parties 0.00% 0.00% 0.00% 0.00% 0.02% 0.01% 0.01% 0.01% 0.01% 0.01% 0.00%
Completed property held for sale 3.76% 2.03% 1.72% 1.44% 0.75% 0.54% 0.47% 0.40% 0.32% 0.26% 0.20%
Derivative financial instruments 0.00% 0.00% 0.02% 0.00% 0.01% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00%
Pledged deposits 0.18% 0.81% 0.43% 0.21% 0.18% 0.13% 0.11% 0.10% 0.08% 0.06% 0.05%
Restricted bank deposits 0.36% 0.16% 0.07% 0.14% 0.04% 0.03% 0.02% 0.02% 0.02% 0.01% 0.01%
Cash and cash equivalents 5.02% 5.73% 5.97% 6.83% 16.84% 13.88% 3.41% 3.76% 4.90% 6.62% 8.72%
Total current assets 57.73% 59.29% 54.67% 55.52% 56.16% 61.04% 56.18% 60.04% 63.24% 65.84% 67.94%
TOTAL ASSET 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Trade and bills payables 22.19% 23.24% 18.06% 24.77% 26.72% 35.74% 39.07% 40.91% 41.94% 42.30% 42.19%
Other payables and accruals 6.71% 6.69% 5.44% 7.73% 16.71% 11.83% 13.45% 14.53% 15.22% 15.57% 15.66%
Lease liabilities 0.00% 0.00% 0.11% 0.08% 0.08% 0.11% 0.12% 0.13% 0.14% 0.14% 0.14%
Advances from customers 2.64% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Derivative financial instruments 0.07% 0.00% 0.02% 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Contract liabilities 0.00% 1.78% 2.30% 4.07% 4.98% 6.38% 7.26% 7.84% 8.21% 8.40% 8.45%
Deferred income 0.29% 0.32% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Interest-bearing bank and other
borrowings
25.63% 26.09% 27.63% 13.75% 7.76% 11.16% 7.39% 6.19% 5.03% 3.99% 3.11%
Due to joint ventures and associates 0.35% 0.67% 0.52% 1.19% 0.55% 0.40% 0.35% 0.29% 0.24% 0.19% 0.15%
Due to other related parties 0.07% 0.04% 0.06% 0.07% 0.03% 0.02% 0.02% 0.02% 0.01% 0.01% 0.01%
Tax payable 0.18% 0.12% 0.13% 0.28% 0.29% 0.27% 0.31% 0.34% 0.35% 0.36% 0.36%
Provision 0.83% 0.95% 0.93% 0.96% 0.80% 0.57% 0.51% 0.42% 0.34% 0.27% 0.21%
Total current liabilities 58.95% 59.91% 55.22% 52.95% 57.92% 66.49% 68.48% 70.67% 71.48% 71.23% 70.29%
Interest-bearing bank and other
borrowings
6.10% 7.16% 11.20% 11.75% 3.65% 4.57% 4.03% 3.38% 2.75% 2.18% 1.70%
Lease liabilities 0.00% 0.00% 0.28% 0.42% 0.48% 0.61% 0.70% 0.75% 0.79% 0.81% 0.81%
Deferred tax liabilities 0.34% 0.03% 0.05% 0.20% 0.21% 0.23% 0.27% 0.29% 0.30% 0.31% 0.31%
Deferred income 0.94% 0.99% 1.14% 1.13% 1.51% 0.61% 0.54% 0.45% 0.37% 0.29% 0.23%
Other liabilities 0.00% 0.72% 0.11% 1.49% 0.99% 0.71% 0.63% 0.53% 0.43% 0.34% 0.27%
Total non-current liabilities 7.38% 8.90% 12.78% 14.99% 6.84% 6.74% 6.16% 5.40% 4.63% 3.92% 3.31%
Equity attributable to owners of the parent 30.88% 28.37% 29.01% 28.29% 32.14% 24.22% 22.71% 21.10% 20.57% 20.85% 21.67%
Share capital 1.53% 1.40% 1.39% 1.36% 0.98% 0.71% 0.63% 0.52% 0.43% 0.34% 0.26%
Reserves 27.16% 24.96% 25.37% 26.39% 31.16% 23.52% 22.09% 20.58% 20.15% 20.51% 21.40%
Perpetual loans 2.19% 2.00% 2.25% 0.54% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Non-controlling interests 2.78% 2.82% 2.98% 3.77% 3.10% 2.55% 2.64% 2.82% 3.32% 3.99% 4.73%
Total equity 33.67% 31.19% 32.00% 32.06% 35.24% 26.77% 25.35% 23.93% 23.89% 24.84% 26.40%
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Balance Sheet (Common-Size)
25
Appendix 3: Income Statement
Appendix 4: Common-size Income Statement
2017
CNY’000
2018
CNY’000
2019
CNY’000
2020
CNY’000
2021
CNY’000
2022
CNY’000
2023
CNY’000
2024
CNY’000
2025
CNY’000
2026
CNY’000
2027
CNY’000
Actuals Actuals Actuals Actuals Actuals Forcast Forcast Forcast Forcast Forcast Forcast
Revenue from Rechargeable Batteries and
Photovoltaic
8,442,131 8,681,073 9,718,500 11,704,632 15,402,042 25,132,833 30,492,522 36,995,190 44,884,580 54,456,418 66,069,493
Revenue from Mobile handset components, assembly
service
39,707,908 41,341,000 52,522,290 59,354,468 85,545,672 109,550,187 140,290,481 179,656,646 230,069,140 294,627,616 377,301,501
Revenue from Automobiles and related products 54,500,575 71,768,852 59,537,327 81,957,889 109,659,458 241,250,808 313,626,050 407,713,865 530,028,024 689,036,432 895,747,361
Revenue from Corporate and others 000452,195 692,746 762,021 838,223 922,045 1,014,249 1,115,674 1,227,242
TOTAL REVENUE 102,650,614 121,790,925 121,778,117 153,469,184 211,299,918 376,695,848 485,247,276 625,287,745 805,995,994 1,039,236,139 1,340,345,597
COGS (77,623,045) (94,297,641) (93,861,995) (113,706,917) (173,558,975) (320,191,471) (410,033,949) (525,241,706) (673,006,655) (862,565,996) (1,105,785,118)
GROSS PROFIT 25,027,569 27,493,284 27,916,122 39,762,267 37,740,943 56,504,377 75,213,328 100,046,039 132,989,339 176,670,144 234,560,479
Other income and gains 1,153,210 2,110,292 1,974,950 1,700,078 3,009,737 1,928,440 1,928,440 1,928,440 1,928,440 1,928,440 1,928,440
Government grants and subsidies 1,275,807 2,332,863 1,707,657 1,688,142 2,263,485 1,853,591 1,853,591 1,853,591 1,853,591 1,853,591 1,853,591
Selling and distribution expenses (4,925,288) (4,729,481) (4,345,897) (5,055,613) (6,081,678) (10,842,138) (13,966,488) (17,997,161) (23,198,344) (29,911,510) (38,578,105)
Research and development costs (3,739,491) (4,989,360) (5,629,372) (7,464,861) (7,990,974) (13,184,355) (21,461,744) (27,655,520) (35,647,969) (45,963,823) (59,281,434)
Administrative expenses (3,047,734) (3,826,379) (4,232,316) (4,395,630) (5,742,242) (7,015,599) (7,450,159) (7,884,718) (8,319,278) (8,753,838) (9,188,397)
Impairment losses on financial and contract assets 0(332,080) (477,031) (1,166,268) (444,553) (604,983) (604,983) (604,983) (604,983) (604,983) (604,983)
Loss on disposal of financial assets 026,871 (519,134) (299,523) (88,765) (220,138) (220,138) (220,138) (220,138) (220,138) (220,138)
Other expenses (463,645) (568,610) (213,536) (2,056,691) (1,986,631) (1,986,631) (1,986,631) (1,986,631) (1,986,631) (1,986,631) (1,986,631)
Other financial costs (77,256) (517,559) (458,950) (527,501) (280,536) (372,360) (372,360) (372,360) (372,360) (372,360) (372,360)
Share of profits and losses of: Joint ventures (270,959) (277,602) (435,311) (198,955) (211,276) (278,821) (278,821) (278,821) (278,821) (278,821) (278,821)
Associates 46,437 52,878 12,535 12,118 65,981 37,990 36,300 32,985 37,075 42,066 37,283
EBITDA 14,978,650 16,775,117 15,299,717 21,997,563 20,253,491 25,819,373 32,690,336 46,860,723 66,179,921 92,402,137 127,868,925
Depreciation (5,759,409) (7,615,308) (8,518,304) (9,603,874) (11,348,260) (13,405,639) (17,734,949) (23,226,076) (23,744,152) (25,457,257) (28,535,796)
Amortization (1,333,086) (1,811,212) (1,321,825) (2,914,802) (2,760,122) (2,134,893) (2,741,261) (3,524,241) (4,534,915) (5,839,337) (7,522,913)
EBIT 7,886,155 7,348,597 5,459,588 9,478,887 6,145,109 10,278,841 12,214,126 20,110,406 37,900,855 61,105,543 91,810,217
Interest expense (2,265,514) (2,962,957) (3,028,457) (2,596,300) (1,627,106) (2,904,729) (2,389,445) (2,389,445) (2,389,445) (2,389,445) (2,389,445)
PROFIT BEFORE TAX 5,620,641 4,385,640 2,431,131 6,882,587 4,518,003 7,374,112 9,824,681 17,720,961 35,511,410 58,716,098 89,420,772
Income tax expense (703,705) (829,447) (312,274) (868,624) (550,737) (924,222) (1,231,360) (2,221,027) (4,450,763) (7,359,084) (11,207,403)
PROFIT FOR THE YEAR 4,916,936 3,556,193 2,118,857 6,013,963 3,967,266 6,449,890 8,593,321 15,499,934 31,060,647 51,357,014 78,213,369
Attributable to:
Owners of the parent 4,066,478 2,780,194 1,614,450 4,234,267 3,045,188 4,956,636 6,603,829 11,911,449 23,869,606 39,467,037 60,105,712
Non-controlling interests 850,458 775,999 504,407 1,779,696 922,078 1,493,253 1,989,492 3,588,485 7,191,041 11,889,977 18,107,657
4,916,936 3,556,193 2,118,857 6,013,963 3,967,266 6,449,890 8,593,321 15,499,934 31,060,647 51,357,014 78,213,369
Income statement
2017
CNY’000
2018
CNY’000
2019
CNY’000
2020
CNY’000
2021
CNY’000
2022
CNY’000
2023
CNY’000
2024
CNY’000
2025
CNY’000
2026
CNY’000
2027
CNY’000
Actuals Actuals Actuals Actuals Actuals Forcast Forcast Forcast Forcast Forcast Forcast
Revenue from Rechargeable Batteries and
Photovoltaic
8.22% 7.13% 7.98% 7.63% 7.29% 6.67% 6.28% 5.92% 5.57% 5.24% 4.93%
Revenue from Mobile handset components, assembly
service
38.68% 33.94% 43.13% 38.68% 40.49% 29.08% 28.91% 28.73% 28.54% 28.35% 28.15%
Revenue from Automobiles and related products 53.09% 58.93% 48.89% 53.40% 51.90% 64.04% 64.63% 65.20% 65.76% 66.30% 66.83%
Revenue from Corporate and others 0.00% 0.00% 0.00% 0.29% 0.33% 0.20% 0.17% 0.15% 0.13% 0.11% 0.09%
TOTAL REVENUE 100.00% 100.00% 100.00% 100. 00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
COGS -75.62% -77.43% -77.08% -74.09% -82.14% -85.00% -84.50% -84.00% -83.50% -83.00% -82.50%
GROSS PROFIT 24.38% 22.57% 22.92% 25.91% 17.86% 15.00% 15.50% 16.00% 16.50% 17.00% 17.50%
Other income and gains 1.12% 1.73% 1.62% 1.11% 1.42% 0.51% 0.40% 0.31% 0.24% 0.19% 0.14%
Government grants and subsidies 1.24% 1.92% 1.40% 1.10% 1.07% 0.49% 0.38% 0.30% 0.23% 0.18% 0.14%
Selling and distribution expenses -4.80% -3.88% -3.57% -3.29% -2.88% -2.88% -2.88% -2.88% -2.88% -2.88% -2.88%
Research and development costs -3.64% -4.10% -4.62% -4.86% -3.78% -3.50% -4.42% -4.42% -4.42% -4.42% -4.42%
Administrative expenses -2.97% -3.14% -3.48% -2.86% -2.72% -1.86% -1.54% -1.26% -1.03% -0.84% -0.69%
Impairment losses on financial and contract assets 0.00% -0.27% -0.39% -0.76% -0.21% -0.16% -0.12% -0.10% -0.08% -0.06% -0.05%
Loss on disposal of financial assets 0.00% 0.02% -0.43% -0.20% -0.04% -0.06% -0.05% -0.04% -0.03% -0.02% -0.02%
Other expenses -0.45% -0.47% -0.18% -1.34% -0.94% -0.53% -0.41% -0.32% -0.25% -0.19% -0.15%
Other financial costs -0.08% -0.42% -0.38% -0.34% -0.13% -0.10% -0.08% -0.06% -0.05% -0.04% -0.03%
Share of profits and losses of: Joint ventures -0.26% -0.23% -0.36% -0.13% -0.10% -0.07% -0.06% -0.04% -0.03% -0.03% -0.02%
Associates 0.05% 0.04% 0.01% 0.01% 0.03% 0.01% 0.01% 0.01% 0.00% 0.00% 0.00%
EBITDA 14.59% 13.77% 12.56% 14.33% 9.59% 6.85% 6.74% 7.49% 8.21% 8.89% 9.54%
Depreciation -5.61% -6.25% -6.99% -6.26% -5.37% -3.56% -3.65% -3.71% -2.95% -2.45% -2.13%
Amortization -1.30% -1.49% -1.09% -1.90% -1.31% -0.57% -0.56% -0.56% -0.56% -0.56% -0.56%
EBIT 7.68% 6.03% 4.48% 6.18% 2.91% 2.73% 2.52% 3.22% 4.70% 5.88% 6.85%
Interest expense -2.21% -2.43% -2.49% -1.69% -0.77% -0.77% -0.49% -0.38% -0.30% -0.23% -0.18%
PROFIT BEFORE TAX 5.48% 3.60% 2.00% 4.48% 2.14% 1.96% 2.02% 2.83% 4.41% 5.65% 6.67%
Income tax expense -0.69% -0.68% -0.26% -0.57% -0.26% -0.25% -0.25% -0.36% -0.55% -0.71% -0.84%
PROFIT FOR THE YEAR 4.79% 2.92% 1.74% 3.92% 1.88% 1.71% 1.77% 2.48% 3.85% 4.94% 5.84%
Attributable to:
Owners of the parent 3.96% 2.28% 1.33% 2.76% 1.44% 1.32% 1.36% 1.90% 2.96% 3.80% 4.48%
Non-controlling interests 0.83% 0.64% 0.41% 1.16% 0.44% 0.40% 0.41% 0.57% 0.89% 1.14% 1.35%
4.79% 2.92% 1.74% 3.92% 1.88% 1.71% 1.77% 2.48% 3.85% 4.94% 5.84%
Income statement (Common-Size)
26
Appendix 5: Cash Flow Statement
2017
CNY’000
2018
CNY’000
2019
CNY’000
2020
CNY’000
2021
CNY’000
2022
CNY’000
2023
CNY’000
2024
CNY’000
2025
CNY’000
2026
CNY’000
2027
CNY’000
Actuals Actuals Actuals Actuals Actuals Forcast Forcast Forcast Forcast Forcast Forcast
Profit before tax 5,620,641 4,385,640 2,431,131 6,882,587 4,518,003 7,374,112 9,824,681 17,720,961 35,511,410 58,716,098 89,420,772
Finance costs 2,342,770 3,480,516 3,487,407 3,123,801 1,907,642 2,904,729 2,389,445 2,389,445 2,389,445 2,389,445 2,389,445
Depreciation 5,759,409 7,615,308 8,518,304 9,603,874 11,348,260 13,405,639 17,734,949 23,226,076 23,744,152 25,457,257 28,535,796
Amortization 1,333,086 1,811,212 1,321,825 2,914,802 2,760,122 2,134,893 2,741,261 3,524,241 4,534,915 5,839,337 7,522,913
Share of profits and losses of joint ventures and
associates
224,522 224,724 422,776 186,837 145,295 240,831 242,520 245,836 241,746 236,754 241,537
Impairment losses on financial and contract assets 10,336 417,245 483,335 1,157,995 444,553 604,983 604,983 604,983 604,983 604,983 604,983
Allowances for assets impairment 242,586 1,103,663 636,031 1,850,159 1,245,549 000000
Recognition of prepaid land lease payments 129,400 143,059 000000000
Lossess or gains on sale of property, plant and
equipment
54,213 (440,995) (10,718) 252,904 114,453 000000
lossess or gains of investments (17,532) (13,615) (22,743) (90,792) (178,577) 000000
Fair value losses/(gains) 118,166 5,470 (9,749) 51,267 (47,356) 000000
Bank interest income (95,783) (187,230) (353,761) (214,613) (631,841) 000000
Other items from operating activities (8,241,905) (5,402,946) (2,071,409) 19,908,554 43,463,233 000000
△ NWC (273,699) 7,060,981 (6,631,968) 25,966,360 61,394,313 35,552,314 27,388,362 35,486,222 46,833,896 61,452,875 80,356,868
Cash generated from operations 7,479,909 13,142,051 14,832,429 45,627,375 65,089,336 26,665,187 33,537,839 47,711,542 67,026,650 93,243,875 128,715,446
Interest received 95,783 187,230 353,761 214,613 631,841 000000
Tax paid (1,207,805) (806,372) (445,183) (449,320) (254,495) (1,421,804) (1,788,258) (2,544,009) (3,573,902) (4,971,821) (6,863,187)
Net cash flows from operating activities 6,367,887 12,522,909 14,741,007 45,392,668 65,466,682 25,243,383 31,749,581 45,167,533 63,452,748 88,272,054 121,852,259
Purchases of items of property, plant and equipment (7,436,202) (10,631,294) (9,528,245) (5,964,464) (9,861,601) (37,669,585) (48,524,728) (24,301,336) (31,324,426) (40,389,128) (52,091,520)
Increase in non-current prepayments (3,917,342) (3,012,775) (7,395,986) (4,247,600) (21,410,143) 000000
Purchases of items of leasehold land included in
right-of-use assets
(814,483) (588,808) (797,080) (239,359) (3,273,197) (2,739,699) (3,529,190) (4,547,701) (5,861,987) (7,558,336) (9,748,297)
Withdrawal of short-term deposits 247,360 ––––000000
Receipt of government grants 166,211 ––––000000
Disposal of subsidiaries –459,784 (5,552) 97,828 222,329 000000
Disposal of joint ventures –10,598 358,685 48 –000000
Disposal of associates 800 ––––000000
Increase in derivative financial instruments –(26,377) –––000000
Additions to other intangible assets (2,625,034) (3,618,923) (2,905,849) (1,322,671) (2,798,668) (4,989,338) (6,427,102) (8,281,938) (10,675,419) (13,764,686) (17,752,881)
Dividend received from equity investments 17,532 45,515 16,440 13,126 2,233 000000
Dividend received from joint ventures and associates 19,368 –34,020 22,690 27,331 000000
Proceeds from disposal of items of property, plant
and equipment and other intangibles assets
213,815 3,936,074 413,119 258,977 826,389 000000
Purchases of equity investments designated at fair
value through other comprehensive income
––––(790,868) 000000
Decrease in equity investments designated at fair
value
13,907 23,922 6,303 77,666 25,960 000000
Acquisition of subsidiaries –(26,872) –––000000
Gain on disposal of financial products 3,966 27,709 11,638 131,786 148,362 000000
Capital contributions to joint ventures and associates (1,010,020) (788,528) (1,073,139) (1,597,014) (2,673,460) 000000
Increase in equity investments at fair value through
profit or loss
(596,602) (40,785) (15,800) (239,800) (62,500) 000000
Increase in financial products –––(1,435,461) (5,786,159) 000000
Net cash flows used in investing activities (15,716,724) (14,230,760) (20,881,446) (14,444,248) (45,403,992) (45,398,621) (58,481,019) (37,130,975) (47,861,832) (61,712,149) (79,592,698)
Proceeds from issue of perpetual loans 3,300,000 0498,792 00000000
Repayment of perpetual loans (3,200,000) 0 0 (3,300,000) (1,100,000) 000000
Perpetual loan interest paid (243,036) (238,400) (241,388) (222,987) (61,600) 000000
△ Interest-bearing bank and other borrowings 14,274,852 9,478,382 9,848,659 (24,494,191) (17,006,426) 30,926,854 (11,469,673) 0000
(Increase)/Decrease in restricted bank deposits and
pledged deposits
(5,712) (1,452,513) 817,510 (73,321) (111,605) 000000
Proceeds from issue of shares 000036,371,791 000000
Shares issue expenses 0000(140,060) 000000
Interest paid (2,419,438) (3,294,620) (3,440,331) (3,244,577) (1,948,323) (2,904,729) (2,389,445) (2,389,445) (2,389,445) (2,389,445) (2,389,445)
Investment from a non-controlling shareholder 0000941,928 000000
Dividends paid to owners of the parent (485,609) (384,668) (556,541) (163,689) (423,449) (423,449) (423,449) (423,449) (423,449) (423,449) (423,449)
Dividends paid to non-controlling shareholders (53,233) (202,505) (150,442) (54,776) (185,931) (185,931) (185,931) (185,931) (185,931) (185,931) (185,931)
Principal portion of lease payments 0 0 (167,700) (153,877) (270,762) 000000
Receipt of non-controlling investments 010,835 1,786 2,800,000 0000000
Acquisition of non-controlling interests 0000(3,046) 000000
Net cash flows (used in)/from financing activities 11,167,824 3,916,511 6,610,345 (28,907,418) 16,062,517 27,412,745 (14,468,498) (2,998,825) (2,998,825) (2,998,825) (2,998,825)
NET INCREASE IN CASH AND CASH
EQUIVALENTS
1,818,987 2,208,660 469,906 2,041,002 36,125,207 7,257,507 (41,199,936) 5,037,733 12,592,091 23,561,080 39,260,737
Cash and cash equivalents at beginning of year 7,111,234 8,935,954 11,151,057 11,674,297 13,738,498 49,819,860 57,077,367 15,877,431 20,915,164 33,507,256 57,068,335
Effect of foreign exchange rate changes, net 5,733 6,443 53,334 23,199 (43,845) 000000
CASH AND CASH EQUIVALENTS AT END OF
YEAR
8,935,954 11,151,057 11,674,297 13,738,498 49,819,860 57,077,367 15,877,431 20,915,164 33,507,256 57,068,335 96,329,072
Cash Flow Statement
27
Appendix 6: Key Financial Ratios
Appendix 7: The New Vehicles Planning of BYD
Appendix 8: Corporate Bonds Information of BYD
A 2017 A 2018 A 2019 A 2020 A 2021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027 Notes
Liquidity Ratios
Current Ratio 0.98 0.99 0.99 1.05 0.97 0.92 0.82 0.85 0.88 0.92 0.97 x
Quick Ratio 0.73 0.73 0.72 0.73 0.70 0.63 0.50 0.52 0.54 0.57 0.61 x
Cash Ratio 0.09 0.11 0.12 0.14 0.29 0.21 0.05 0.05 0.07 0.09 0.12 x
Efficiency Ratios
Days sales in Inventory 71 79 77 75 75 75 75 75 75 75 75 Days
Days of contract asset 0 19 21 13 15 17 17 17 17 17 17 Days
Collection period 189 133 120 93 61 61 61 61 61 61 61 Days
Days of prepayments 24 23 18 14 26 21 21 21 21 21 21 Days
Days of Accounts Payables 141 136 106 118 137 142 137 133 130 128 127 Days
Days of other payable 42 39 32 37 85 47 47 47 47 47 47 Days
Days of contract liabilities 0 10 13 19 25 25 25 25 25 25 25 Days
Days of tax payable 1 1 1 1 1 1 1 1 1 1 1 Days
Cash Conversion Cycle 99 68 84 19 -72 -42 -36 -32 -29 -27 -26 Days
Total asset turnover 0.6 0.6 0.6 0.8 0.7 0.9 1.0 1.1 1.2 1.2 1.2 x
Profitability Ratios
ROA 2.8% 1.8% 1.1% 3.0% 1.3% 1.6% 1.8% 2.8% 4.5% 6.0% 7.1% %
ROE 8.2% 5.9% 3.4% 9.3% 3.8% 5.9% 7.3% 11.7% 19.0% 24.0% 26.8% %
ROIC 6.2% 5.2% 3.7% 7.4% 4.1% 5.4% 6.4% 9.6% 15.4% 20.1% 23.4% %
Gross margine 24.4% 22.6% 22.9% 25.9% 17.9% 15.0% 15.5% 16.0% 16.5% 17.0% 17.5% %
EBITDA Margin 14.6% 13.8% 12.6% 14.3% 9.6% 6.9% 6.7% 7.5% 8.2% 8.9% 9.5% %
EBIT Margin 7.7% 6.0% 4.5% 6.2% 2.9% 2.7% 2.5% 3.2% 4.7% 5.9% 6.8% %
Net Profit Margin 4.8% 2.9% 1.7% 3.9% 1.9% 1.7% 1.8% 2.5% 3.9% 4.9% 5.8% %
R&D Intensity 3.6% 4.1% 4.6% 4.9% 3.8% 3.5% 4.4% 4.4% 4.4% 4.4% 4.4% %
Administration Turnover 3.0% 3.1% 3.5% 2.9% 2.7% 1.9% 1.5% 1.3% 1.0% 0.8% 0.7% %
Solvency Ratios
Debt-to-Equity Ratio 94.3% 106.6% 121.4% 79.5% 32.4% 58.7% 45.0% 40.0% 32.5% 24.8% 18.2% %
Debt Structure 80.8% 78.5% 71.2% 53.9% 68.0% 71.0% 64.7% 64.7% 64.7% 64.7% 64.7% %
Interest Coverage Ratio 0.3 0.4 0.6 0.3 0.3 0.3 0.2 0.1 0.1 0.0 0.0 x
Net Debt-to-EBITDA 3.1 3.1 4.1 1.7 -0.8 0.3 1.1 0.7 0.3 0.0 -0.3 x
Equity to Assets Ratio 33.7% 31.2% 32.0% 32.1% 35.2% 26.8% 25.4% 23.9% 23.9% 24.8% 26.4% %
Brand Model Expected Lunch Time Types
Expected Price
Rang(RMB'000)
Song Pro DM-i 2012.12 compact SUV 138.8 - 163.8
Song Max DM-i 2022.03 MPV 145.8 - 172.8
Destroyer 05 DM-i 2022.03 A-level passenger car 119.8 - 155.8
Han DM-i 2022.03 B-level passenger car 215.8-289.8
Destroyer 07 DM-i 2022 Passenger car Undetermined
Frigate 07 DM-i 2022 Midsize SUV Undetermined
Landing ship series 2023 MPV Undetermined
Xia DM-i 2023 MPV Undetermined
Improved Han model 2022.03 Passenger car 269.8 - 329.8
Yuan plus EV 2022.02 SUV 137.8 - 165.8
Seal 2022Q2 B-level passenger car 200 - 250
Seagull 2023 Passenger car 50 - 100
Sealion 2023 SUV 200 - 300
DENZA D9 2022 MPV 500+
High-end Brand Undetermined 2023 Undetermined Undetermined
BEV (Dynasty + Marine)
DM-i (Dynasty + Marine)
Corporate
bonds
(RMB'000)
Maturity
year
maturity weight
Weighted
Maturity
Yield
Weighted
yield
1,600,000 2022 0 10.6% 0 5.75% 0.61%
1,500,000 2022 0 9.9% 0 4.87% 0.48%
3,000,000 2023 1 19.9% 0.20 5.17% 1.03%
1,000,000 2023 1 6.6% 0.07 4.98% 0.33%
2,500,000 2024 2 16.6% 0.33 4.60% 0.76%
1,000,000 2024 2 6.6% 0.13 4.86% 0.32%
2,500,000 2024 2 16.6% 0.33 4.80% 0.79%
2,000,000 2025 3 13.2% 0.40 3.56% 0.5%
1.46 4.80%
28
Appendix 9: The Battery Production Capacity Planning of BYD (GWh)
Appendix 10: Perpetuity Growth Rate (g)
Method 1:
M"NOPQROSTUOQT(NVTO&NWX
NOPQROSTUOQT(NVTO"+,-./012,3456+
.789:;<0=>
Method 2: PRAT Model:
M"NOTOQTPYQ(NVTO&NWX
NOTOQTPYQ(NVTO"5?=@8ABCD?01EFEG?AGH
.IJE=K
NWX"Z[Y\PT(U[MPQ&]SSOT(T^[QYRO[&_PQVQ`PVa(aORO[VMO
This model under the assumption of the company will not borrowing more debt or raising equity by issuing new
shares.
Method 3: Using the forecasted China’s GDP and inflation rate released by PWC, assuming that the perpetuity
growth rate will along the line with GDP or inflation rate. So, the estimated g is in a range of 2% to 4.9%.
Manufacturing Base Planning capacity Type of batteries Capacity in 2020 Capacity in 2021 Capacity in 2022 Capacity in 2023
Huizhou, Guangdong 2 LFP 2 2 2 2
Shenzhen, Guangdong 14 LFP, MnNiCo ternary 14 14 14 14
Xi'an, Shaanxi 50 MnNiCo ternary, Blade 10 30 50 50
Xining, Qinhai 24 LFP, MnNiCo ternary 10 24 24 24
Guiyang, Guizhou 15 Blade 010 15 15
Bishan, Chongqing 45 LFP, Blade 20 35 45 45
Changsha, Hunan 20 LFP, Blade 10 10 10 20
Bengbu, Anhui 20 Blade 010 20 20
Jinan, Shandong 30 Blade 0 0 15 30
Wuwei, Anhui 40 Blade 0 0 25 40
Yancheng, JiangSu 30 Blade 0 0 15 30
Wuhan, Hubei 20 Blade 0 0 10 20
Shaoxing, Zhejiang 30 Blade 0 0 0 30
Ninbo, Zhejiang 20 Blade 0 0 20 20
Chuzhou, Anhui 20 Blade 0 0 5 20
Fuzhou, Jiangxi 15 Blade 0 0 15 15
Xiangyang, Hubei 30 Blade 0 0 0 30
Changchun, Jilin 45 Blade 0 0 0 45
Taizhou, Zhejiang 22 Blade 0 0 0 22
Nanning, Guangxi 45 Blade 0 0 0 45
Total 537 66 135 285 537
YoY 105% 111% 88%
g=Reinvestment Rate*ROE A 2017 A 2018 A 2019 A 2020 A 2021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027
Terminal period
CAPEX 10,875,719 14,839,025 13,231,174 7,526,494 15,933,466 45,398,621 58,481,019 37,130,975 47,861,832 61,712,149 79,592,698 353,637,254
D&A 7,092,495 9,426,520 9,840,129 12,518,676 14,108,382 15,540,533 20,476,210 26,750,317 28,279,066 31,296,594 36,058,709 185,028,486
ΔNWC 273,699 (603,440) 5,873,187 (20,141,566) (49,435,889) (1,342,914) (5,036,900) (6,650,957) (9,624,865) (13,427,177) (18,356,426) (124,016,693)
EBIT 7,886,155 7,348,597 5,459,588 9,478,887 6,145,109 10,278,841 12,214,126 20,110,406 37,900,855 61,105,543 91,810,217 249,043,984
Tax rate 12.50% 18.90% 12.80% 12.60% 12.20% 12.53% 12.53% 12.53% 12.53% 12.53% 12.53% 12.53%
Reinvestment rate 51.44% 65.44% 169.69% -265.16% -774.78% 277.42% 269.92% 18.55% 26.27% 27.80% 27.42% 20.47%
ROE 8.20% 5.86% 3.38% 9.33% 3.81% 5.86% 7.28% 11.66% 19.01% 23.98% 26.81% 16.77%
g3.43%
PRAT Model A 2017 A 2018 A 2019 A 2020 A 2021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027
Terminal period
Net income (NI) 4,916,936 3,556,193 2,118,857 6,013,963 3,967,266 6,449,890 8,593,321 15,499,934 31,060,647 51,357,014 78,213,369 201,155,403
Revenue 102,650,614 121,790,925 121,778,117 153,469,184 211,299,918 376,695,848 485,247,276 625,287,745 805,995,994 1,039,236,139 1,340,345,597 5,037,577,703
Assets 178,099,430 194,571,077 195,641,593 201,017,321 295,780,147 411,167,093 465,741,916 555,688,401 684,034,324 862,138,959 1,105,181,033 4,580,749,195
Dividends (D) 538,842 587,173 706,983 218,465 609,380 609,380 609,380 609,380 609,380 609,380 609,380 4,484,125
Equity (E) 59,957,487 60,693,979 62,601,420 64,453,912 104,244,209 110,084,719 118,068,660 132,959,214 163,410,480 214,158,114 291,762,103 1,199,141,410
NI/Revenue 4.79% 2.92% 1.74% 3.92% 1.88% 1.71% 1.77% 2.48% 3.85% 4.94% 5.84% 3.99%
Revenue/Assets 57.64% 62.59% 62.25% 76.35% 71.44% 91.62% 104.19% 112.52% 117.83% 120.54% 121.28% 109.97%
Assets/Equity 297.04% 320.58% 312.52% 311.88% 283.74% 373.50% 394.47% 417.94% 418.60% 402.57% 378.80% 382.00%
ROE 8.20% 5.86% 3.38% 9.33% 3.81% 5.86% 7.28% 11.66% 19.01% 23.98% 26.81% 16.77%
Retention Rate 7.30% 4.89% 2.26% 8.99% 3.22% 5.31% 6.76% 11.20% 18.63% 23.70% 26.60% 16.40%
g2.75%
GDP growth A 2017 A 2018 A 2019 A 2020 A 2021 F 2022 F 2023 F 2024 F 2025 F 2026 F 2027
Terminal period
China 6.9% 6.7% 5.9% 2.3% 8.1% 3.80% 5. 00% 4.90% 4.90% 4. 90% 4.90% 4.90%
Inflation rate 1.6% 2.1% 2.9% 2.4% 0.9% 2.1% 2. 7% 2.0% 2.0% 2. 0% 2.0% 2.0%
Between 2% to 4.9%
29
Method 4: Fisher equation:
M"
8
b$M
9
&
8
b$[
9
'b
Appendix 11: The DCF valuation models
Method 1: The WACC method
Method 2: The equity method
Fisher formular F 2022
Projection of Real GDP growth 3.80%
Projection of inflation rate 2.10%
g5.98%
WACC Method F 2022 F 2023 F 2024 F 2025 F 2026 F 2027 Terminal period
(+) Operational income 10,278,841 12,214,126 20,110,406 37,900,855 61,105,543 91,810,217
(-) Tax on operational income (924,222) (1,231,360) (2,221,027) (4,450,763) (7,359,084) (11,207,403)
(=) NOPAT 9,354,619 10,982,766 17,889,379 33,450,092 53,746,459 80,602,813
(+) D&A 15,540,533 20,476,210 26,750,317 28,279,066 31,296,594 36,058,709
(+) Impairments 604,983 604,983 604,983 604,983 604,983 604,983
(-) Changes in Net Working Capital 1,342,914 5,036,900 6,650,957 9,624,865 13,427,177 18,356,426
(-) CAPEX (45,398,621) (58,481,019) (37,130,975) (47,861,832) (61,712,149) (79,592,698)
FCFF (18,555,573) (21,380,160) 14,764,661 24,097,174 37,363,063 56,030,233 1,219,574,022
Present Value of FCFF (18,555,573) (19,845,678) 12,721,357 19,272,190 27,737,186 38,609,781 840,394,244
WACC 7.7%
g3%
Enterprise Value 918,889,079
(+) Cash & cash equivalents 57,077,367
(-) Debt (64,656,158)
(+) Non-operational assets 5,061,124
(-)Non-operational liabilities (6,407,022)
(-)Non-controlling interests (10,481,860)
Equity Value 899,482,530
# shares ('000) 2,854,226
Price Target (31/12/2022) CNY 315.14
Yahoo Finance (30/9/2022) CNY 252.01
Upside 25.1%
Equity Method F 2022 F 2023 F 2024 F 2025 F 2026 F 2027 Terminal period
(+) FCFF (18,555,573) (21,380,160) 14,764,661 24,097,174 37,363,063 56,030,233
Interest 2,904,729 2,389,445 2,389,445 2,389,445 2,389,445 2,389,445
Corporate tax rate 12.5% 12.5% 12.5% 12.5% 12.5% 12.5%
(-) Interests after tax (364,059) (299,477) (299,477) (299,477) (299,477) (299,477)
(+) New borrowings 30,926,854 (11,469,673) 0000
FCFF 12,007,222 (33,149,310) 14,465,184 23,797,697 37,063,586 55,730,756 1,131,380,852
PV of FCFF 12,007,222 (30,672,879) 12,384,659 18,852,766 27,168,623 37,800,294 767,377,504
Ke8.1%
g3%
Equity Value 832,910,966
# shares ('000) 2,854,226
Price Target (31/12/2022) CNY 291.82
Yahoo Finance (30/9/2022) CNY 252.01
Upside 15.8%
30
Method 3: The APV method
Appendix 12: The Relative Valuation
APV Method F 2022 F 2023 F 2024 F 2025 F 2026 F 2027 Terminal period
FCFF (18,555,573) (21,380,160) 14,764,661 24,097,174 37,363,063 56,030,233 1,197,712,409
g3%
Ku7.82%
PV of FCFF (18,555,573) (19,829,780) 12,700,983 19,225,910 27,648,411 38,455,376 822,029,086
Total value of unlevered enterprise
900,229,987
Total Debt 64,656,158 53,186,485 53,186,485 53,186,485 53,186,485 53,186,485
Interest expenses 2,904,729 2,389,445 2,389,445 2,389,445 2,389,445 2,389,445
Corporate tax rate 12.5% 12.5% 12.5% 12.5% 12.5% 12.5%
Tax shield 364,059 299,477 299,477 299,477 299,477 299,477 20,666,336
PV of tax shield 364,059 286,601 274,279 262,487 251,201 240,401 16,589,612
Kd4.5%
Value created by debt 17,904,582
Adjusted present value 918,134,569
(+) Cash & cash equivalents 57,077,367
(-) Debt (64,656,158)
(+) Non-operational assets 5,061,124
(-)Non-operational liabilities (6,407,022)
(-)Non-controlling interests (10,481,860)
Equity Value 898,728,020
# shares ('000) 2,854,226
Price Target (31/12/2022) CNY 314.88
Yahoo Finance (30/9/2022) CNY 252.01
Upside 24.9%
Market Cap P/S
Billion 2022 E
9866.HK NIO 255.758 3.2
2015.HK Li Auto 228.825 3.4
9868.HK Xpeng 125.25 3.3
Average 002594 3.3
300750 CATL 1,237 3.7
002074 Gotion High-tech 68.006 3.1
300014 EVE Energy 192.347 5
Average 002594 3.9
Market Cap P/E
Billion 2022 E
002475 luxshare Precision Industry 274.207 23.7
002241 Goertek 116.428 23.6
300433 Lens Technology 55.355 9.3
Average 002594 18.9
F 2022
241,250,808
25,132,833
2,611,265
40.5%
944,249,346
2,854,226
Price Target CNY 330.82
Yahoo Finance 25/8/2022 CNY 252.01
Upside 31.3%
Equity value
# shares ('000)
Stock code
Company
Mobile business proportion
Revenue from Auto segment
Revenue from Battery segment
Net income from Mobile segment
Relative valuation
Stock code
Auto segment
Company
Battery segment
Mobile segment
31
Appendix 13: Income Statement Forecasting Assumptions
2022 2023 2024 2025 2026 2027
Forcast Forcast Forcast Forcast Forcast Forcast
Revenues:
Rechargeable Batteries and Photovoltaic 63.2% 21.3% 21.3% 21.3% 21.3% 21.3% YoY%
In 2022, forecasted using the 2times of growth ra te in 2021, 63.2%
CAGR. After 2022, forecasted using the historical 2019-2021average
growth rate, 21.3% CAGR.
Mobile handset components, assembly service 28.1% 28.1% 28.1% 28.1% 28.1% 28.1% YoY%
forecasted using the historical 2019-2021average growth rate ,28.1%
CAGR.
Automobiles and related products 120% 30% 30% 30% 30% 30% YoY%
In 2022, forecasted re ferin g to YoY automobile sales growth rate
162.03% in the first half of the year, 120% CAGR. For other
forecasted years, using the Chinese EV market growth rate during
2022- 2027 forecasted by Mordor Intelligence, 30% CAGR
Corporate and others 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% YoY%
Non-recurring items, forecasted using the conservative hypothetical
growth rate, 10% CAGR.
Other income and gains 1,928,440 1,928,440 1,928,440 1,928,440 1,928,440 1,928,440 RMB'000
Historical 2018-2020 Average
Government grants and subsidies 1,853,591 1,853,591 1,853,591 1,853,591 1,853,591 1,853,591 RMB'000
Historical 2017-2021 Average
Expenses
COGS 85.0% 84.5% 84.0% 83.5% 83.0% 82.5% % Rev
Gross margin 15.00% 15.50% 16.00% 16.50% 17.00% 17.50% %
Selling and distribution expenses -2.9% -2.9% -2.9% -2.9% -2.9% -2.9% % Rev
Same percentage of total revenue with 2021, -2.9%
Research and development costs -3.5% -4.4% -4.4% -4.4% -4.4% -4.4 % % Rev
The R&D expenditure accounted for 3.5% of total revenue in the first
quarter of 2022, assuming the same ratio for the full year of 2022. For
the rest of years, assuming the Historical 2019-2021 Average
Administrative cost per employee: # employees 352,092 373,901 395,711 417,520 439,329 461,138 Number
△ Number of employees 63,906 21,809 21,809 21,809 21,809 21,809 Number
Administrative cost per employee -20 -20 -20 -20 -20 -20 RMB'000
Impairment losses on financial and contract
assets
(604,983) (604,983) (604,983) (604,983) (604,983) (604,983) RMB'000
Historical 2018-2021 Average
Loss on disposal of financial assets measured
at amortised cost
(220,138) (220,138) (220,138) (220,138) (220,138) (220,138) RMB'000
Historical 2018-2021 Average
Other expenses (1,986,631) (1,986,631) (1,986,631) (1,986,631) (1,986,631) (1,986,631) RMB'000 In line with 2021
Share of profits and losses of: Joint ventures (278,821) (278,821) (278,821) (278,821) (278,821) (278,821) RMB'000 Historical 2017-2021 Average
Associates 37,990 36,300 32,985 37,075 42,066 37,283 RMB'000 Historical 2017-2021 Average
Deprecitaion and Amortization
Depreciation on PPE 12,821,938 17,039,219 22,383,114 22,708,685 24,170,997 26,923,628 RMB'000
% of PPE (n-1) 17.0% 17.0% 17.0% 17.0% 17.0% 17.0% %
Depreciation on Right-of-use assets 583,701 695,730 842,962 1,035,466 1,286,260 1,612,168
% of Right-of-use assets (n-1) 5.2% 5.2% 5.2% 5.2% 5.2% 5.2%
Amortisation of other intangible assets 2,134,893 2,741,261 3,524,241 4,534,915 5,839,337 7,522,913 RMB'000
% of Intangible assets (n-1) 21.2% 21.2% 21.2% 21.2% 21.2% 21.2% %
CAPEX
Capital expenditure on PPE 37,669,585 48,524,728 24,301,336 31,324,426 40,389,128 52,091,520 RMB'000
as % of total revenue 10.0% 10.0% 3.9% 3.9% 3.9% 3.9% %
Capital expenditure on Right-of-use assets 2,739,699 3,529,190 4,547,701 5,861,987 7,558,336 9,748,297 RMB'000
as % of total revenue 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% %
Capital expenditure on Other intangible assets 4,989,338 6,427,102 8,281,938 10,675,419 13,764,686 17,752,881 RMB'000
as % of total revenue 1.3% 1.3% 1.3% 1.3% 1.3% 1.3% %
Corporate effective tax rate
Corporate effective tax rate 12.5% 12.5% 12.5% 12.5% 12.5% 12.5% % Historical 2019-2021 Average ratio, 12.5%
Historical 2020-2021 Average Depreciation rate, 5.2%
Historical 2018-2021 Average Amortization rate, 21.7%
New 6 vehicle factories and 4battery factories are setting up in 2022,
assuming the CAPEX will be 10% in 2022 and 2023. For rest
forecasted years, assuming will keep a lower ratio,3.9%.
Historical 2017-2021 Average ratio, 0.7%
In line with 2021
Income Statement
Notes
Assumption
Refer to the 12.4% gross margin in the first quarter of 2022, assuming
a15% gross margin for the full year. Then, increase by 0.5% of gross
margin annually from 2023 to 2027 on the basis of the previous year.
BYD expansion rap idly since 2021, it plans increase 6 new vehicle
factories and 4new battery factories in 2020. So, for 2022, forcased
using the same new employee number in 2021, for rest of forecasted
years using historical 2018-2021 average yearly new employees. In
addition, assuming the administrative cost per employee will keep the
same value of RMB20 thousand.
Historical 2018-2021 Average Depreciation rate, 17.0%
32
Appendix 14: Statement of Financial Position Forecasting Assumptions
2022 2023 2024 2025 2026 2027
Forcast Forcast Forcast Forcast Forcast Forcast
NWC
Prepayments, other receivables and other
assets turnover (Non-current portion)
16 16 16 16 16 16 Days Historical 2017-2021 Average
Long-term receivables turnover 4 4 4 4 4 4 Days Historical 2017-2021 Average
Inventories 20.6% 20.6% 20.6% 20.6% 20.6% 20.6% % Rev Historical 2017-2021 Average
Contract assets 4.6% 4.6% 4.6% 4.6% 4.6% 4.6% % Rev Historical 2018-2021 Average
Trade receivables collection period 61 61 61 61 61 61 Days In line with 2021
Prepayments, other receivables and other
assets turnover (Current portion)
21 21 21 21 21 21 Days Historical 2017-2021 Average
Days of trade and bills payables outstanding 142 137 133 130 128 127 Days Similar turenover with previous years
Days of other payables and accruals
outstanding
47 47 47 47 47 47 Days Historical 2017-2021 Average
Contract liabilities 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% % Rev In line with 2021
Taxes Payable 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% % Rev Historical 2017-2021 Average
Debt
Total Debt(ST+LT) 64,656,158 53,186,485 53,186,485 53,186,485 53,186,485 53,186,485 RMB'000
Interest rate 4.5% 4.5% 4.5% 4.5% 4.5% 4.5% % Historical 2017-2021 Average
ST debt 45,878,692 34,409,019 34,409,019 34,409,019 34,409,019 34,409,019 RMB'000
assuming the short term-debt will increase with the rate of 100% and
50% in 2022 and 2023 respectively on the base of 2021 to guarantee
business expansion. Then in line with 2023
LT debt 18,777,466 18,777,466 18,777,466 18,777,466 18,777,466 18,777,466 RMB'000
Assuming the long-term debt will be rolls over of previous 3-year
average value
Equity
Profit for the year attribute to owners of the
parent
76.8% 76.8% 76.8% 76.8% 76.8% 76.8%
Dividends paid to owners of the parent
Historical 2017-2021 Average
Dividends paid to owners of the parent 423,449 423,449 423,449 423,449 423,449 423,449 % Profit In line with 2021
Dividends paid to non-controlling shareholders 185,931 185,931 185,931 185,931 185,931 185,931 % Profit In line with 2021
Others
Lease liabilities 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% % Rev
Current portion 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% %
Non-current portion 85.1% 85.1% 85.1% 85.1% 85.1% 85.1% %
Provision 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% % Rev In line with 2021
Deferred income 135% 135% 135% 135% 135% 135% % Subsidies
The movements in deferred income related to government grants and
subsidies. Assuming the historical 2017-2021 average ratio
Deferred tax liabilities 0.26% 0.26% 0.26% 0.26% 0.26% 0.26% % Rev Historical 2017-2021 Average
forecasted using same proporation of revenue in 2021, 0.79. Then,
allocated by fixed proporation to current and non-current
Statement of Financial Position
Notes
Assumption
33
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34
Disclosures and Disclaimer
This report is published for educational purposes by Master students and does not constitute an offer
or a solicitation of an offer to buy or sell any security, nor is it an investment recommendation as
defined by Article 12º A of the Código do Mercado de Valores Mobiliários (Portuguese Securities
Market Code). The students are not registered with Comissão de Mercado de Valores Mobiliários
(CMVM) as financial analysts, financial intermediaries or entities/persons offering any service of
financial intermediation, to which Regulamento (Regulation) 3º/2010 of CMVM would be applicable.
This report was prepared by a Master’s student in Finance at ISEG – Lisbon School of Economics and
Management, exclusively for the Master’s Final Work. The opinions expressed and estimates
contained herein reflect the personal views of the author about the subject company, for which he/she
is sole responsible. Neither ISEG, nor its faculty accepts responsibility whatsoever for the content of
this report or any consequences of its use. The report was supervised by Prof. Paulo Francisco, who
revised the valuation methodologies and the financial model.
The information set forth herein has been obtained or derived from sources generally available to the
public and believed by the author to be reliable, but the author does not make any representation or
warranty, express or implied, as to its accuracy or completeness. The information is not intended to
be used as the basis of any investment decisions by any person or entity.
Recommendation System
Level of Risk
SELL
REDUCE
HOLD/NEUTRAL
BUY
STRONG BUY
High Risk
0%≤
>0% & ≤10%
>10% & ≤20%
>20% & ≤45%
>45%
Medium Risk
-5%≤
>-5% & ≤5%
>5% & ≤15%
>15% & ≤30%
>30%
Low Risk
-10%≤
>-10% & ≤0%
>0% & ≤10%
>10% & ≤20%
>20%
