Following a crash, industry analysts weigh in on BYD's situation.

In a recent announcement, Chinese electric vehicle (EV) manufacturer BYD reported its second-quarter results, revealing a 30% year-on-year decrease in net profit to 6.36 billion yuan (approximately €7.6 billion). Despite this profit drop, the company's revenue for the quarter increased by around 14%, reaching a substantial 201 billion yuan (approximately €23.7 billion).

According to Nick Lai, an analyst at JPMorgan, the price cuts implemented by BYD contributed to the profit drop. High dealer discounts and the inclusion of new assistance systems like "Gods Eye" without extra charge were also cited as reasons. Tim Hsiao, an analyst at Morgan Stanley, commented that the second-quarter results fell short of expectations and consensus.

However, the revenue growth for BYD in the second quarter was driven primarily by an increase in sales volume. The company's long-term view remains unchanged, particularly regarding its overseas expansion, as stated by Nick Lai. Capacity expansion in Indonesia, Brazil, and Hungary is ahead of schedule for BYD, further indicating its commitment to global growth.

Nick Lai also expects an improvement in BYD's situation in the second half of the year. Morgan Stanley has a price target of 136 Hong Kong dollars (approximately €15.00) for BYD, and JPMorgan has a target of 150 Hong Kong dollars (approximately €16.50). Jeff Chung of Citigroup, on the other hand, remains extremely optimistic about BYD, with a price target of 233 Hong Kong dollars (approximately €25.60).

The stock of BYD dipped after the release of the second-quarter results but has already started to rebound. Research institutes and analysts generally see further growth potential for BYD's stock, indicating that despite recent rallies, the stock's upside is not yet exhausted. However, specific detailed forecasts vary and depend on broader economic factors.

Jeff Chung believes that BYD's growth is long-term, driven by export trends, increasing global market share, and potential cost reduction in China by 2026. He sees BYD's long-term strategy resulting in the company being a winner in China's price war due to its size, scale effects, and value chain.

Expansion of BYD's dealer network is necessary to improve its visibility, a step that could potentially boost its performance in the future. The stock is currently holding at its current level, and after recovering from a brief dip, it needs to quickly retake the 200-day moving average at 115.42 Hong Kong dollars (approximately 12.65 EUR).

In conclusion, while BYD's second-quarter results were lower than the expectations set by both the company and the consensus of analysts, the company's long-term prospects remain promising. The gross margin for the second-quarter results was at its lowest since Q2/2022, but with ongoing capacity expansions and strategic moves, BYD is well-positioned for future growth.