Overseas sales could be a positive surprise in FY26

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 30 Mar 2026 CMB International Global Markets | Equity Research | Company Update BYD (1211 HK/002594 CH) Overseas sales could be a positive surprise in FY26 China Auto 12-mth Price Performance Source: FactSet Maintain BUY. Despite its 4Q25 earnings miss, we are of the view that the cash dent from shortening payable days could be over now and BYD could be one of the biggest beneficiaries from rising oil price in its overseas markets. We believe BYD’s previous high earnings quality and industry-leading technologies could also lay foundation for its net profit growth in FY26-27E.  4Q25 earnings miss on GPM, finance cost. BYD’s 4Q25 revenue was largely in line with our forecast while GPM narrowed by 0.2ppts QoQ, or 0.6ppts lower than our projection. Such miss was offset by its stringent R&D expenses. On the other hand, BYD’s finance cost (incl. forex loss) and government grants in 4Q25 were both below our prior expectation, leading to a net profit miss of 18% in 4Q25. Net profit per vehicle was about RMB6,900 in 4Q25, about RMB100 lower than that in 3Q25.  Cash flow dent from shortening payable days may be over. BYD’s operating cash flow of RMB59bn in FY25 hit its lowest level since FY21 due to shortened payable days. Its net cash at the end of FY25 was narrowed by about RMB62bn YoY. We estimate that BYD’s interest expense and receivable discounts rose by almost RMB1.3bn YoY in FY25, dragging down its net profit by about 4%. We are of the view that such dent is short-lived, should BYD be able to keep its current payable days.  Overseas markets, energy storage to lift profit. We maintain our FY26E sales volume forecast of 5mn units, with overseas markets contributing 1.5mn units (implying 1% YoY decline for domestic sales volume). We believe BYD could be one of the biggest beneficiaries from rising oil price amid the current geopolitical tension, not only for its overseas NEV sales, but also photovoltaic and energy storage battery sales. We thus project its revenue to rise 9%/8% YoY and GPM to be largely flat at 17.8% in FY26-27E.  Earnings/Valuation. It appears to us that BYD has been more prudent on R&D expenses with only 9% YoY growth and 8.6% capitalization ratio in FY25 (vs. 1.8% in FY24). We expect R&D expenses to rise 3%/2% YoY in FY26-27E. We also expect government grants in FY26-27E to be at a similar level as FY25, given the continuously rising deferred income balance. Accordingly, we project BYD’s net profit to rise 11%/21% YoY to RMB36.3bn/43.8bn in FY26-27E. We maintain our BUY rating and A/H share target price of HK$125/RMB125, based on 23x (prior 20x) our FY27E P/E, to reflect its brighter overseas outlook. Key risks include lower sales volume or margins than we expect, and a sector de-rating. Earnings Summary - 1211 HK (YE 31 Dec) FY23A FY24A FY25A FY26E FY2