Maintain "Buy" and the TP of HK$300.00. BYD’s (the "Company") sales in 2024 were better than expected, and profits are expected to increase due to economies of scale. The EPS for 2024-2026F are raised to RMB14.20 (+2.25), RMB18.27 (+2.95), and RMB22.15 (+3.21). As the industry leader in the field of NEVs, the Company's earnings performance certainty is one the strongest during the industry consolidation process. We give the Company a 14.5x 2025F PE and maintain "Buy" rating with TP of HK$300.00.
　　The "trade-in for new" policy was implemented again, and new models boost sales growth. On 8 Jan., the National Development and Reform Commission and the China Ministry of Finance issued a notice on the implementation of large-scale equipment renewal and consumer goods trade-in policies in 2025, which mentioned expanding the scope of support for automobile scrapping and renewal and improving the subsidy standards for automobile replacement and renewal. Specifically, for consumers who meet the scrapping and renewal requirements, the purchase of fuel vehicles and new energy vehicles will be subsidized by RMB15,000 and RMB20,000, respectively, and for consumers who meet the replacement and renewal requirements, the purchase of fuel vehicles and new energy vehicles will be subsidized by no more than RMB13,000 and RMB15,000, respectively. The policy relay is expected to smooth the fluctuations in demand in the automotive industry. On 7 Jan., the Company's Seal 05 DM-i started pre-sale, and on 8 Jan., the Dynasty series. Xia MPV was officially launched. We expect that with policy support, DM-i 5.0 model transformation and the launch of the BEV E4.0 platform, BYD's sales in 2025 will achieve growth that exceeds the growth rate of the NEV industry in China.
　　Most models will be opened up equal rights for intelligent driving. In Jan. 2024, BYD first publicly released the intelligent vehicle architecture Xuanji (智能 化架构璇玑), planning to invest RMB100 bn in intelligentization, which will be applied to BYD's three major areas of intelligent cockpit, intelligent driving and intelligent chassis to achieve vehicle intelligentization. The Company currently cooperates with NVIDIA, Huawei, Horizon Robotics and other companies to develop intelligent driving solutions. The self-developed intelligent driving solution is expected to be implemented first in 2025. The latest announcement by the Ministry of Industry and Information Technology shows that BYD will add a three-eye vision hardware solution to the registration of multiple new vehicle models in 2025, and it is expected to gradually popularize models above RMB100,000, and popularize mid-to-high-end intelligent driving to consolidate its business fundamentals and break through the mid-to-high-end market.
　　4Q2024 sales performance is expected to increase significantly qoq. BYD achieved net profit of RMB11.6 bn attributable to the Company in 3Q2024, with gross profit margin of 21.89%, an increase of 3.2 ppts qoq, and R&D expenses of RMB13.7 bn, an increase of RMB4.7 bn qoq. The Company recorded vehicle sales of 1.52 mn units in 4Q2024, an increase of 390,000 units qoq. We expect that the effect of economy of scale will boost a high qoq improvement in sales.
　　Risks: 1) The demand for NEVs may be lower than expected; 2) the price war in the NEV industry may continue to intensify.