[ET Net News Agency, 15 October 2019] UBS Global Research resumed coverage on BYD
Company Limited (01211) with a lower target price of HK$32 (was HK$38 previously) and
maintained its "sell" rating.
The research house believes BYD's electric vehicle (EV) business and associated EV
batteries are its key share price drivers. It acknowledged BYD's market position. However,
UBS said BYD's large and concentrated EV exposure also makes it a victim in an era of
rising competition and declining subsidies.
UBS thinks BYD faces profitability challenges and UBS's 2019-20 earnings are more than
20% below consensus. It noted that BYD's incumbent competitors are at net cash positions,
with modest capex needs and positive free cash flow (FCF). Thus, they can afford
temporarily-poor EV profitability during technology migrations, brand building and
regulatory fulfilment. BYD's lofty debt, diverse business scope, and continuously negative
FCF could undermine its product development relative to the competition. (KL)