BYD stock forecast: Will Chinese EV maker recover?

BYD (1211), the Chinese electric vehicle manufacturer, saw its stock price temporarily plummet 12% on speculation that leading investor Warren Buffett was selling his stake in the company.

The rumours started when a 225 million share BYD (1211) stake, which matched the holding of Buffett’s Berkshire Hathaway conglomerate, appeared in Hong Kong’s clearing system.  And they were enough to send the share price of the world’s third largest automaker tumbling from HK306.8 to HK268.2 during mid-July 2022.

Although the BYD stock price has since recovered, what does this mean for the company’s longer-term prospects? In this BYD stock forecast, we take a look at BYD’s recent earnings, examine the broader electric vehicle market, and ask analysts for their predictions.

What is BYD? Facts about the company

BYD’s history can be traced back to 1995 when it started developing rechargeable batteries, with the goal of creating a clean-energy ecosystem that reduces our reliance on fossil fuels. 

Its growth has been rapid. Over the past 27 years it’s transformed from a relatively small start-up with 20 employees, to a global giant employing more than 230,000 people. Overall, the company now has more than 30 industrial parks across six continents and is involved in electronics, automobiles, new energy, and rail transit. 

BYD has been involved in electric vehicles since 2003. The company has focused attention on research and development, with chief designer Wolfgang Egger leading an international team. 

According to Morningstar, the automobile segment contributes about half of company revenue. 

This includes manufacturing and selling electric and internal combustion vehicles, primarily passenger vehicles and buses, as well as low-carbon urban rail transportation products.

BYD stock performance

BYD stock started trading on Hong Kong Stock Exchange (HKEX) in 2002 at RMB 1.00 a share. In 2011 the company also listed in Shenzhen (SZSE), at CNY 18. 

In 20 years, BYD’s share price has grown over 10,000% stock-split adjusted. The stock enjoyed most of its growth since 2020 as the company benefited from the electric vehicle revolution.

The BYD stock price stood at HK74 in July 2020 but is currently (21 July) 284% higher at HK284.4 – and was trading at more than HK300 at the end of June 2022.

Year-to-date, however, the BYD stock price has been rather volatile. It had virtually doubled from a March 2022 low of HK166 to HK331 in early July 2002 before the Warren Buffett rumours hit the news cycle.

Over the past five years the stock has achieved trailing returns of 41.75%, according to Morningstar data to 20 July 2022. In July, BYD was included in the Hang Seng 50 index amid a major index reshuffle. 

Sales overtake rival Tesla

One of the driving factors behind the share price performance has been the sales figures released by BYD in 2022. 

The company has sold substantially more electric vehicles than rival Tesla (TSLA), according to a comparison of figures released by both companies for the first six months of this year.

Tesla delivered 564,743 vehicles during the period – despite ongoing supply chain challenges and factory shutdowns due to Covid-19.

“June 2022 was the highest vehicle production month in Tesla’s history,” it revealed in a statement. 

However, these numbers were beaten by BYD, which had sold 641,350 by the end of June 2022, fuelling the bull case for the BYD stock forecast.

Latest results

BYD has estimated first half net profit will be between RMB 2.8bn and RMB 3.6bn for the six months to the end of June 2022. It pointed out that this result would represent an increase of between 138% and 206% over the corresponding period last year.

In a statement, it emphasised the new energy vehicle industry performed well, despite the macroeconomic downturn, pandemic, a shortage of chips, and raw material price increases.

The dynamic electric car market

Few areas in the world of clean energy are as dynamic as the electric car market, according to the International Energy Agency’s (IEA) global electric vehicle outlook 2022. This may be good news for the BYD stock forecast.

It pointed out that just 120,000 electric cars were sold worldwide in 2012 – but more than that number were sold each week last year.

The study attributed the success to sustained policy support, with public spending on subsidies and incentives for EVs nearly doubling in 2021 to USD $30bn.

China leads the way

The increase in EV sales in 2021 was primarily led by China, which accounted for half of the growth, according to the IEA’s report.

“More vehicles were sold in China in 2021 (3.3 million) than in the entire world in 2020,” it stated. 

The study also noted that electric cars in China are typically smaller than in other markets. 

“This, alongside lower development and manufacturing costs, has contributed to decreasing the price gap with conventional cars,” it added.

BYD stock forecast: Key price targets

What are the latest BYD stock predictions? Well, the consensus analyst BYD stock forecast for 2022 was that the stock’s a ‘buy’, with an average price target of HK317.07, according to Investing.com data, as of 21 July.

According to the algorithmic forecasting of Wallet Investor, BYD stock was expected to rise 35% to HK$383.56 over the coming year. The site’s BYD stock forecast 2025 put the stock at HK582.99.

Looking further ahead, its five year forecast put the stock at HK$769.53, which would represent a 170% premium over the HK$284.4 price at close on 21 July 2022.

Note that analysts and algorithm-based predictions can be wrong. BYD share price forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. Remember that past performance is no guarantee of future returns. And never invest or trade money you cannot afford to lose. 

What do the analysts say?

Danni Hewson, financial analyst at AJ Bell, pointed out that standout investor Warren Buffett’s Berkshire Hathaway group is a prominent backer of the auto group.

Of course, that doesn’t mean to say it’s been problem-free. 

However, these potential downsides need to be viewed against the wider backdrop. 

FAQs

Further reading:

Tesla stock forecast after Bitcoin sell-off and profit slump

Hong Kong’s Hang Seng index adds three new members