Warren Buffett-Backed BYD Has Much Higher Revenue Than Nio, Yet A Similar Market Cap — Analyst Says That Could Change Soon

Chinese automaker BYD Co Ltd’s BYDDFBYDDY price-to-sales ratio is expected to be on par with pure-play electric vehicle maker Nio Inc NIO, as per Citi, reports cnEVpost.

What Happened: Nio has a market cap of $75.9 billion and posted $3.4 billion in revenue in the past four quarters, implying a P/S ratio of 22. In comparison, BYD delivered $27.5 billion in revenue in the past four quarters and has a market cap of $86.2 billion, implying a P/S ratio of 3.

The P/S ratio is a key stock valuation metric calculated by the ratio of a company's market capitalization to its revenue in the most recent year.

See Also: Warren Buffett-Backed BYD Sees EV Sales More Than Double In June, Outdoes Rival Nio By 148%

Why It Matters: The legacy automaker, which is ramping up new energy vehicles in its portfolio, has much higher delivery volumes than the U.S.-listed counterparts such as Nio, Xpeng Inc XPEV, and Li Auto LI, and a lower market cap. A Citi analyst believes BYD will change that situation gradually. 

The analyst expects BYD, which is backed by Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B), to ship 50,000 and 60,000 new energy vehicles in July and August, respectively, and to continue to make growth this year. The brokerage has also forecast BYD’s new energy vehicle sales to be 537,000 vehicles in 2021, in 2022 sales are expected to be 747,000 vehicles and 1 million units in 2023.

The company sold 41,336 new energy vehicles in June, a jump of 192% from a year ago.

Electric vehicle adoption is picking up pace in China. Citi estimates China’s new energy passenger vehicle sales to be 2.8 million units in 2021, up from its previous forecast of $2.5 million. The firm expects China’s electric vehicle penetration to reach 15% by the fourth quarter and 35% by 2025.

Citi maintained a Buy rating on BYD shares and raised its target price on BYD in Hong Kong by 13.9% to HKD 327 from HKD 287.

Price Action: BYD shares closed 0.13% higher at $59.88 on Tuesday.

Read Next: Nio's Next Move In Europe Could Be Battling Tesla In Crucial Market Germany, Indicates Job Post

Photo: Courtesy of BYD