BYD Leaps On Record Sales That Value The Chinese EV Maker At 66% Discount To Tesla

BYD Company Limited BYDDF BYDDY shares leaped 7%, their most in two months, Wednesday morning in Hong Kong after saying it would report record quarterly earnings this month.

BYD said that it would make between 9.5 billion RMB ($1.3 billion) and 11.6 billion RMB in net profits in the third quarter, representing an increase of 67% to 102% over the same period last year. China’s largest EV maker estimates that its earnings for Q3 will be 3.29 RMB to 3.97 RMB per share, which values the company at between 15x – 20x forward earnings.

For the first three quarters of 2023 BYD said that it expects earnings to be between 18.3 billion RMB and 20.2 billion RMB, or 7.06 RMB to 7.74 RMB per share, representing an increase of 119% to 142% over the same period last year. That would value the company at a forward P/E of between 24x – 25x.

The company said that its EV sales had hit a “record sales volume” during the period, “ranking first in the world in terms of sales of new energy vehicle(s)”. BYD hinted at strong performance in its handset components business as a result of its partnership deal with Apple Inc AAPL for iOS installations and a rebound in users for Android handsets more broadly. BYD said that its auto divisions and margins showed “strong resilience” in the face of a price war with rival EV maker Tesla Inc TSLA.

BYD made the stock exchange announcement about its earnings, due out October 30, in a Hong Kong Stock Exchange filing late Tuesday evening in Asia.

Recently, there have been ruminations among investors that compared to rivals Tesla, XPeng Inc XPEV, Li Auto Inc LI and Nio Inc NIO, BYD is trading at a significant discount to its EV peers despite showing stronger overall performance.

The company’s latest earnings surprise means that it may be making nearly half of what Tesla is expected to make in net profits, while BYD’s company’s market capitalization is around an eighth of Tesla’s and its P/E multiple trades at around a third of its American EV rival. Part of that discount is a reflection of geopolitical risks of investing in China right now, while another part of it is due to a sharp sell-off for all Hong Kong stocks this year, say analysts.