The Zhitong Finance App learned that Citibank released a research report saying that the net profit of BYD shares (01211) for the third quarter (excluding exchange effects and BYD's electronic contributions) is expected to reach RMB 12.95 billion, supported by strong free cash flow, which is expected to trigger shortfall recovery in the market. The bank maintains the “buy” rating of BYD shares, and the target price for H shares is HK$142.
The bank believes that there are three factors that help establish a lower valuation limit for BYD shares and may put pressure on short positions in the market to close positions:
(1) Policy uncertainty eliminated: In the past week, two key obstacles have been removed — the China-Europe plug-in hybrid agreement statement brought short-term relief, and the export tax rebate reduction policy was finally introduced — and the market's expectations for weak demand in China in the fourth quarter of 2026 are quite sufficient (domestic electric vehicle sales for the fourth quarter of 2026 are expected to decrease 11.3% year-on-year).
(2) Western European exports have limited room to decline in FY2027: Although the quota for hybrid vehicles may be capped at 350,000 vehicles, the bank expects China's electric vehicle exports to Western Europe to remain roughly the same as the same period last year, mainly due to the increase in local production capacity to 400,000 units (compared to 90,000 units in FY2026) — this is a conservative estimate given that the EU's total production capacity is likely to exceed 600,000 vehicles.
(3) The outlook for exports and domestic markets in FY2027 is less pessimistic: Assuming that retail sales of new energy vehicles (NEV) and fuel vehicles (ICE) remained flat and fell 24% year on year (pessimistic scenario), and exports of new energy vehicles and fuel vehicles increased by 45% and 10% year over year, respectively (basic scenario), the bank predicts that passenger car wholesale volume will increase by 5.9% year on year in fiscal year 2027, which is better than the market consensus forecast of a year-on-year decrease of about 5% year-on-year.