Following a triple-digit jump in net profit in the second quarter, BYD's third-quarter results ushered in even stronger growth, which is expected to push the company's annual earnings to finally bottom out.
On October 29, BYD released its latest earnings report, and the third-quarter net profit attributable to shareholders of the listed company is 1.75 billion yuan, a sharp increase of 1362.66%, which is BYD's best single-quarter profit performance since its listing.
BYD expects its cumulative net profit to reach RMB4.2 billion to RMB4.6 billion in 2020, which means BYD's full-year earnings will leave the previous three years of consecutive declines and rebound from the bottom.
BYD's net profit reached RMB 5.05 billion in 2016, the highest since its IPO. However, its net profit fell consecutively in 2017, 2018, and 2019 to RMB 4.07 billion, RMB 2.78 billion, and RMB 1.61 billion, respectively.
Although its first-quarter earnings fell sharply on the impact of Covid-19, BYD's net profit for the first three quarters was RMB3.41 billion, up 116.83% year-on-year, thanks to a boost from the second and third quarters, which was its best profit performance in the same period in the past four years.
Previously, BYD was thought to be heavily reliant on government subsidies. According to its latest results, government subsidies included in current profit and loss amounted to RMB 1 billion in the third quarter, but its net profit excluding non-recurring gains and losses still amounted to RMB 1.577 billion, up 1,130.25 percent year-on-year.
BYD's net profit for the first three quarters of the year was higher than its performance in August, when it had initially expected RMB2.8 billion to RMB3.0 million, up 77.86% to 90.56% year-on-year.
And then on October 13, BYD raised its expectation from RMB 3.4 billion to RMB 3.6 billion, mainly due to the rapid growth of the company's car sales, as well as the expansion of the scale of mobile phone components and assembly business.
Corresponding to the increase in net profit, BYD's revenue for the third quarter was RMB 44.52 billion, an increase of 40.72% year-on-year, while the total revenue for the first three quarters was RMB 105 billion, an increase of 11.94% year-on-year.
BYD's net cash flow from operating activities in September was RMB 13.13 billion, up 122.66% year-on-year, while net cash flow from operating activities from January to September was RMB 28.66 billion, up 647.87% year-on-year.
However, in the case of a number of car companies to increase cost control, BYD's operating costs and expenses in the first three-quarters of the same period, except for management expenses fell slightly by 1.9%. Among them, research and development expenses in the first three quarters increased by 27.4% year-on-year.
Automotive and related products are BYD's most important business. According to BYD's 2019 financial report, the revenue ratios of its automotive and related products and mobile phone components and assembly businesses are relatively close at 49.53% and 41.79%, respectively; however, the difference in gross margin between the two is relatively large, at 21.88% and 9.35%, respectively.
In addition, BYD expanded its mask business this year in response to the demand for medical supplies under Covid-19, which also contributed to the incremental volume. "The mask contribution is definitely there, but the expansion of the main business volume is the most critical driver. "BYD insiders told the Economic Observer.
"In the third quarter of 2020, the domestic Covid-19 prevention and control situation continues to improve, the automotive segment business to achieve resilient growth, especially new energy vehicle sales to achieve a rapid bottoming out. "BYD announcement shows.
BYD in July ushered in the first year-on-year growth in sales this year and continued into August and September. In the third quarter, BYD's cumulative sales were 110,347 units, up 2.4 percent year-on-year.
Among them, BYD's fuel-vehicle segment saw a 10.38% year-on-year increase in cumulative sales from January to September, driven by the SUV Song series, but the new-energy vehicle segment fell 42.4% year-on-year.
Affected by Covid-19 and subsidy rollback and other factors, China's new energy vehicles overall decline in the first half of this year, until July only to return to positive.
BYD's new energy vehicles sold 1,981 units in September, up 45.3% year-on-year, the first growth of the year.
This year, BYD has many layouts in the field of new energy vehicles, including the launch and external supply of blade batteries, a number of new cars on the market, and the spin-off of core components.
According to BYD's announcement, Han and the revamped flagship model Tang are the main growth drivers of the company's new energy passenger car business.
In addition, BYD's power battery business returned to second place with an installed capacity of 1.07 GWh in September, up 110.75% year-on-year.
BYD's mobile phone components and assembly business has also been frequently favorable this year.
As the main company in this business, BYD Electronics, a Hong Kong-listed company with 65.76% shareholding in BYD, recorded a turnover of RMB 51.517 billion in the first three quarters of this year, up 34.16% year-on-year; earnings attributable to equity owners of the parent company were RMB 4.334 billion, up 322.23%.
However, according to a report issued by Morgan Stanley, which estimates that BYD Electronics is generating about 50% of its profits from the mask business this year, it believes that this is unsustainable.
BYD believes the company's sales of both fuel and new energy vehicles will continue to grow in the fourth quarter, as well as the share of major customers in its handset components and assembly business.
So far this year, BYD has been much sought after by the capital, with its share price rising by more than 232% during the year. On October 30, 2020, BYD closed at 159.81 yuan, with a market capitalization of 436 billion yuan, another record high since its IPO, holding first place in A-share automakers.
Equally sought-after car companies include NIO, Li Auto, XPeng, Tesla, and others, whose valuations easily surpassed many traditional car companies.