2021Q3 Earnings Report highlights for BYD 1211.HK

Here is my highlight of Q3/2021 earnings report for BYD $BYD COMPANY(01211)$ , $BYD Co., Ltd.(BYDDF)$ , $BYD Co., Ltd.(BYDDY)$

<++> are positive developments

<??> are potential areas of concerns

Currency is RMB$

Notable highlights:

• <++> operating income +21.98% QoQ and +38.25% (9 months from beginning of year compared to same period last year)
• <??> net profit -27.5% QoQ and -28.43% (9 months from beginning of year compared to same period last year)
• <??> Basic EPS is 0.44 for last quarter and 0.85 (9 months from beginning of year compared to same period last year). This is down ~ 28%++ from previous quarter and 9 months from 2020.
• Govenement grant totalling 9 months is about $1.5 billion - this income will be lost once government remove this.
• <++> Balance Sheet - monetary fund/cash has increased from $14.445B from 31Dec2020 to $36.174B 30Sep2020
• <++> Development expenses was reduced from $4.8B to $2.0B due to conversion of internal R&D projects into tangible assets when they are ready for intended use.
• <++> Balance Sheet - Debentures payable reduced from $8.88B to $1.99B. Debentures are long term security (liability) payable within one year.
• <??> though revenue from operations of last 9 months has increased by 38.25% but the cost of operations has increased by 51.81% - meaning lesser profit margin with notable increase in automobile and mobile phone business
• <++> Gain of $256B from gains on disposal of assets
• <??> inventory increase from $31.9B to $40.6B (from 31Dec2020 to 30Sep2020). Inventory increase can be due to production increase but it can be worrisome if the inventory increase was due to products lacking demand. Inventory storage is a running costs for the company. the more and longer inventory stays in storage, the more it will reduce the profits.
• <++> Construction in progress has increased from $6.1B to $13.7B which will imply increment in the operational capacity expected.
• <++> Between 31Dec2020 to 30Sep2021, total assets increased from $201B to $251B (almost 25%) and Total liability increased from $136B to $160B (17.6% increase). Good that the assets grow more than liabilities, Current liabilities is $141B that is lesser than current assets $145B. <??> Personally, I will prefer for cash on hand $36B to be more than current liabilities of $141B.
• <++> For quarter ending 30Sep2020, free cashflow has increased from $12.321B to $32.659B from previous quarter.
• <??> BYD has also raised another round of capital $1.7B. This will dilute the stocks but it is to fund their capital investment without taking on more loans. with over $32B in cash, we should be expecting more capital investment

Despite the drop in earnings, BYD has displayed great fundamentals. The energy crisis in China (where there are rationing) will mean that Q4 figures maybe rocky. But BYD is one of the fastest growing battery manufacturer in the world. Given the recent challenges of battery fire involving the batteries supplied by LG Chem (to GM), BYD is poised to overtake LG Chem as the #2 battery manufacturer by early 2022, trailing only behind CATL. As the only vertically integrated auto manufacturer in the world who produces their own battery and chops, BYD will have more “control” over their production compared to the other auto makers.

News about shares issue:

<Bloomberg> Chinese car and battery maker BYD Co. raised about $1.78 billion in a share placement, a term sheet showed. The Shenzhen-based company sold 50 million H-shares at HK$276 ($35.50) each, a 6.9% discount to its closing price on Friday, according to terms of the deal obtained by Bloomberg News Saturday. Bloomberg previously reported the pricing to be between HK$273.5 and HK$279.5.

How to set up trade for BYD

from the 26 Oct 2021 earnings, the price has started to fall. It is likely to continue the fall in the coming week. Thanks to the good fundamentals and great prospects, we can consider adding BYD 1211.HK or BYDDF or BYDDY to our portfolio as an energy/EV play. Tesla has a worthy competitor from Asia and NIO is not the only one leading the charge. Let us do our own due diligence before we invest. Here is wishing all good health and happy investing ahead.

@Tiger Stars