Wang Chuanfu: New Energy Vehicles Will See Profit in Three Years

BYD’s return to A-shares is faster than most people expect. The stock market in the Mainland has continued to slump, and BYD has fallen into a slump in performance. However, it still insists on the issuance of A-shares in the market on June 30th. On the same day, BYD (002594) closed at 25.45 yuan, up 41.39%. The performance was better than most analysts expected, and it was a strong daily limit last Friday.

Some analysts pointed out that the first day of BYD's rally was due to the institutional investors' support. In the future, A-shares may face a return to value. However, for BYD, its significance is not only to boost confidence on the first day, but also to ease the financial pressure on the company's recent operations.

The BYD A shares will raise a total of 1.422 billion yuan, which will be mainly invested in new energy business. The future development prospects of the company will also depend on the company's electric vehicle promotion. BYD chairman Wang Chuanfu stated that the company is “faithful” with the development of new energy business. He believes that new energy can generate profits in the next 3 years.

BYD prepared for the return of A shares for three years, but when it officially returned, it may not have thought that the market environment was so bad. From the perspective of the external environment, the overall A-share market is in a downturn as a whole, and it has continued to oscillate; BYD's automotive industry has also ended its rapid growth and is facing negative growth risks.

Accidentally rose 41% on the first day of the listing

For its own sake, BYD fell into a situation of rapid growth in sales volume and profits in the second half of last year, and it has not yet escaped the difficulties. On June 30th, BYD landed the A-shares on the same day and issued a late-quarter first-quarter financial report. The report showed that as of March 31, the company’s net profit attributable to shareholders of the parent company was 267 million yuan, a sharp drop of 84.35% year-on-year. The operating income was 11.71 billion yuan, a year-on-year decrease of 11.6%.

However, BYD's poor first-quarter earnings did not affect the company's share price performance. On June 30th, BYD (002594) A shares were listed on the SME Board of the Shenzhen Stock Exchange. The opening price was reported at 22 yuan, which was 22.22% higher than the issue price of 18 yuan. Then, the stock price rose further. It soared to 43.59% to 25.45 yuan. Breaking down the various unfavorable forecasts of the brokers.

It is reported that on June 30th, the stock price of BYD was mainly enlarged, which should be the support of institutional investors. Prior to this, to ensure that the first day was not broken, BYD did more preparations. The first is to reduce the size of the issue. BYD initially planned to announce that it would issue no more than 100 million shares at the time of its return. The announcement on May 9 adjusted to no more than 79 million shares. The announcement on the Shenzhen Stock Exchange on June 28 showed that BYD’s first online publication was reduced to 6400. Shares.

Followed by the extension of the inquiry time, BYD A shares road show time is equivalent to twice the time of the ordinary new shares. Thirdly, BYD also lowered the issue price. According to the original plan, BYD's initial listed issue price was around 27 yuan, but it was finally set at 18 yuan, and the issuance price-earnings ratio was 20.47 times. Affected by this, BYD's A shares raised a total amount of 1.422 billion yuan, which was 770 million yuan less than the 2.192 billion yuan of financing announced by the original BYD prospectus.

Realize "financing thirst"

BYD (002594) A-shares rose sharply on the first day, which surprised everyone. Not only were brokers not optimistic about this, BYD also had internal concerns. "When it wasn't opened, there was actually a bit of concern, including President Wang Chuanfu. After all, the previous round of inquiry was not as imaginative as it was sought after," said an insider from BYD.

Why face so many difficulties, BYD still insists on A shares? This may be related to its exposure to greater financial pressure. "The weak market must be listed, indicating that companies have reasons for having to list, may be due to funding constraints." Professor Wuhan University of Technology Dong Dengxin said. Xu Minfeng, an analyst in the automotive industry at Zhongyuan Securities, also said that BYD has clearly shown signs of intense funding and has strong financing needs.

The data shows that in 2010, 2009 and 2008, the net profit attributable to shareholders of the parent company of BYD Group was respectively RMB 2.523 billion, RMB 3.794 billion and RMB 1.021 billion. The net profit for 2010 was 33% lower than the same period last year. Due to the change in the sales structure of automobiles, the increase in sales discounts and the increase in costs, the gross profit margin of its automotive business dropped from 25.09% in 2009 to 20.91% in 2010.

The decline in performance has caused the company's financial pressure to increase significantly. According to the BYD Annual Report, by the end of December 2010, BYD had only 1.98 billion yuan in cash on hand, and bank loans that had to be repaid within a year amounted to 11 billion yuan. The data shows that the company's asset-liability ratio rose sharply from 52.96% in 2009 to 60.06%. The balance of short-term loans at the end of 2010 increased by 9.5 billion yuan from the end of 2009, an increase of 3252%. In addition, the company's net cash flow from operating activities as of the end of 2010 was 3.1 billion yuan, a substantial drop of 74% from the 12 billion yuan in 2009.

On the other hand, despite the slowdown in BYD's auto business growth in the past two years, the transcripts are not as bright as they were in the early years, but they have not stopped the rapid expansion of production capacity. On the contrary, such projects as Xi'an No. 2 Plant and Changsha BYD Plant have stepped up implementation. The rapid expansion of production capacity and the huge amount of funds required are one of the reasons why BYD considers the listing of A shares.

The prospect of enterprise development depends on electric vehicles

As a result of the cancellation of domestic auto consumption stimulus policies and the impact of market overdrafts in the past two years, the overall growth rate of the industry has declined sharply this year, with the decline of self-owned brands being even greater; and BYD was not only unable to meet its target due to the channel crisis last year, but also adjusted its business this year. Among them. Under such circumstances, it is difficult for BYD to achieve a substantial growth plan in the short-term, relying solely on traditional fuel vehicles.

BYD has been holding high the banner of electric vehicles since its entry into the automobile industry, but this business has not progressed smoothly. BYD A shares prospectus disclosed that the company’s new energy vehicles have so far sold less than 500 vehicles and sales revenue has been less than 43 million yuan, accounting for only about two-tenths of the total income of the automotive business in 2010.

In the face of doubt, Wang Chuanfu said that BYD's new energy business will only begin to exert its force in the second half of this year. It is reported that during the "Universiade" BYD will provide nearly 500 electric vehicles, 200 electric buses and 300 electric taxis. "Battery bottleneck technology for electric vehicles has been solved, and BYD will be ready for mass production in the next step." Wang Chuanfu said that 2011 should be the first year of BYD's mass production of electric vehicles.

Wang Chuanfu said that the new energy business will bring considerable profits to the company in the next three years.

Compared to Wang Chuanfu's optimism for electric vehicles, some brokers frankly say that the future of new energy is difficult to determine. Wang Liusheng, an automotive analyst at China Merchants Securities, believes that BYD’s new business in new energy vehicles and rechargeable batteries will be difficult to make a profit in the short term. He said that due to the shrinking of traditional businesses and the difficulty of keeping up with new business, this year and next year will be difficult for BYD. period.