China’s battery leader, the epitome of China’s electric vehicle boom, is also undervalued. This is the latest statement from Bernstein, whose analysts this week reiterated their outperform rating on Chinese automaker BYD’s Hong Kong-traded stock. BYD is the world’s second-largest battery maker in terms of installed electric vehicles, shipping 70% more batteries than the third-largest company, according to analysts at Bernstein. “Amid the current pressures in China’s EV market, BYD’s valuation has been compressed and appears to overlook the value and growth potential embedded in BYD’s battery assets,” the report said. “Our analysis shows that the battery division alone is worth almost as much as the market valuation of the entire company.” Mobile phone battery start BYD started as a manufacturer of mobile phone batteries in the 1990s. After the move to cars, the automaker became the leader in EV sales, finally surpassing Tesla last year, thanks to its safety-focused “Blade” battery (launched in BYD’s sporty Hang cars in 2020). In September, BYD announced a utility-grade energy storage system based on Blade batteries. The new system, called Haohan, is cheaper to manufacture than other solutions, Bernstein analysts said. According to the report, BYD’s battery shipments for energy storage systems more than doubled last year, and battery shipments to automakers such as Xiaomi, Xiaopeng and Toyota nearly tripled. Bernstein added that just over half of BYD’s battery shipments were used in the company’s cars, helping the automaker reduce costs. Xiaomi and XPeng each account for 25% of BYD’s external EV battery shipments, analysts said. Overall, BYD’s total battery shipments increased by 47% last year and are expected to increase by 35% this year. Ford sales On Thursday, the Wall Street Journal reported, citing anonymous sources familiar with the matter, that Ford Motor Co. is in talks to buy BYD batteries for some hybrid vehicles. BYD has not commented. “We are in discussions with many companies about many things. We do not comment on rumors or speculation about our business,” a Ford spokesperson said. BYD’s stock price has risen significantly over the past decade, and Ford’s market value of $55 billion is now less than half of BYD’s, at about $115 billion. But recently, the Chinese company’s stock price has fallen over the past few months due to fierce domestic competition and weak sales. But BYD’s battery division alone could be worth $110 billion, Bernstein estimates. Analysts said BYD’s external battery shipments accounted for more than 10% of sales last year and are expected to increase to the mid-teens this year. They forecast domestic car sales to rise 10% this year to 5.4 million units, and overseas sales to rise 4.4% to 1.5 million units. The China Automobile Manufacturers Association said Wednesday that China’s auto market is expected to grow by just 1% this year, as new energy vehicles will increase by 15.2% and exports will increase by 4.3%. New energy vehicles include both battery-only vehicles and hybrid vehicles. Bernstein has a price target of HK$130 ($16.67) on BYD. This is about 30% above the stock’s closing price on Friday. “We expect near-term catalysts from upcoming events. [battery electric vehicle] “Several product launches are planned within the next month, as well as battery technology upgrades,” the analysts said, noting that BYD plans to launch at least 10 new car models this year.
