UBS: Expects BYD COMPANY (01211) to exceed 2.5 million overseas sales in 2027, reiterates "Buy" rating.

UBS released a research report stating that after participating in the analyst and investor conference for BYD COMPANY (01211), their positive outlook on the company has strengthened. The bank expects BYD Company Limited's overseas sales to exceed 2.5 million units by 2027, achieving sustainable unit profits. In terms of the domestic market, based on the strong demand for second-generation blade battery models, the bank sees further evidence of sales growth and rising profit margins. Regarding the overseas market, UBS pointed out that while concerns about potential reductions in export VAT rebates remain a primary worry for investors and are beyond corporate control, BYD Company Limited has favorable conditions to mitigate the impact. The company has established nearly 1 million units of overseas production capacity, including an annual capacity of 300,000 units in Brazil, which has recently been increased to 25,000 units per month; production has begun at 150,000 units annual capacity in Thailand and 150,000 units in Indonesia; an additional 300,000 units capacity in Hungary is expected to commence production in November or December this year. UBS believes that although initial costs are higher than domestic plants, after 1 to 2 years, the saved logistics costs, which exceed 10,000 RMB per vehicle, along with tariffs of 27% for the EU and 35% for Brazil, will offset the additional costs of localized production. Additionally, as sales volume expands, the sharing of dealer support costs is also expected to improve. In the domestic market, UBS stated that strong demand for fast-charging models is driving sales growth and rising profit margins. Management estimates that there are currently 250,000 undelivered orders, reflected in the mid-year report's pre-receipts, which increased by over 25 billion RMB quarter-on-quarter, meaning dealers have paid nearly 200,000 full payments. New product pricing and combinations are relatively high, coupled with the company's additional monthly increase of 20,000 battery production capacity, are expected to drive sustained improvements in profit margins in the second half of this year. The company aims to establish 20,000 fast-charging stations by the end of this year, with progress in line with expectations, and plans to further build out next year and the year after to drive the domestic market share toward a long-term target of 25%.