BYD's first-quarter results were weak but better than feared; Bernstein maintains Outperform

Overview

Bernstein published a company research event commentary on BYD Co Ltd, with the core view that Q1 2026 results were weak but better than the market's worst fears. The report mainly attributes the earnings decline to lower sales volumes, while emphasizing that a better overseas and premium-brand mix, solid per-vehicle profitability, new-model orders, and progress in overseas and external battery businesses could help the market reassess the stock.

Core views

The report maintains a positive view on BYD. Q1 revenue was RMB 150.2bn, down 11.8% year over year and 36.8% quarter over quarter; EV and battery revenue fell 12.5% year over year and 35.6% quarter over quarter, driven by a 30.0% year-over-year and 47.8% quarter-over-quarter decline in sales volume. Despite weak volume, the overseas mix rose from 20.9% in Q1 25 and 26.2% in Q4 25 to 46.6%, while premium-brand mix rose to 12.4%, supporting ASP and gross margin performance better than feared. Net profit was RMB 4.0bn, with a net margin of 2.7%, but net profit per vehicle of RMB 5.7k was above the market expectation of about RMB 4k. The report believes the earnings disclosure could become a clearing event; first-month orders for Song Ultra reached 61,240 units, and Da Tang received 30,000 pre-sale orders within 24 hours. Together with domestic EV market share rebounding to 23% in March, this makes Q2 delivery ramp-up and market-share improvement key catalysts.

Analysis framework

The report uses first-quarter financial breakdowns, sales and mix changes, per-vehicle profitability, expense ratios, market share, new-model orders, overseas registrations, and battery shipments as key evidence, and combines these with a SOTP valuation framework to assess the value of the EV, battery, BYDE handset components and assembly, and semiconductor businesses.

Methodology notes

• Valuation methodsSOTP

  Sum-of-the-parts valuation

  The report values BYD by business segment: the EV business uses DCF, P/E, and EV/sales; the battery business uses DCF and P/E; the handset components and assembly business uses BYDE's current market capitalization; and the semiconductor business references the latest transaction valuation of BYD Semiconductor.

• Valuation methodsDCF

  Discounted cash flow

  Used to assess the long-term cash flow value of the EV and battery businesses.

• Valuation methodsP/E

  Price-to-earnings valuation

  The target price corresponds to about 18x 2026E P/E and is used to cross-check the SOTP result.

• Operating analysisNet profit per car

  Net profit per car

  The report uses net profit per vehicle excluding BYDE to measure the earnings quality of the core auto and battery businesses; it was RMB 5.7k in Q1 26, above the market expectation of about RMB 4k.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 002594.CH / 002594.SS

  A-share listed entity, one of the report's core covered targets

  Strengths

  Strong orders for new models, rising overseas mix, improving premium-brand mix, quarter-over-quarter improvement in EV and battery gross margin, and growth in external battery sales.

  Weaknesses

  Q1 sales volume, revenue, operating profit, and net profit all declined significantly; net margin was under pressure both year over year and quarter over quarter.

  Comparison

  A-shares may be more volatile than H-shares, and A-shares and H-shares may be affected by different market rules.

  Risks

  Sales volume below expectations, product quality and recalls, intensifying competition, technology substitution, and adverse government policies.

• 1211.HK

  H-share listed entity, with both target price and current price provided in the report

  Strengths

  Target price of HK$136.00 implies 31% upside versus the closing price of HK$103.70 on 2026-04-28.

  Weaknesses

  Absolute return over the past 12 months was -16.2%, and relative return versus ASIAX was -60.2%.

  Comparison

  Represents the same equity exposure to BYD Co Ltd as 002594.CH, but with different trading market and volatility characteristics.

  Risks

  Also faces sales, competition, policy, and technology risks.

• BYDE

  Handset components and assembly business, used in SOTP valuation

  Strengths

  The report includes BYDE's current market capitalization in the valuation as part of segment value.

  Weaknesses

  Q1 BYDE net profit was only RMB 28mn, down 95.5% year over year and 91.4% quarter over quarter.

  Comparison

  Compared with the core EV and battery businesses, its Q1 earnings contribution was materially weaker.

  Risks

  Profit volatility in the business could weigh on the group's segment valuation.

• Battery business

  A core BYD business and a source of growth from external sales

  Strengths

  Q1 total battery shipments were 60 GWh, up 14% year over year; external battery shipments grew more than 62%.

  Weaknesses

  EV and battery revenue fell sharply quarter over quarter due to weaker vehicle sales volumes.

  Comparison

  Valued using DCF and P/E, unlike the market-cap method used for the handset components business.

  Risks

  Risks from external OEM and ESS demand, price competition, and technology iteration.

Key data

• Q1 2026 revenueRMB 150.2bnDown 11.8% year over year and 36.8% quarter over quarter.
• Q1 2026 net profitRMB 4.0bnDown 57.5% year over year and 57.9% quarter over quarter; net margin was 2.7%.
• EV and battery revenueRMB 116.8bnDown 12.5% year over year and 35.6% quarter over quarter.
• Overall gross margin18.8%20.1% in Q1 25 and 17.4% in Q4 25.
• EV and battery gross margin22.5%23.9% in Q1 25 and 21.6% in Q4 25; improved product mix provided support.
• Net profit per vehicleRMB 5.7kAbove the market expectation of about RMB 4k, but below RMB 8.8k in Q1 25 and RMB 6.8k in Q4 25.
• Domestic EV market share23% in MarchFell to 19% in January-February and rebounded to 23% in March.
• Premium-brand sales mix12.4%5.3% in Q1 25 and 12.3% in Q4 25; brands include Denza, Fang Cheng Bao, and Yangwang.
• Overseas sales mix46.6%20.9% in Q1 25 and 26.2% in Q4 25.
• Q1 2026 total battery shipments60 GWhUp 14% year over year; external battery shipments accounted for about 36% of total shipments in January-February 2026, up more than 62%.
• Song Ultra orders61,240 unitsStarting price RMB 152k; first-month orders.
• Da Tang orders30,000 unitsStarting pre-sale price RMB 250k; orders within 24 hours.

Impact & implications

For investors, the key implication of the report is that short-term earnings pressure has already been largely priced in; if deliveries of new models, market share, overseas expansion, and external battery sales continue to materialize, the stock price could recover on the back of earnings clearing and improving orders. Maintaining Outperform and unchanged target prices indicates that Bernstein views the current weakness as more cyclical than a deterioration in long-term competitiveness.

Risks

• Sales volume below expectations.
• Product quality issues and potential recalls.
• Deterioration in the competitive landscape.
• Technological disruption or changes in technology pathways.
• Adverse government policies.
• A-shares may be more volatile than H-shares, and Chinese capital market or economic growth regulation policies may affect A-shares and H-shares differently.
• Lower R&D expenses in Q1 may partly reflect undisclosed R&D capitalization, creating uncertainty about sustainability.

What to watch

• The pace of Q2 delivery ramp-up for new flash-charging models.
• Whether domestic EV market share can remain stable or improve further from 23% in March.
• Conversion of Song Ultra and Da Tang orders into actual deliveries.
• Registration and sales trends in overseas markets, especially Europe, Latin America, and ASEAN.
• Whether the share and growth of external battery sales can be sustained.
• Whether EV and battery gross margin can remain at a relatively high level.
• The impact of R&D expenses and R&D capitalization disclosure on earnings quality.