HSBC maintains BYD A/H share buy ratings and raises target prices

Overview

This is an HSBC company research and rating update on BYD. The report maintains Buy ratings on BYD's A shares and H shares, and raises the A-share target price from RMB123 to RMB126 and the H-share target price from HKD139 to HKD146. The core view is that overseas expansion in 2026, the domestic new product cycle, the second-generation Blade Battery upgrade, and battery and energy storage demand will support growth, while raw material cost inflation and margin pressure in certain businesses lead to forecast cuts.

Core views

The report's key conclusions are: first, overseas markets will be the main driver of volume and margin growth in 2026, with HSBC forecasting overseas sales of more than 1.6 million units, up more than 50% year on year; second, despite intense competition, the domestic market is still expected to maintain share through technology upgrades, Song Ultra EV, and new models across multiple brands; third, rising oil prices strengthen the total cost of ownership advantage of new energy vehicles over gasoline cars and support global energy storage demand; fourth, although near-term gross margins are under pressure, A/H shares still have significant upside after segment-based valuation.

Analysis framework

The report analyzes quarterly results, sales outlook, product cycle, battery technology upgrades, raw material costs, segment earnings forecasts, and sum-of-the-parts valuation. It separately evaluates the mobile phone components, semiconductor, battery, and automotive businesses in the valuation, and rolls forward based on 2026-2028 forecasts.

Methodology notes

• Valuation methodssum-of-the-parts

  sum-of-the-parts valuation

  HSBC breaks BYD into mobile phone components, semiconductors, batteries, and automotive businesses for separate valuation, then combines them to derive the A-share and H-share target prices.

• Valuation methodspeer multiple

  peer multiple valuation

  The mobile phone components business is valued using BYDE's 12-month forward P/E, the semiconductor business uses the implied P/S from Starpower Semiconductor's target price, and the battery and automotive businesses use peer P/E multiples.

• forecast_revisionearnings revision

  earnings forecast revision

  The report cuts 2026-2027 earnings forecasts by 18% and 10%, respectively, mainly reflecting lower gross margin assumptions and the impact of raw material cost inflation, while also introducing 2028 forecasts for the first time.

Asset mapping & comparison

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

• BYD A share 002594.SS

  core covered name

  Strengths

  The second-generation Blade Battery, strong product cycle, domestic share resilience, and overseas sales growth support the target price increase.

  Weaknesses

  Raw material cost inflation and competitive pressure lead to lower gross margin assumptions, and 2026-2027 earnings forecasts are cut.

  Comparison

  A-share target price RMB126 implies about 22.7% upside versus the current price CNY102.65.

  Risks

  Domestic price war, rising costs, sales below expectations, and weaker-than-expected execution of the product cycle.

• BYD H share 1211.HK

  core covered name

  Strengths

  Also benefits from overseas expansion, technology upgrades, and segment valuation support.

  Weaknesses

  Valuation and earnings are also affected by gross margin, costs, and competition.

  Comparison

  H-share target price HKD146 implies about 39.4% upside versus the current price HKD104.70.

  Risks

  Exchange rates, market risk appetite, Hong Kong liquidity, and fundamental execution risk.

• BYD Electronic (285 HK)

  segment valuation reference asset

  Strengths

  Used as the valuation reference for the mobile phone components business, based on its 12-month forward P/E multiple.

  Weaknesses

  4Q25 electronics gross margin fell from 7% in 3Q25 to 4%, reflecting a higher share of low-margin assembly business.

  Comparison

  The report uses a 9.8x 12-month forward P/E to estimate the value of the mobile phone components segment.

  Risks

  Persistent gross margin pressure in the electronics business may weigh on overall earnings and segment valuation.

Key data

• Report date2026-04-03Market data are as of the 2026-04-01 close unless otherwise stated in the report.
• RatingBuy/BuyBuy ratings are maintained for both A shares and H shares.
• A-share target priceRMB126 (previously RMB123)Current price CNY102.65, implying about +22.7% upside.
• H-share target priceHKD146 (previously HKD139)Current price HKD104.70, implying about +39.4% upside.
• 2026 overseas sales forecast1.6m units; 50%+ year-on-year growthThe report says overseas growth is the key catalyst for 2026.
• 4Q25 net profitRMB9.3bnBelow HSBC's previous expectation, mainly due to lower gross margin in the electronics business.
• EV and battery business gross margin19.0%A slight improvement from 18.7% in 3Q25.
• 1Q26 EV and ESS battery shipments60GWh; up 15% year on yearThe report believes higher oil prices and energy storage demand will continue to support this business.
• Earnings forecast adjustmentsDown 18% in 2026; down 10% in 2027Mainly due to gross margin reductions of 2.2 and 1.5 percentage points, respectively.
• 2027-2028 forecasts versus consensus2%-6% above Bloomberg consensusDriven by HSBC's more optimistic view of sales prospects after the second-generation battery upgrade.

Impact & implications

For investment implications, the report believes BYD still has medium-term growth and valuation upside, especially as the H-share target price implies a larger upside. Overseas expansion and battery technology upgrades are the most important positive drivers, while the stability of domestic market share depends on the pace of new model launches and product mix improvement. In the near term, attention should be paid to whether raw material costs, price competition, and electronics business gross margin pressure continue to weigh on earnings.

Risks

• Raw material cost inflation causes gross margin to fall further below expectations.
• Intense competition in domestic new energy vehicles means new configurations cannot be priced higher in step, compressing margins.
• Overseas expansion progress, sales, or margins fall short of expectations.
• A higher share of low-margin assembly business in electronics weighs on group profit.
• Macro variables such as oil prices, exchange rates, and regional conflicts may change demand and valuation assumptions.

What to watch

• Whether 2026 overseas sales can exceed 1.6 million units and achieve 50%+ year-on-year growth.
• The pace of second-generation Blade Battery adoption in major models and consumer feedback.
• Order intake and deliveries for Song Ultra EV and new models from BYD, Fangchengbao, and other brands.
• Whether EV and battery business gross margin can continue to improve despite cost pressure.
• Changes in raw material prices and their impact on 2026-2027 earnings forecasts.
• Whether battery and ESS shipments can sustain the 1Q26 momentum of 60GWh and 15% year-on-year growth.