China-based electric vehicle (EV) maker BYD (HK:1211) is poised to overtake Tesla (NASDAQ:TSLA) in terms of volumes in the fourth quarter, as per various reports. BYD is offering several promotions and discounts to hit its 3 million unit sales target for 2023. The company’s Hong Kong-listed shares have risen about 11% year-to-date. Analysts are bullish about BYD’s long-term growth potential and estimate a solid upside in the stock.
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BYD’s Robust Performance So Far
Thanks to the company’s aggressive promotions, BYD sold 63,900 vehicles in the December 18 to December 24 week, up nearly 24% from the week before, as per CarNewsChina.com. BYD has sold over 2.683 million vehicles from January through November, reflecting a 65% year-over-year growth. The company needs to sell 320,000 units to meet its annual goal of 3 million vehicles.
The company’s international expansion is boosting its sales. It sold 30,629 new energy vehicles (NEVs) in international markets in November. Given the intense competition in the Chinese market, the company is rapidly expanding overseas. Moreover, macro uncertainty in China is weighing on the sales of big-ticket purchases like EVs. BYD has a footprint in 58 international markets and intends to grow its presence further.
The company is also impressing on the profitability front. In the third quarter, BYD’s net profit increased 82% to 10.41 billion yuan. Despite the ongoing price wars and cut-throat competition, BYD reported a 4 percentage point sequential increase in the Q3 gross margin of its automotive business to 25.7%.
Overall, the company’s prospects look bright, with various new models lined up to be launched next year.
Is BYD Stock a Buy?
On December 6, Macquarie analyst Allen Yuan initiated coverage on BYD stock with a Buy rating and a price target of HK$310. Also, JPMorgan analyst Nick Lai and Jefferies analyst Johnson Wan reiterated a Buy rating on BYD with price targets of HK$270 and HK$331, respectively.
Wall Street has a Strong Buy consensus rating on BYD stock based on seven Buys versus just one Hold. The average price target of HK$324.49 implies 58.1% upside potential.
Conclusion
After establishing a hold over the domestic market, BYD is rapidly expanding its presence internationally, giving a tough time to market leader Tesla. Analysts are bullish on the stock and see a solid upside over the next 12 months.
