Insights

Better Buy: BYD vs. BYD Electronic

Which is the better buy; BYD Co Ltd (SEHK: 1211) or BYD Electronic Co Ltd (SEHK: 285)? – Buy stock

BYD Co Ltd (SEHK: 1211) just announced its half-year results with a 14.3% rise in its interim profit to RMB 1.6 billion (US$235.5 million). This is mainly due to the release of new electric bus models since the start of 2020.

In the second quarter, with the improvement of BYD’s new energy vehicle business, has the company achieved a return of investment in its renewable energy business?

Or should investors consider buying into BYD Electronic Co Ltd (SEHK: 285)? Which one has better prospects and investment value?

Stable mobile parts business

BYD’s performance in the first two quarters was better than expected due to higher contributions from its mobile phone business and government subsidies.

Otherwise it would have suffered a loss due to weak electric vehicle sales. BYD’s performance has been affected by government subsidies, and the mobile phone parts business has always supported the group’s performance.

Last year, mobile phone components and the automobile business accounted for 40% and 50% of revenue respectively.

The difference in the proportions is not too big, but the contribution of performance each accounted for 36% and 56%.

If there is trouble in the automobile business, I believe that BYD’s electronic business will need to provide assistance. 

Outlook for the EV industry in China

Last year, the overall sales of electric vehicles (EVs) in China were at a disadvantage. It can be seen from the 42% drop in BYD’s profit.

The main reason is that the subsidies for new energy vehicles have been reduced, which greatly cut the demand for EVs and dragged down BYD’s EV sales.

This year the EV market is not only competitive, but the industry players also have to deal with the impact of Covid-19.

The consumption power and economic performance of China is still unstable, making it hard for BYD to further sell their EVs.

In addition, Tesla Inc (NASDAQ: TSLA) has made aggressive expansion plans in China while there are other Japanese and Korean electric car brands to choose from.

Thus, BYD will have more competition for sales in the near future.

Foolish bottom line

The prospects for new energy vehicles in China this year are uncertain due to the slide in demand. On the other side, 5G has developed a blue ocean.

BYD Electronics clearly has a leading advantage in the mainland mobile phone components and assembly markets. Therefore, BYD Electronics had a more stable and profitable business this year.

More reading

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Hong Kong contributor Edmund R doesn’t own shares in any companies mentioned.

The Motley Fool Hong Kong Limited(www.fool.hk) 2020

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