Maintain BUY. BYD’s strong 4Q24 earnings once again underscored the importance of economies of scale. We expect BYD to prioritize sales volume again in FY25E, by leveraging new models, overseas expansion, battery technology upgrades and AD catch-up, which could lead to solid earnings in FY25E again.

4Q24 results beat with high quality earnings. BYD’s 4Q24 revenue beat our prior forecast by 6%. In fact, BYD’s average selling price (ASP) excluding BYDE rose sequentially for two consecutive quarters, despite the prolonged price war. The accounting standard change by moving after- sales provision from selling expenses to COGS lowered its 4Q24 GPM to 17.0%. 4Q24 GPM by previous accounting standards would have been 21.5%, 0.9ppts higher than our forecast. Meanwhile, BYD’s 4Q24 R&D expenses were about 16% higher than our estimates (BYD invested RMB54bn in R&D and expensed 98% of it in FY24), leading to a beat of 14% from our estimates at the net profit level.

More comprehensive model portfolio, overseas expansion, battery technology upgrade and AD catch-up to fuel FY25 sales growth. We are of the view that BYD’s 4Q24 earnings once again underscored the importance of economies of scale. We project BYD’s FY25 sales volume to rise 23% YoY to 5.25mn units, maintaining its current EV market share in China. We expect its overseas sales volume to double YoY to 0.8mn units, following strong momentum in Jan-Feb 2025. We expect a plethora of new models, especially the Han L, Tang L and Denza N9, to lift its ASP and GPM. We project its premium brands (Denza, Fangchengbao and Yangwang) to deliver 0.37mn units in FY25E. We also expect more technological upgrades in FY25 to strengthen its brand value. The recently showcased 1kW fast charging could also aid its energy storage battery sales. We are of the view that BYD could absorb its extra costs from autonomous driving (AD) functions (which we estimate to be RMB3,000- 4,000 per vehicle), should it deliver our projected sales volume.

Earnings/Valuation. We revise up our FY25E net profit by 8% to RMB57.5bn, implying net profit of RMB10,900 per vehicle (vs. RMB9,400 in FY24). We maintain our BUY rating and raise target price to HK$470 for H share and RMB440 for A share, both of which are based on 23x (prior 20x) our FY25E EPS to reflect BYD’s leading position and recently improving investor sentiment. Key risks to our rating and target price include lower sales or margins than we expect, and a sector de-rating.