Shares of BYD Co. Ltd. (SHE:002594) closed over 7% lower in Shanghai’s Wednesday trading session, a day after the electric vehicle (EV) maker reported results.
BYD reported first-half results that saw the EV company generate 150.6 billion yuan ($21.84 billion), which marks a 66% year-over-year (YoY) growth. The reported H1 revenue numbers are worse than what the analysts were expecting. The Bloomberg consensus stood at 166.03 billion yuan.
Q2 2022 hedge fund letters, conferences and more
Still, BYD reported a net income of 3.60 billion yuan ($521 million), much better than the 1.17 billion reported for the same period last year. Earnings per share were 1.24 yuan, again much better than the 0.41 yuan reported for the last year.
“China’s economy has seriously deviated from the normal track,” which has made a negative impact on the development of the country’s automobile industry, BYD said in a statement.
The results also showed that the company’s EV market share rose to 26.2% in the second quarter of the year from 23.7% in Q1. What is especially impressive about the H1 results is the fact that BYD has managed to increase its QoQ gross margins, mostly thanks to the higher vehicle selling prices and improving product mix.
The Chinese automaker also saw quarter-over-quarter gross margin expansion thanks to higher vehicle selling prices and improving product mix.
Moreover, the CPCA data released earlier this week showed that BYD is currently leading the New Energy Vehicles (NEV) sales in China as far as the first four weeks of August are concerned. BYD reportedly sold 136,379 EV units in this period, which implies the company is on the road to selling over 150,000 units for the second consecutive month.
For comparison purposes, BYD sold over 162,000 EVs in July and just below 134,000 cars in June. About half of all EVs sold in July were fully electric. BYD absolutely smashed its competition in China, including the one from Tesla (NASDAQ: TSLA) that managed to sell 25,596 EVs from August 1 to August 28.
Despite generally solid results for both the first half of the year and August sales, BYD shares closed by 7.36% in Hong Kong on Wednesday. The reason for this is the filing that showed Warren Buffett’s Berkshire Hathaway sold 1.33 million local shares of the EV business.
When quizzed on Buffett’s decision to trim the stake in BYD, the company’s representatives said there’s “no need to overinterpret” Berkshire Hathaway’s stake sale. Moreover, the company’s representatives said they have no major issues to report on this subject while operations remain normal.
Berkshire cut its stake to 19.9% from 20.04% last week, the filing showed.
While there’s no information on why Buffett’s conglomerate has slightly trimmed its stake in the EV maker, it is likely that Berkshire was simply cashing out given the impressive run-up in BYD shares.
In June, BYD share price hit an all-time high before correcting about 20% on profit-taking. BYD shares are still up over 6% YTD despite the widespread selling of equities this year on central bank tightening and decades-high inflation that continues to harm the global economy.
BYD stock price has started to move higher in a continuous uptrend since June 2020, resulting in a mouth-watering 550% move in just 24 months. Many stocks belonging to EV firms continue to remain popular on the top platforms for trading stocks, despite the current bearish sentiment across markets.
Berkshire Hathaway is BYD’s fourth-largest shareholder with a stake that now sits just below 20%. The investment was made in 2008 when Buffett’s conglomerate bought 225 million shares at HK$8 per share through its Western Capital LLC business.
Some eyebrows were raised in mid-July, when Citibank increased its holdings in the EV company by 225 million shares. Some investors speculated that Buffett is about to make moves as the transaction value equaled his stake in BYD. In response to this news, BYD shares fell over 11% in a single day.
“The data we are seeing now is that Buffett’s holdings have not changed at present. Its shareholding ratio is very large, and if it involves changes in shares, it will definitely be disclosed,” the company responded.
Global EV Leader
BYD made headlines in early July after it overtook Tesla to become the world’s largest EV company by sales. For the first six months of the year, BYD sold 641,000 EVs, which implies a jump of over 300% from the same period last year.
On the other hand, Tesla sold 564,000 EV units. Weaker-than-expected sales from Tesla in Q2 were results of Covid lockdown disruptions.
“The performance looks impressive,” said Jeff Chung, an auto analyst with Citigroup, when discussing BYD’s sales growth.
In addition to becoming the world’s largest EV business by cars sold, BYD also overtook South Korea’s giant LG as the world’s second-biggest EV battery producer.
While BYD continues to dominate the Chinese EV market, analysts expect the company to soon shift its focus on global expansion.
They’re going to make some really aggressive moves to go international,” said Tu Le, managing director of advisory group Sino Auto Insights.
Nomura analysts told their clients in July that BYD is one of the top EV stocks to own due to the company’s “vibrant product pipeline.”
Summary
BYD shares fell over 7% after Warren Buffett’s Berkshire modestly cut its stake in the EV manufacturer. This comes as consumer interest in EVs continues to rise. Buffett is still the fourth-largest shareholder in the company that overtook Tesla as the world’s largest EV seller and LG as the second-largest battery producer. News of Buffett selling 1.33 million shares came shortly after the company reported strong results for the first half of the year.
Get Smarter on Crypto and Macro. Get the 5-minute newsletter that keeps investors in the loop. Five Minute Finance is an independently run newsletter covering the latest and most important trends in crypto, macro, and global markets.
