BYD cuts profit hopes as electric car interest lags
Car and battery maker BYD has warned that its full-year net profit could fall as much as 65 per cent - worse than analysts had forecast.
'The company expects the net profit for 2011 will decrease by 35 to 65 per cent ... ranging from 883.2 million yuan [HK$1.08 billion] to 1.64 billion, and the operating profit for the year is expected to be reduced by 40 to 50 per cent,' the Shenzhen-based company told the Hong Kong stock exchange yesterday.
The revised forecast from the company part-owned by Warren Buffett's Berkshire Hathaway is more pessimistic than a Bloomberg consensus estimate of 12 analysts that BYD's net profit would fall 54.8 per cent to 1.14 billion yuan this year, from 2.52 billion yuan last year.
For the quarter that ended September 30, BYD's net profit leapt 582 per cent to 77.37 million yuan, but for the first three quarters, net profit plunged 85.5 per cent to 352.73 million yuan.
Turnover rose 10.95 per cent to 11.79 billion yuan in the third quarter, but fell 4.34 per cent to 34.33 billion yuan in the first three quarters.
The lower profit outlook was mainly due to a fall in car sales. Also, the weak solar energy market meant BYD's solar energy business would not perform as expected, the company said.
In terms of the number of units, BYD's car sales rose 9.1 per cent to 94,024 units in the third quarter. BYD said its traditional battery business remained stable during the third quarter, but sales of solar cell products were less than satisfactory because of weak demand.
BYD's all-electric car e6 made its market debut on Wednesday, with a retail price of 369,800 yuan.
'We are not positive on the sales outlook for this model,' said a KGI Securities report.
The return on investment on the e6 car is low, as it will take 22 years to recover the initial investment in this vehicle, KGI said. Mainland infrastructure for recharging electric cars was inadequate, it said, adding that the most advanced city, Shenzhen, had only five charging stations.
'Accidents have been reported in Hangzhou, Shenzhen and Shanghai, in which batteries of electric buses have burst into flames,' KGI said. 'We think the chances of an accident may increase with the growth of BYD's all-electric vehicles in service.'
Mainland brokerage CFSG was also bearish on the company.
'Stay away from BYD,' it warned in a report saying it had been a controversial year for the carmaker. It said recently a BYD industrial park in Shenzhen had been found to be emitting pungent-smelling waste gas and potentially posed hazard for nearby residents.
BYD's long-term borrowings increased 120.3 per cent to 6.7 billion yuan on September 30 from three billion yuan at the beginning of this year. Berkshire Hathaway owns 28.4 per cent of the Shenzhen and Hong Kong-listed company, while Morgan Stanley owns 5.25 per cent, according to the Hong Kong stock exchange.