Buffett-backed BYD boosts price ceiling by 33 per cent for stock buy-back plan in vote of confidence on market outlook

BYD, the Chinese new-energy vehicle (NEV) maker backed by Warren Buffett, will repurchase its shares at a higher price ceiling under a 1.85 billion yuan (US$277 million) buy-back plan, signalling more upside room after a six-fold jump over the past two years as industry sales recover.

The Shenzhen-based carmaker will pay as much as 400 yuan each from the open market under a proposal approved by the board this week, the firm said in an exchange filing on Thursday. The company had indicated a top side of 300 yuan each at a shareholder meeting last month.

The decision came as BYD overtook Volkswagen this week as a rally in Chinese stocks boosted its market capitalisation to the equivalent of US$142 billion, helping the Chinese firm overtake its German rival as the third most valuable carmaker after Tesla and Toyota Motor.

“Boosting buy-back price has reflected the company’s confidence in its future development,” said Gao Deng, an analyst at Changjiang Securities. “BYD will probably exceed the market expectations given the robust sales, orders and launches of new car models.”

BYD fell 1.5 per cent to 322.41 yuan in Shenzhen trading on Thursday, in line with a weaker broader market. The stock has rallied 45 per cent over the past three months, and 570 per cent from as low as 48.15 yuan in 2020. The stock lost 0.7 per cent to HK$300 in Hong Kong.

Investors have been flocking back to Chinese car stocks as analysts from JPMorgan Chase to Jefferies backed the sector because of better sales prospects and tax incentives to spur the economy after recent lockdowns. The central and local governments have rolled out incentives, including 60 billion yuan worth of tax breaks on car purchases and subsidies for rural buyers.