While everyone panicked over BYD's Q3 results, I saw something different.
The headlines screamed weakness: Revenue down 5.9%. Margins compressed. Tesla investors celebrated. Chinese EV bears nodded knowingly.
But the narrative was wrong.
What looked like deterioration was actually strategic sacrifice. BYD deliberately tanked their average selling price to flood the mass market with $10,000 EVs (Seagull at RMB 69,800). While Xiaomi and Huawei fight over premium customers, BYD is capturing the volume game — the place where legacy auto goes to die.
And it's already working. Gross margin snapped back to 18.2% in Q3. Operating margin tripled quarter-over-quarter. The trough was Q2. We're past it.
Here's what I found when I analyzed BYD Company Limited ($BYDDY / 1211.HK):
The Market's Blind Spots
Q3 wasn't weakness — it was a land grab. BYD chose market share over margin. Result? Gross margin recovering (15.7% â 18.2%), operating margin tripled QoQ, and they now own the mass market moat.
Vertical integration = structural cost advantage. They manufacture batteries (Blade Battery), chips (BYD Semiconductor), and electric motors in-house. That's 15-20% lower unit costs than any Western OEM. This isn't fixable by competitors in 2-3 years.
International is 10% of sales. It should be 40%. BYD's exporting to 70+ countries now. Thailand, Brazil, Indonesia ramping. Europe next. International margin is 5-7 points higher than China. Huge mix tailwind coming.
The valuation is absurd. BYD trades at 17x NTM P/E while growing 30%+ top-line and 25%+ EPS. That's a 0.68 PEG ratio. Tesla? 3.2x PEG. NIO? Negative earnings. BYD is the only profitable, scaled Chinese EV play — and it's trading like it's dying.
The Setup
- Current Price: HKD 100.5
- 12-Month Target: HKD 165
- Upside Potential: +64%
- Rating: Strong Buy
Risk/reward: 3.6:1. This is what asymmetric setups look like.
Inside the Full Report
This isn't a two-page stock pitch. It's a 20-page forensic teardown:
Four-method valuation — DCF, P/E comparables, EV/EBITDA, and Sum-of-Parts. Weighted average target: HKD 165. I show every assumption.
Competitive threat quantification — How much share does Xiaomi SU7 actually steal? What about Huawei AITO? I modeled it. 3-5% premium segment loss by 2026. Painful, but not structural.
Margin bridge analysis — Exactly how BYD gets from 18% gross margin today to 25%+ in 2026. It's not hope — it's operating leverage + international mix shift.
Probability-weighted scenarios — Bear case (trade war, margin collapse): HKD 75. Base case (steady execution): HKD 165. Bull case (international breakout): HKD 240. I assign probabilities to each.
Q3 earnings forensics — Line-by-line breakdown of what the revenue miss actually meant. Spoiler: It was mix, not demand.