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<Research>CMS Maintains LT Optimism on BYD COMPANY, GEELY AUTO; Both Rated Overweight
Recommend 26 Positive 58 Negative 24 |
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The Chinese electric vehicle (EV) market is experiencing an intense price war, with BYD COMPANY (01211.HK) stepping up its promotion of the “618” sales discount, drawing immense attention. CMS released a research report indicating that promotions are a normal strategy, as inventory levels in the industry are rising during the off-season, exerting pressure on terminal sales. BYD's electrification has been successful and drastically ahead, aiming to gain more market share through price reductions as a strategic move to consolidate the market. As the penetration rates of NEVs surpass 50%, China-made cars have formed an advantage in brand strength and scalability, creating a snowball effect, with future sales trends clearly concentrating towards domestic leaders. The broker was optimistic about the long-term benefits for both BYD and GEELY AUTO (00175.HK), with Geely having greater flexibility in the short to medium term. The broker considered that the competitive dynamics between BYD and Geely were established, with mutual offense and defense becoming the norm. During phases of stalemate (such as the off-season), price discount competition will arise. However, as product cycles strengthen and the transition between off-peak and peak seasons occurs, competition will gradually diminish. In the long term, both BYD and Geely will benefit from increased industry concentration, with both expected to continue increasing their market share, the broker opined. Short-term stock prices are negatively impacted by market sentiment, but once sentiment subsides, growth trends will resume, with the market focusing more on delivery volumes. CMS recommended buying on dips. It maintained a long-term positive outlook on BYD and Geely, considering the current market cap, with Geely having potentially greater flexibility in the short to medium term. It set a target price of HKD27.5 for Geely and HKD510 for BYD, both rated Overweight . AASTOCKS Financial News Website: www.aastocks.com |
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