BYD (1211.HK, HK$108.30, HK$987bn) Overseas Mix Drives Resilience

BYD reported 1Q26 revenue of RMB150.2bn (-11.8% YoY / -36.8% QoQ), with net profit of RMB4.08bn (NPM: 2.7% / -56.2% YoY). Earnings were pressured by weak domestic demand, intensified price competition and legacy model clearance, while FX losses and lower investment income further weighed on net profit. Positively, resilient overseas sales drove better mix, supporting QoQ improvement in ASP and automotive GPM, partly offsetting domestic weakness.

Overseas mix expansion supported ASP uplift: Automotive revenue reached RMB112bn (-16.1% YoY / -38.4% QoQ), contributing 74% of total revenue and beating market expectations of RMB100bn. Total vehicle sales stood at 700k units (-30% YoY / -48% QoQ), with overseas sales at 321k units (+55.8% YoY / -8% QoQ), representing 46% of total volume, up 20% QoQ. Premium models (Yangwang, Denza and Fangchengbao) remained stable at 12% of sales. Higher overseas mix offset domestic weakness and legacy model discounts, which reflected demand pull-forward in late 2025 amid policy transition and promotional campaigns. ASP therefore rose 18.5% QoQ to RMB160k. Automotive GPM expanded by 1.8ppts QoQ to 23.4%, as lower volume diluted scale benefits and PHEV battery upgrades under the 2026 purchase-tax exemption rules lifted unit costs.

BYD Electronics (285.HK) slightly recovered: BYD Electronics posted 1Q26 revenue of RMB38.2bn (+3.5% YoY), contributing 26% of group revenue, driven by NEV intelligent components and AI infrastructure demand.

Mix improvement drove margin expansion: Blended GPM rose for the fourth consecutive quarters to 18.8%, led by overseas mix improvement in auto segment. Overseas automotive gross profit is estimated to account for over 60% of total gross profit, indicating a shift from domestic scale-driven earnings to overseas high-margin contribution. BYD Electronics’ GPM also recovered QoQ to 5.2%, providing additional support.

Operating deleverage and non-operating losses weighed on earnings: Core operating profit reached RMB6bn (-29% YoY / +58% QoQ), with core OPM at 4%. Although R&D and selling expenses declined, overseas expansion lifted administrative expenses, while a lower revenue base pushed OPEX ratio to 18.2% (from 13.7% in 4Q25 Fig 7). Earnings pressure was therefore driven more by operating deleverage than absolute cost expansion. Net profit fell to RMB4.08bn (-55.4% YoY), with NPM at 2.7%, mainly due to FX swinging from a RMB1.9bn gain in 1Q25 to a RMB2.1bn loss in 1Q26, creating a RMB4bn negative swing.

Our views: We believe the market has largely priced in domestic sales pressure and intensifying competition, while core earnings quality remains intact. Excluding FX volatility, it is estimated that 1Q26 recurring automotive profit is at around RMB6bn, with per-vehicle profit of roughly RMB8.5k, up RMB2k YoY and RMB1k QoQ respectively. This highlights that overseas mix improvement and high margins continue to support earnings resilience. Overall, profit growth is increasingly driven by overseas structural shift rather than domestic volume expansion.

In the near term, although the second-gen Blade Battery has been launched and intelligent driving is planned for RMB100k–150k models, conversion into sales is unlikely until 2H26. BYD is not adopting aggressive pricing, and thus it is unlikely that the company will see any significant turnaround in domestic sales. Consequently, near-term earnings recovery still relies on overseas shipment growth and a rising export mix.

Furthermore, the second-gen Blade Battery will become a core competitive edge, strengthening both vehicle products and energy storage applications. With storage demand staying robust, BYD's storage shipments are expected to rise from 50GWh to 70GWh, reinforcing its first‑tier position in battery manufacturing. The counter is trading at 20.5x FY26E P/E. (Research Department)