Is BYD (SEHK:1211) Undervalued After Six Straight Months Of NEV Sales Growth?

BYD (SEHK:1211) just logged its sixth straight month of new energy vehicle sales growth, with October deliveries reaching 490,168 units and exports playing a bigger role in the mix.

Investors have rewarded the steady NEV headlines only in bursts, with BYD's share price edging up over the past week but still down about 20% over three months and about 27% year to date. The 1 year total shareholder return has declined roughly 24%, pointing to pressure on longer term sentiment despite recent operational progress.

Scan how BYD compares with other electrification plays by reviewing the hand picked 41 power grid technology and infrastructure stocks that could benefit as EV adoption and charging demand expand.

BYD keeps posting resilient NEV volumes while the share price has retreated sharply over the past year. Is that gap mostly about the business, or about sentiment that has swung too far?

Most Popular Narrative: 41% Undervalued

Against BYD's last close at HK$72.30, the most followed narrative points to a fair value near HK$122.68, which implies a sizeable valuation gap built on its overseas expansion plans and ecosystem build out.

The main thing that has to go right is that BYD successfully shifts its revenue mix toward higher priced overseas markets while adding local production and charging infrastructure fast enough to offset weaker and more competitive domestic demand.

The valuation implies that the market is not fully pricing in BYD's push to expand overseas volumes, increase localized production and build out its global EV ecosystem, which supports the view that the stock is undervalued and the narrative is positive.

See why 16 investors see BYD as 41% undervalued .

Result: Fair Value of HK$122.68 (UNDERVALUED)

Still, the BYD narrative depends on overseas expansion offsetting weak China demand, and on policy barriers not tightening to the point that global growth plans stall.

Find out about the key risks to this BYD narrative .

Another View: BYD Through The Earnings Lens

On the first cut, BYD screens as cheap, trading at a steep discount to a fair value estimate and well below some analyst targets. Look at the earnings ratios though and the picture is less clear. The current P/E is 17.9x, above the fair ratio of 10.2x and higher than the Asian auto sector on 13.1x, even if it sits below peers at 19.8x. That mix of cheap on one yardstick and expensive on another raises a simple question for investors: which signal deserves more weight, the DCF style upside case or the earnings based warning about valuation risk?