BYD earned an average profit of RMB 5600-7900 ($1,170) per vehicle in the second quarter, up from RMB 2400 in the first quarter, analysts said.

BYD (SHE: 002594, HKG: 1211, OTCMKTS: BYDDF) is China's largest new energy vehicle (NEV) maker, so how much profit does it make per vehicle? A new research note provides a reference.

Given weak demand in the consumer electronics sector, BYD's profit in the second quarter was mainly contributed by its automotive and battery businesses, said a team of analysts led by Cheng Siqi at local brokerage firm CSC Financial, in a research note released today.

BYD earned an average profit of RMB 5,600-7900 ($1,170) per vehicle in the second quarter, the team said, citing their calculations. For comparison, that figure was RMB 2,400 in the first quarter.

CSC Financial said the improvement in BYD's average profit per vehicle was due to three main factors:

The scale effect was reinforced as its sales rose. The company sold 355,000 vehicles in the second quarter, up 149.06 percent year-on-year and up 21.84 percent from the first quarter.

The effect of BYD's first price increase in the first quarter was initially felt in the second quarter.

The cost of raw materials such as lithium carbonate became stable.

BYD expects to achieve a net profit attributable to shareholders of RMB 2.8 billion - 3.6 billion in the first half of the year, up 138.59 percent - 206.76 percent from RMB 11.7 in the same period last year, according to its earnings preview released yesterday.

This means that in the second quarter, BYD's net profit attributable to shareholders is expected to be RMB 1.992 billion to RMB 2.792 billion, up 112.7 percent to 198.2 percent year-on-year and up 146.4 percent to 245.3 percent from the first quarter.

BYD said the surge in sales of NEVs drove a significant improvement in its earnings and eased the pressure on earnings from upstream raw material prices.

In the cell phone parts and assembly business, BYD benefited from improved cost control capabilities and product mix adjustments to restore profitability despite weak demand in the consumer electronics industry, according to its announcement.

As background, BYD's businesses include the automotive business, the power battery business, and the consumer electronics business.

In a research note last month, CITIC Securities concluded that these three businesses of BYD are reasonably valued at RMB 950 billion, RMB 330 billion, and RMB 100 billion, respectively, in 2023, implying a reasonable value of RMB 1.4 trillion for BYD.

Back to BYD's latest earnings preview, CSC Financial believes it signals that the company's profit elasticity is expected to be further unleashed in the second half of the year.

The team expects BYD to see a significant inflection point in its earnings in the third quarter, mainly due to:

The results of its product price increases in the first quarter will be further reflected in the third quarter.

Improved product mix and the launch of a number of new high-value models, including the new Han, the new Tang, and the Seal, are expected to boost the company's average product price.

Sales in the second half of the year will maintain sequential growth and the scale effect will continue to strengthen.

The main models currently on sale at BYD are launched in 2021-2022, and most of them are in the sales creep or start-up period, the team noted.

At the same time, BYD has a number of models in reserve, and its sales have the momentum to continue to grow at a high rate, the team said.

BYD shares surged in early trading today, with its Hong Kong-traded stock up 5.23 percent and its Shenzhen-traded stock up 6.66 percent as of press time.

BYD expects net profit of up to $533 million in H1