BYD had a record gross margin of 25.7 percent for its auto business in the third quarter, a 4-percentage point improvement from the second quarter.

(Image credit: CnEVPost)

BYD (OTCMKTS: BYDDY) reported strong third-quarter earnings yesterday, and analyst comments provided more insight into the results.

Excluding BYD Electronic, BYD's gross margin in its automotive business was a record 25.7 percent in the third quarter, a 4-percentage-point improvement from the second quarter, said Essence Securities analyst Xu Huixiong's team in a research note today.

The team sees four main reasons behind this:

China's auto industry saw favorable demand and milder competition in the third quarter, with no large-scale price wars erupting among car companies.

Models that offer high gross margins contributed to more sales for BYD, with the Han DM-i, Denza D9 DM-i, Song Pro DM-i, and Song Plus DM-i collectively selling 212,000 units in the third quarter, an increase of 27 percent from the second quarter.

Volume growth resulted in more significant economies of scale and significantly lowered average depreciation and amortization per vehicle.

The average price of battery-grade lithium carbonate declined by 5.5 percent to RMB 241,000 ($32,940) per ton in the third quarter compared to the second quarter, resulting in a lower average cost per vehicle.

BYD's revenue in the third quarter was a record RMB 162.15 billion, up 38.49 percent year-on-year and up 39.76 percent from the second quarter, according to its earnings report released yesterday.

The company's net profit attributable to shareholders in the third quarter was a record RMB 10.41 billion, up 82.16 percent year-on-year and up 52.59 percent from the second quarter.

Its gross margin in the third quarter was 22.12 percent, a record high since the third quarter of 2020. The company's gross margin was 18.72 percent in the second quarter and 18.96 percent in the same period last year.

After deducting the contribution from BYD Electronic, BYD's average profit per vehicle was about a record RMB 10,500 in the third quarter, an improvement of about RMB 2,800 from the second quarter, calculations by Essence Securities show.

Demand in China's auto sector is currently favorable and the year-end peak season is approaching, the team noted.

The team expects BYD's scale advantage is expected to be further enhanced, and its average profit per vehicle will continue to improve in the fourth quarter.

BYD sold 824,001 new energy vehicles (NEVs) in the third quarter, up 52.96 percent year-on-year and up 17.12 percent from the second quarter.

In the first three quarters, BYD sold 2,079,638 NEVs, up 76.23 percent year-on-year, data monitored by CnEVPost showed.

($1 = RMB 7.3174)

BYD posts record Q3 net profit, gross margin hits 3-year high