After two consecutive years of net profit decline, BYD Electronics (00285.HK) finally ushered in good news.
Not long ago, BYD Electronics released its mid-term profit forecast for 2023, showing that the net profit in the first half of the year increased by 115%-146% year-on-year (the net profit in the first half of 2022 showed 634 million yuan).
This is mainly due to the increase in the share of major customers and the growth of new businesses such as new energy vehicles and new smart products. In 2021-2022, BYD's profit performance is not optimistic, and there have been consecutive cases of increasing revenue but not increasing profits.
In 2022, BYD Electronics will achieve revenue of 107.186 billion yuan, an increase of 20.36% year-on-year, 89.06 billion yuan in the same period last year, and a net profit of 1.858 billion yuan, a decline of 19.58% from 2.31 billion yuan in the same period of the previous year.
In 2021, BYD Electronics will achieve a total revenue of 89.057 billion yuan, a year-on-year increase of 21.79%, and a net profit of 2.31 billion yuan, a sharp decline of 57.55% year-on-year. Its annual report explained that it was mainly due to the epidemic and the shortage of chips in the industry, and customer demand was lower than expected, resulting in low capacity utilization and pressure on profitability.
BYD Electronics currently has three main businesses: consumer electronics business (smartphones, laptop products and accessories), new smart products (energy storage, smart home, game hardware, drones, etc.), new energy vehicles (automotive intelligent systems) .
In 2022, its consumer electronics business revenue will be 82.209 billion yuan, a year-on-year increase of 14.77%; of which, component revenue will be approximately RMB 14.155 billion, a year-on-year decrease of 9.58%; assembly revenue will be approximately RMB 68.054 billion, a year-on-year increase of 21.57%.
From the perspective of business structure, the consumer electronics business accounts for 76.7% of the total revenue of listed companies, which can be said to be the core supporting business segment. In the past two years, it has been affected by the weakness of the global consumer electronics market.
According to the 2022 annual report of BYD Electronics, according to statistics from the market research organization IDC, the global smartphone shipments in 2022 will be 1.21 billion units; a year-on-year decrease of 11.3%; the global PC market shipments will be 292.3 million units, a year-on-year decrease of 16.5%; The volume was 162.8 million units, a year-on-year decrease of 3.3%.
It also made it clear in its annual report that earnings are under pressure mainly due to the impact of the consumer electronics market. This also stretches the overall profitability of listed companies.
According to the annual report data, its gross profit rate and net profit rate have been declining for many years. Among them, the gross profit margin will be 13.17%, 6.77% and 5.92% respectively during 2020-2022. It can also be seen from the table below that its net interest rate has also shown a decline.
Another major business segment is new smart products, which will achieve revenue of 15.207 billion yuan in 2022, a year-on-year increase of 22.19%. The segment accounted for 14.19% of overall revenue.
The third largest sector is the automotive intelligent system business. In 2022, BYD Electronics' business revenue in this sector will be 9.263 billion yuan, a year-on-year increase of 145.71%. Accounting for 8.64% of the overall business income.
It stated in its annual report that benefiting from the accelerated development of intelligent and connected cars, the Group's shipments of smart cockpits and smart connected products have increased significantly.
It mainly includes intelligent cockpit products, including vehicle intelligent modules (multimedia central control, instrumentation, panels, 4G/5G communication modules, etc.), and Dilink automotive intelligent system solutions. It also expands intelligent driving systems, thermal management systems, intelligent chassis, Suspension and other diversified products.
This business has continued to grow rapidly in the past three years. In 2021, BYD Electronics' revenue from the automotive intelligent system business will be 3.77 billion yuan, a year-on-year increase of 107.47%. The business of this sector accounts for 4.23% of the total revenue, and this value has risen to 8.64% in 2022.
Behind this, the support from BYD Group, the holding parent company, cannot be ignored.
According to the annual report, the sales of its top five customers reached 76.71%, of which the annual sales from the largest customer accounted for more than 44%. Among them, the controlling shareholder BYD Group is also one of its top five customers.
For example, it disclosed in its 2022 annual report that BYD Electronics supplies products and materials to BYD Group, including rotating displays, injection molding machines, molds, intelligent driving, intelligent cockpits, and auto parts production line equipment. Last year only this part of the actual total amount of related transactions reached 7.426 billion yuan. In addition, the annual report also mentioned that the total amount of processing services provided by BYD Electronics to BYD Group reached 1.16 billion yuan and so on.
At present, the new energy and intelligentization of China's auto industry is an irreversible trend, and it shows huge market potential. According to the monitoring data of Gaogong Intelligent Vehicle Research Institute, the penetration rate of China's smart electric market has rapidly increased from 0.32% in 2018 (accounting for all new energy vehicle deliveries) to 41.84% in 2022, and this figure is expected to exceed 50% in 2023.
Behind this, BYD, as the leading enterprise in the global electric vehicle market, will undoubtedly become the main driving force for BYD Electronics on the car track. And BYD Electronics is also investing in related business companies under BYD's automobiles, with the purpose of deepening its business layout in the field of new energy vehicles and strengthening cooperation with BYD.
In particular, BYD has just announced that the 5 millionth new energy vehicle has officially rolled off the assembly line, which undoubtedly brings greater room for imagination to BYD Electronics' automotive business.
It should be pointed out that, like many intelligent network suppliers relying on the background of car companies to quickly rise to the top, the help from the parent company is also one of the resistances for them to jump out of the original supply circle.
In addition to the above, two years ago BYD merged its automotive electronics and chassis divisions and established a subsidiary Fudi Technology. The company covers a rich smart cockpit product line, including smart cockpit system solutions, instruments, central control screens, In-vehicle entertainment system, audio system, communication module products, in-vehicle TBOX, HUD, etc., Fudi Technology's related products are mainly supplied to BYD.
Moreover, Fudi's entertainment host, cockpit domain controller, body controller, Tbox and other products have also entered the supply chain system of other domestic OEMs. From another perspective, it may also put pressure on BYD Electronics' smart car system-related product business.
On the whole, under the circumstances that the profitability of consumer electronics, the main supporting business, is under pressure, BYD Electronics needs to expand its high-margin business income such as automotive electronics is imminent. However, it will take time for the business sector, which currently accounts for less than 9%, to grow into the second largest performance growth curve of listed companies.