Chinese electric vehicle maker BYD (HK: 1211) expects to feel the blow of increasing battery costs and said Monday that net profits attributable to shareholders in Q1 will be between 200 million yuan ($30.4 million) and 300 million yuan.Fundamental analysis: Hit from rising battery costs expected
BYD, backed by Warren Buffett, issued a warning about the first quarter outlook. A new guidance represents just between 3%-5% of what market experts are expecting for full-year results, said Credit Suisse analysts on Tuesday.
“Affected by the price fluctuation of upstream raw materials, the profit of automobile business is yet to be improved,” the carmaker said in a statement and pointed out that seasonal factors could also affect new energy passenger vehicle sales.
The demand for batteries used in electric cars is rapidly rising and because of that, the prices for materials used in those batteries are expected to surge and drive battery prices roughly 18% higher, said Goldman Sachs analysts.
″(BYD) mgmt. also mentioned they are facing pressure on raw material price surge, e.g. lithium carbonate, electrolyte & copper,” Citi analysts wrote in a note, after talking to BYD’s Chairman Wang Chuanfu in a call.
Still, even the new price target suggests a gain of over 60% for the carmaker after its shares closed at 170.40 HKD on Tuesday.Technical analysis: Approaching key support
Credit Suisse slashed its price target on BYD’s Hong Kong-listed shares to 280 Hong Kong dollars from 310 Hong Kong dollars. Shares of BYD are down over 16% in March as the price action trades about 40% off the record highs set in January.
The price action’s pullback has now exceeded the 50% retracement of the rally that started in August last year. BYD stock price is now approaching the key 61.8% Fibonacci retracement that is located around the 150 mark.Summary
Chinese EV producer BYD said its first-quarter net profits attributable to shareholders will range between 200 million yuan ($30.4 million) and 300 million yuan due to rising battery costs. As a result, shares plunged further to increase the monthly losses to over 16%.
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