Battery maker remains `unattractive' after share sale

19/05/2009

Morgan Stanley yesterday raised the target price of BYD Company (1211) by 70 percent to HK$16.5, but still maintains an "unattractive" evaluation on its stock performance. BYD president Wang Chuanfu on Friday sold all his 11.2 million H shares in the company for HK$280 million, or HK$25 each, about 10 percent below the market price. He still holds 27.8 percent of the total issued share capital. "Wang's share disposal was carried out at the behest of Chinese regulators and not due to any concerns over the company's future development." Bank of China International analyst Frank He said. "The company is still awaiting central government approval to sell 225 million shares to Warren Buffett's MidAmerican Energy." Buffett last year said he would buy a 10 percent stake in electric vehicle maker BYD - a deal which is still in process. BYD said it is scheduled to launch its first all-electric car, the E6, in the second half. "We think intensifying competition in handset components and batteries will put great pressure on BYD's margin outlook in what is a fragile market. We retain our Underweight rating." said a Morgan Stanley research report out yesterday. Morgan Stanley said while BYD's move to solar batteries and industrial power storage businesses may offer long-term growth potential, these plans are in their early stages and expected to contribute hardly any immediate revenue in 2009. "The share price has almost doubled since April 2009 and the stock now trades at P/E multiples of 41 times for 2009 earnings against our estimate. We see the current valuation as demanding. "We believe the near-term catalyst for the stock will be battery shipments to European and North American automakers... we reiterate our "sell" rating for BYD," He wrote. The stock dipped 0.60 percent to end at HK$26.80 yesterday.

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