Chinese car company BYD, which is backed by Warren Buffett, raised $3.9 billion from a stock sale, WSJ reports.
What is BYD? It makes “electric cars, batteries, plug-in hybrids and fossil-fuel-powered vehicles” and trades in both Hong Kong and Shenzhen.
Why It Matters: BYD is joining in on a trend its peers are taking advantage of, capitalizing on investors’ excitement about new-energy vehicles. The firm’s stock has more than quintupled this year, thanks to investor enthusiasm about green cars and advancements in battery technology. Overall, it’s BYD’s biggest equity financing since it went public in Hong Kong back in 2002.
Numbers To Consider:
- BYD has a market capitalization of $91 billion.
- By comparison, NIO has a similar number and Tesla lands around $806 billion, according to FactSet.
- Warren Buffett’s Berkshire Hathaway held 8.25% of BYD, or 25% of its Hong Kong stock, as of June 2020. Berkshire Hathaway has held a stake in the company for roughly 13 years.
Other EV Companies Reaping Rewards:
- Xpeng raised $2.5 billion in December from “a follow-on offering of American depositary receipts.”
- NIO raised more than $4.5 billion through December and January “by selling ADRs and convertible bonds.”
Looking Ahead: “China is already the world’s largest market for electric vehicles, and has become a major battleground for EV manufacturers,” and that market is about to heat up even further as Tesla begins rolling out its “made-in-China” Model Y compact crossover vehicles.
Analysts expect BYD to grow 31% in 2021, but for growth to taper off to the mid teens after that.
BYD CO ($BYDDF, $BYDDY) is trading at a $105 billion Enterprise Value. On analyst estimates, that would represent 3.7x forward Sales, 22.9x forward Gross Profit, and 30x forward EBITDA.
It’s not a particularly crazy EBITDA valuation and is probably a more level-headed investment in the growth of EVs in China and globally than chasing the nonsensical valuations of $NIO and $XPEV.