Will BYD Help The Chinese EV Makers Lead Auto AI Race?

With the Chinese EV makers looking to partner Nvidia for the new chip, Blackwell to power NVIDIA DRIVE Thor, this will be a new era of artificial intelligence for the EV market.

THe evolution of how a smart car should behave might change completely once we see the first successful implementation of the Blackwell GPU chip on car self-driving. We do not know much about the potential yet, but it is a new generation of AI graphics processors.

AI graphics might be just what an EV would need, a self-driving electric car uses artificial intelligence imaging and scanning to drive around highways and cities. The Japanese electric car developer Turing has unveiled its driverless EV whose car concept lets AI makes driving decisions while it cruises on the road.

The camera on board, alongside sensors and dynamic maps, of the car design gathers the views it receives while driving. Based on the information detected, the car operates the steering wheel on its own and drives itself on public roads without the passengers’ help.

Here are one of the Chinese EV makers I would focus on seeing how the development will played out.

BYD demonstrates formidable strength from the business perspective, leaving competitors far behind in terms of the deliveries expansion. Business success is converted into improving profitability and accumulating resources on the face of the company's balance sheet.

Chinese country risks, including foreign exchange fluctuations and political uncertainty, may impact BYD's financial performance. I believe that a 25% potential upside is worth the above-mentioned risks.

It is important that we understand whether a company, especially an EV maker, whether they are going to continue to grow and generate annual revenue growth.

Their capital outlay is high, so for BYD’s forecast earnings growth (18.1% per year) is above the savings rate (2.3%), this would be good meaning that it would not go bust at least for the next few years.

BYD’s earnings (18.1% per year) are forecast to grow faster than the US market (13.3% per year), though BYD's earnings are forecast to grow, but not significantly. BYD's revenue (14.8% per year) is forecast to grow faster than the US market (8.1% per year). BYD's revenue (14.8% per year) is forecast to grow slower than 20% per year.

For the future ROE, BYD's Return on Equity is forecast to be high in 3 years time (23.1%). This should be very encouraging as BYD should be rolling out the new features for driving in their future model.

There will be an amount of investment required, but I would think the return should be proportionately well planned.

On the debt level, BYD has more cash than its total debt, this is important as they continue to innovate and partner with Nvidia. With a strong cash position, we should be seeing more investment from BYD.

BYD has been successful in reducing its debt, bring the debt to equity ratio reduced from 102.4% to 17.9% over the past 5 years. With its operating cash flow (585.4%), the debt coverage is healthy as the debt is well covered.

BYD also earns more interest than it pays, so coverage of interest payments is not a concern.

Something we might need to be aware is the high cost of sales, we do understand that for EV makers, this is pretty common, but maybe it should be time to look at trimming this cost, so that it could be deployed for better use, e.g. Research and Development.

I believe we should be continuing to see BYD beating its estimate for earnings per share, though we might see some of the revenues decreasing due to cost.

If we look at the ownership for BYD, we have more than 35% of insiders and more than 25% of pubic investors, this would mean that any stock holdings movement by either group could sway the stock price.

The trading volume for BYD would be important in this case.

With the Chinese EV makers making progress in introducing new tools and softwares into their vehicles, are we going to see a shift in the Auto AI race?

The talk on self driving might have been overshadowed by what the software have been upgraded with more advanced generative AI capabilities.

Appreciate if you could share your thoughts in the comment section whether you think BYD can help to lead the Chinese EV makers in the Auto AI race?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.