BYD CO LTD (HK: 1211; SZA: 002594) has suffered an over 35% drop in its Hong Kong-listed valuation since June, and its A shares are faring little better.
Analysts say this hybrid vehicle maker, in which Warren Buffett holds around a 10% stake, is on the verge of a share price collapse.
A Chinese-language piece in Beijing News said that only the most steely-nerved investors would ignore the recent downward trends of the Shenzhen-based pure electric and hybrid vehicle maker’s share performance.
The green vehicle champion’s A-share valuation was flirting with the possibility of touching its IPO price of 18 yuan (Monday closing price: 19.65 yuan, down 5.5% on the day).
Beijing News said the fact that Mainland China’s de facto flagship green automaker has hemorrhaged some 20 bln yuan in market value since its listing is starting to shake confidence in even its most patriotic PRC shareholders.
The firm began the year by announcing another disappointing performance, in which 2010 full-year sales failed by a significant gap to hit the original target of 600,000 units.
And the fact that BYD initially disappointed investors in June of this year by raising a less-than-expected 1.42 bln yuan in its A-share IPO did little to endear existing and potential investors to the firm’s long-term potential.
Even more destabilizing to investor confidence was the recent news that BYD had plans to lay off upwards of 70% of its workforce to compensate for a sharp nosedive in first half unit sales and earnings.
BYD also announced plans to reduce its marketing and sales expenditures by the end of this month, all of which would result in the eventual reduction of its workforce to around 800 from the current 2,600.
But bad news comes in threes, so the saying goes.
Chart: Bloomberg.
It was recently reported that BYD would likely be forced to sell a record amount of corporate bonds to meet demands from maturing loans next year amid a prolonged credit tightening campaign from the People’s Bank of China meant to stymie inflation in the bud.
BYD’s beleaguered shareholders on Sept 9 granted approval for the hybrid vehicle maker to sell up to 6 bln yuan in bonds, which analyst say is “very poor timing” given the economic uncertainty, high payout rates and slumping sales of the Hong Kong- and Shenzhen-listed firm.
And sales for the automaker and rechargeable battery manufacturer have been abysmal of late, Beijing News added.
Unit auto sales for BYD have fallen every month over the past 14 months, a shocking turnaround from its performance just two years ago.
In 2009, BYD enjoyed the enviable status of having the best-selling passenger sedan in Mainland China – the F3.
However, this honor now seems like a distant memory as BYD’s first half net profit plunged a crippling 89% year-on-year.
The report added that the firm is once again turning to fundraising activities including corporate bond sales to make ends meet, but its recent track record leaves much to be desired.
BYD garnered some 1.4 bln yuan from a share sale in June, some 35% below target.
And the automaker currently has outstanding bond commitments and loans of 16 bln yuan, with a 15 bln yuan loan due next year.
It would seem that BYD – saving another white knight appearance a la Buffett – would need a sudden burst of sales to truly turn things around.
Therefore investors will no doubt be eagerly awaiting third quarter results and sales figures.
See also: Troubled PRC Automaker BYD Eyes 70% Staff Cuts... Will Buffett Bail Too?