Is BYD (1211.HK) too high now?

BYD (1211.HK) closed on 22 Sep at $70.60, up 50% within 10 trading days. Is it too lofty to go in? What were the push factors in the past 10 days?

BYD boss believed that China will have all electric cars or hybrid electric cars on the road by 2030, a target which is much more ambitious than even the Europe zone's.

But 50% surge within so short a time can lead to a crisis to BYD share prices due to the following reasons:

1. The surge was driven by policy changes, not by compelling consumer demand or growth of the industry or new technology.

2. The crude oil prices are still very low for existing car owners to have the urge to change theirs to electric cars.

3. Too much exuberance in BYD share price which has not been backed by its financial performance. BYD’s half-year earnings actually retreated 24% and it has been estimated that the earnings will drop by 20% for the first 9 months compared to the same period in last FY. Its current p/e (ttm) is 33.79x (based on $70.6 closing price on 22 Sep) and it is almost certain that BYD will have negative growth in this FY. These figures are not compelling for shrewd investors to invest in it at this stage.

If anyone who have bought some BYD earlier, my suggestion is that they can sell it should the price retreat to $68 or/and when the stock opens-high-closes-low.

I tried to compare four China automotive stocks listed on the HK Exchange:

1.      Geely (175.HK): p/e (ttm) at 36.25, dividend yield at 0.51%

2.      BYD (1211): p/e (ttm) at 33.79x, dividend yield at 0.58%

3.      Brilliance (1114.HK): p/e (ttm) at 27.82x, dividend yield at 0.97%

4.      Dongfeng (489.HK): p/e (ttm) at 6.07x, dividend yield at 2.24%

The answer is clear that Dongfeng is my choice at this stage!

Superphang

https://superphang.blogspot.sg/