Morgan Stanley: BYD reports third-quarter revenue and profit growth as sales volumes rise, while gross margin faces sequential pressure

How strong was third-quarter profit?

BYD’s third-quarter net profit was 10 billion yuan, up 22% quarter over quarter and 28% year over year, broadly in line with Morgan Stanley’s estimate of 10.4 billion yuan. Operating profit was 11.2 billion yuan, within the market’s expected range of 11 billion to 12 billion yuan.
Excluding BYD Electronic, profit per vehicle was 7300 yuan, above 7200 yuan in the second quarter and 6100 yuan a year earlier, and within the market’s expected range of 7000 to 9000 yuan.

Third-quarter revenue was 221 billion yuan, up 14% both quarter over quarter and year over year; sales volumes rose 17% and 16%, respectively, and were the main driver of revenue growth.
Sales volumes grew faster than revenue, implying a low-single-digit percentage decline in average selling price. Morgan Stanley believes this may reflect changes in the product mix and retail discounts.
Third-quarter gross margin was 18.0%, down 0.9 percentage points quarter over quarter but up 0.4 percentage points year over year. The bank believes sequential pressure may have come from higher material costs and promotional discounts on plug-in hybrid models.

Third-quarter research and development and selling and administrative expense ratios fell 0.2 and 0.5 percentage points quarter over quarter, respectively, while operating profit rose from 10.4 billion yuan in the second quarter to 11.2 billion yuan.
Morgan Stanley estimates that the third-quarter R&D capitalization rate was a high-single-digit percentage, below the high-tens percentage level in the first half of 2026.
Non-operating profit improved by 3 billion yuan quarter over quarter, supported by lower finance costs and investment income; third-quarter investment income was 400 million yuan, benefiting from ChangXin Technology.

Cash and equivalents fell from 58.7 billion yuan to 31 billion yuan, partly because of debt repayment.
Morgan Stanley believes incremental sales from the adoption of driver assistance and ultra-fast charging can partly offset the impact of intense competition in the mass market; the bank identifies progress in overseas expansion, demand for new energy vehicles and gross margin as key variables.
The bank rates BYD’s Hong Kong-listed shares “Overweight,” with a target price of 114 Hong Kong dollars; the report lists a closing price of 68.65 Hong Kong dollars on 29 October 2026.