Buffalo-backed EV maker BYD Co. to enter trillion-yuan Cap Club

Bloomberg BYD Co., a Chinese electric vehicle maker backed by Warren Buffett, is about to enter the trillion-yuan market cap club as its production resilience and government's consumption incentives helped spur a rally.

The company's shares have gone up 66% since a March low, a move that will allow it to hit the milestone, a rare feat only achieved by a handful of mainland-listed stocks, including Contemporary Amperex Technology Co. and Kweichow Moutai Co..

BYD stood out from this year s industry disruption as the company managed to navigate component shortages and Covid 19 lockdowns to post record monthly production and sales in May. Analysts believe the firm will sell 1.5 million vehicles this year, doubling from 2021, with its vertically integrated business structure giving it a lead over rivals.

Bridget McCarthy, a market research analyst at US hedge fund Snow Bull Capital Inc., said that BYD is the only company with fully weathered lockdowns, chip shortages, and raw material price increases.

China's EV industry fell during Shanghai's lockdown when not even one car was sold in the city in April and factories were forced to shut down or operate under heavy restrictions. As the authorities unveiled a number of measures including subsidies, higher quota for car ownership in Shanghai and Guangdong, and a possible extension of the purchase tax exemption for new energy vehicles, automakers have had strong rebound since.

Since March, XPeng Inc., XPeng Inc., and Nio Inc. have surged over 70% since. The Hong Kong shares of BYD closed at a new record on Tuesday. On the mainland, Chongqing Changan Automobile Co., Guangzhou Automobile Group Co. and Great Wall Motor Co. are some of the top winners over the period.

Read: China Electric-Vehicle Stocks Are All the Rage, Trouncing Tesla

BYD has a wide variety of product lines and footprints across the supply chain, which distinguishes it from other automakers. The company may supply batteries to Tesla Inc., and is now involved in the mining of lithium, the raw material that is vital for EV batteries, in hopes that it can give a longer-term advantage over competitors in securing upstream resources.

Steve Man, an analyst at Bloomberg Intelligence said that BYD s manufacturing is more vertically integrated, so the automaker experienced less supply chain disruptions than peers. He said that the expanded battery capacity and refreshed lineups have allowed monthly production and sales to hit new records.

Four of the 34 analyst recommendations compiled by Bloomberg are buys, four are holds and one sell. The average 12 month price target is 359 yuan, compared to Tuesday's close of 352.9 yuan.

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