* Q3 net down 99 percent on weak sales
* Nine-month profit up 4.02 percent
* BYD shares fall more than 10 percent after results
(Adds analysts comments, stock price)
By Fang Yan and Ken Wills
BEIJING, Oct 26 BYD Co Ltd (1211.HK), a Chinese
carmaker backed by U.S. billionaire Warren Buffett, posted a
disappointing 99 percent drop in quarterly earnings as its sales
strategy backfired, sending its stock down 10 percent on Tuesday.
The worse-than-expected quarterly result came as auto sales
tapered off in China, the world's biggest auto market, in
response to Beijing's efforts to keep its economy from
"Investors were disappointed by its sharp drop in earnings
when other automakers were posting strong results," said Francis
Lun, general manager from Fulbright Securities. "It suggested
that the products are having problems."
BYD's pullback marked a sharp contrast with breakneck
expansion in 2009 and the first quarter of this year.
"BYD had been expanding its sales network aggressively and
pressing its dealers to hike their sales targets. That strategy
worked well when the market was good," said Marvin Zhu, an
analyst with J.D. Power and Associates. "But it backfired when
the market slowed in the summer months."
Shares of BYD fell 10.3 percent to close at HK$51.05 in their
biggest single day drop in about two years. The stock has lost
more than a quarter of its value this year, underperforming an 8
percent gain on the broader market .HSI.
"Selling pressure is still there as it is still expensive
compared with rivals," Lun said.
POOR Q3 EARNINGS
BYD said its July-September net profit stood at 11.82 million
yuan ($1.78 million) against 1.16 billion yuan a year earlier.
J.P. Morgan had forecast BYD's net profit to fall by 55
percent to 522 million yuan.
"BYD is trading at 23.3 times 2011 earnings, which is hardly
a bargain for a company that has deteriorating fundamentals,"
Adrian Chan, an analyst at Credit Suisse said in a research
BYD's auto sales started to taper off in August, down 19
percent from the year-earlier period, with September sales down
about 25 percent, company data showed.
That compared with an 18.7 percent and 19.3 percent rise in
China's passenger car market during the two months, respectively.
While BYD's market share was slipping, others, especially
some long-established foreign brands, including General Motors
[GM.UL] and Volkswagen AG (VOWG.DE), were gaining ground.
Sales at GM's car venture with SAIC Motor Corp Ltd
(600104.SS) rose 41 percent in September from a year earlier,
with sales at Volkswagen's tie-up with SAIC up 36 percent.
BYD, 10 percent owned by Buffett's Berkshire Hathaway Inc
(BRKa.N), in August warned of a slowdown in car sales in the
second half and said it would launch new models to lessen the
It had also cut its car sales target by 25 percent to 600,000
for the year and lowered prices by more than 5 percent.
(Additional reporting Donny Kwok; Editing by Dhara Ranasinghe
and Chris Lewis)