Jefferies downgrades BYD stock to Underperform on earnings miss

Jefferies downgraded BYD Co Ltd (SZ:002594) to Underperform from Buy, significantly cutting its price target to HK$92.00 from HK$447.00, following the Chinese EV giant's 'jarring miss' in Q2 2025 earnings. BYD reported a net profit of RMB6.4 billion, a 30% year-over-year decline that fell substantially short of the RMB10 billion consensus estimate. Jefferies attributed this underperformance to 'lackluster sales momentum and structural headwinds' eroding the company's competitive advantages, expecting the stock to underperform until BYD demonstrates renewed business momentum.

Analysis

Jefferies has issued a significant downgrade for BYD Co Ltd, shifting its rating from Buy to Underperform and slashing the price target to HK$92.00 from HK$447.00. This action is a direct response to a 'jarring miss' in the company's second-quarter 2025 earnings, where net profit fell 30% year-over-year to RMB6.4 billion, substantially underperforming consensus estimates that exceeded RMB10 billion. The downgrade reflects a belief that BYD's competitive advantages, previously rooted in scale, cost efficiency, and technology, are being eroded by 'lackluster sales momentum and structural headwinds.' This sharp profit contraction occurs despite reported trailing-twelve-month revenue growth of 31.7%, suggesting an acute margin compression issue. While BYD is pursuing strategic initiatives, such as localizing its supply chain for its Hungary plant, these long-term moves are overshadowed by the immediate operational underperformance. The company's struggles are particularly notable given the robust global EV market, which saw sales grow 24% in June 2025, indicating BYD's problems may be company-specific rather than sector-wide.

Key Decisions for Investors

• Investors should view the significant Q2 2025 earnings miss and subsequent Jefferies downgrade as a major red flag, indicating that BYD's profitability and competitive advantages are facing severe structural pressure.
• It is critical to monitor near-term sales figures and company guidance for evidence of a turnaround, as the stock is expected to underperform until 'renewed business momentum' is demonstrated.
• Re-evaluate valuation models to account for potential severe margin compression, as evidenced by the 30% profit decline despite strong trailing revenue growth, which underpins the analyst's drastic price target reduction.