Morgan Stanley upgrades BYD to "overweight," sees strong global upside

Investing.com -- Morgan Stanley has upgraded its rating on BYD Company (OTC:BYDDY) Limited to “overweight” from “equal-weight,” raising its price targets on the company’s H- and A-shares, citing strong fundamentals and growing global clout in the electric vehicle sector.

The brokerage lifted its price target for BYD’s H-shares to HK$438 from HK$307 and for its A-shares to Rmb433 from Rmb305. 

Analysts pointed to BYD’s ability to turn a challenging macroeconomic environment into an opportunity for structural growth, much like Toyota (NYSE:TM) and Tesla (NASDAQ:TSLA) did during previous downturns. 

BYD’s growing market share, technology rollout, and supply chain control were cited as factors that give it an edge amid ongoing global consolidation in the EV sector.

Morgan Stanley now expects BYD (SZ:002594) to deliver 5.5 million vehicles in 2025 and forecasts that the company will contribute over 30% of global EV growth that year. 

The brokerage anticipates a compound annual growth rate in volume of 10-12% through 2030, with the potential for BYD to rival Toyota in overall vehicle sales volume by the end of the decade.

The report emphasized BYD’s rapid scaling of innovation, particularly in autonomous driving systems and fast-charging technology. Its “God’s Eye” advanced driver-assistance system (ADAS) and a 1000-kW charging platform are being deployed at scale, giving it a lead in delivering smart features to the mass market without price hikes. 

Morgan Stanley noted that more than half of BYD’s incoming orders now feature the God’s Eye system.

While trade barriers continue to present headwinds, the report highlighted BYD’s move to build local production in key overseas markets. 

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The company is expanding dealership networks and plans new plants in Europe, which should allow it to bypass tariffs and compete more effectively with established players. 

In Europe, BYD’s NEV market share has already grown from less than 1% in 2023 to about 5% in early 2025, with further gains expected as local production ramps up.

Morgan Stanley also pointed to significant potential in emerging markets, where BYD is seeing rapid growth in regions like Southeast Asia and Latin America. 

In Thailand, Indonesia, and Brazil, BYD’s share is climbing steadily, helped by its cost-competitive plug-in hybrids, which are less dependent on mature charging infrastructure.

Beyond vehicles, analysts cited BYD’s long-term potential in robotics, autonomous driving chips, and even vertical take-off and landing aircraft. 

While these businesses are still nascent, the report described the company’s in-house expertise in batteries and mechanical engineering as highly transferable.

Despite the upgrade, Morgan Stanley acknowledged risks. These include rising tariffs, especially in developed markets, price competition in China’s EV market, and the potential for lower-than-expected overseas or premium segment sales. 

However, the brokerage said BYD’s vertically integrated supply chain and strong operational performance provide a cushion against these challenges.

The upgrade reflects Morgan Stanley’s revised outlook for BYD’s earnings, margins, and free cash flow. 

It raised its 2025 net profit estimate to Rmb53.5 billion, up from Rmb49.8 billion, and sees gross profit margin rising to 21.2% next year. 

The analysts note that BYD trades at 17 times estimated 2025 earnings, in line with its two-year average, but could be valued more attractively at 12 times earnings when adjusted for low R&D capitalization relative to peers.

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Morgan Stanley’s analysts expect BYD to emerge as one of the few automakers capable of turning current global disruptions into long-term strategic gains.

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