In a significant strategic move, BYD has announced plans to develop a value management system aimed at enhancing its investment profileThis initiative was made public on the evening of December 27, 2024, revealing the company's intention to improve its market valuation and to protect the legal rights of both the company and its investorsThe announcement coincides with the regulatory expectations from the Shenzhen Stock Exchange regarding transparent information disclosure.

As BYD embarks on this new development path, the specifics of how it plans to boost its investment value remain to be seenNonetheless, this represents a crucial first step in its value management journey and may have profound implications for the company's long-term growth trajectoryWhat remains unclear is the extent to which this will impact BYD's stock price at present.

Currently, BYD holds the distinction of being the largest new energy vehicle maker by market capitalization in the A-share market, boasting a value of approximately 832.9 billion yuan

Recently, the company's third-quarter revenue surpassed that of Tesla for the first time in historyYet, it's noteworthy that BYD’s market cap is merely one-twelfth that of Tesla.

BYD’s status as a major component in numerous broad-based indices and its high market capitalization make its approach to value management particularly significantBy strengthening its value management practices, BYD could positively influence market stability and enhance its own value propositionThe recent increase in companies publicly announcing similar value management frameworks indicates a broader trend across the corporate landscapeA reported 30 listed companies have created and announced their value management systems this year alone, including a mix of state-owned enterprises and private companies like Jianlang Hardware and Bull Group.

Under the impetus from regulatory bodies and the State-owned Assets Supervision and Administration Commission, more companies are recognizing the importance of value management

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This has now become an essential component of corporate governance across the boardCompanies are increasingly adopting various strategies including mergers and acquisitions, equity incentives, employee stock ownership plans, cash dividends, investor relations management, information disclosure, and share buybacksThese approaches serve to accurately reflect investment value and corporate quality.

The guidelines also clearly define the responsibilities of key stakeholders, including company boards, directors, and senior management, in implementing these value management frameworksSpecialized requirements have been set for components of major indices to establish these management systems and for companies that have persistently traded below book value to disclose their plans for valuation increasesFurthermore, it is explicitly prohibited for companies to engage in illegal activities under the guise of value management.

To deepen this trend, on December 17, new directives aimed at enhancing the market value of state-controlled listed companies were issued

These measures seek to foster effective value management processes, increase investment potential, and protect investors' interests while contributing to the steady development of the capital market.

A number of investors have pointed out that effective value management encourages listed companies to focus on performance growth and improve overall company quality, leading to a beneficial cycle where value appreciation aligns with corporate development.

BYD’s market capitalization, though the largest among new energy vehicle makers in the A-share market, significantly lags behind Tesla’s astronomical valuationAs of late 2024, BYD’s valuation stands at 832.9 billion yuan with a rolling price-to-earnings ratio of 24.6. This rapid growth is reflected in the company’s latest quarterly report, which shows that for the first time, BYD’s revenue of 201.1 billion yuan in the third quarter exceeded Tesla’s revenue of 179.4 billion yuan during the same period.

Both Tesla and BYD hold pivotal positions as the leading electric vehicle manufacturers in both China and globally, capturing significant market share amidst fierce competition and maintaining growth amidst challenges

In terms of financial performance, BYD reported a year-on-year revenue increase of 18.94%, reaching a total of 502.25 billion yuan in the first three quarters of 2024, along with a net profit of 25.24 billion yuan, marking an 18.12% increase from the previous yearConversely, Tesla reported slightly lower revenues of 504.4 billion yuan during the same period.

Despite BYD’s impressive growth metrics, the disparity in market capitalization between it and Tesla is starkThis year, Tesla’s stock price soared by 82.76%, bringing its valuation close to 1.46 trillion US dollars (about 10.48 trillion yuan), while BYD’s stock experienced a 46.37% increase, resulting in its current market capitalization of only 832.9 billion yuanThus, BYD’s market cap is a mere one-twelfth of Tesla’s.

In spite of its strong sales growth, BYD faces challenges posed by fierce competition in China's new energy sector

Recent trends indicate that many new energy companies are experiencing stagnant stock performance after previous highs, impacting even industry leaders like BYD.

Regarding passenger vehicles, industry analysts have noted that ongoing technical innovations and supportive policies are pivotal in sustaining domestic demandThe transition to new energy and the rise of independent brands are expected to be key investment themes in the medium to long termDemand for vehicles in 2024 is anticipated to grow beyond expectations, underscoring the resilience of the domestic market and the effectiveness of stimulus policies.

Looking forward, ongoing fiscal support policies are expected to remain robust, with stable growth anticipated in demand and further increases in new energy vehicle penetrationThe intense price competition in the market may begin to moderate over time, presenting valuable investments, especially in leading companies, as well as in products poised for significant market shifts on the horizon.

According to research from Hu Long Securities, BYD's rich pipeline of new products supports its transition towards higher-end markets