Morgan Stanley Cuts BYD Profit Forecast 13% on Rising Costs

Morgan Stanley lowered its 2026 and 2027 net profit forecasts for BYD Co. (01211.HK) by 13 percent, citing concerns over rising costs and increased investment needs for the electric vehicle maker.

"The adjustments reflect inflation in raw material costs and higher bill of materials (BoM) costs from upgrades in intelligent driving and ultra-fast charging," Morgan Stanley said in a research report. The bank maintained its "Overweight" rating on the stock.

The investment bank reduced its gross margin forecasts for 2026 and 2027 by 0.3 and 0.2 percentage points to 18.3 percent and 18.7 percent, respectively. This was despite factoring in a higher contribution from overseas markets and premium models. Operating expense forecasts were also raised to account for increased investment in intelligent driving research and higher overseas selling and administrative expenses.

Despite the profit revision, Morgan Stanley kept its target price at HKD 126 and maintained its sales forecasts of 5.2 million and 5.7 million vehicles for 2026 and 2027. The bank also introduced a 2028 sales forecast of 6.2 million vehicles.

The forecast cut highlights the growing margin pressures within the competitive electric vehicle industry. Investors will be closely watching BYD's ability to offset higher costs through its premium and international expansion. The company's next major catalyst will be its upcoming quarterly results, which will provide an update on margin trends.

This article is for informational purposes only and does not constitute investment advice.