Hillhouse Capital takes part in BYD's latest private placement after liquidating its positions in NIO, XPeng and Li Auto

February 17, 2021 ideaTechX

After liquidating its positions in NIO, XPeng Motors, and Li Auto, Hillhouse Capital has participated in the latest round of private placement by Warren Buffett-backed BYD, demonstrating the top private equity firm’s continued interest in China’s electric vehicle industry.

On February 17, Chinese financial media Zhitong Caijing cited sources as saying that Hillhouse spent $200 million to participate in the latest round of private placement by BYD Company Limited (01211.HK).

Hillhouse originally planned to participate in the subscription for a higher amount but did not receive a positive response from BYD, and the final amount was set at $200 million, the report said.

BYD did not confirm the news at the time, but on February 18, Li Yunfei, general manager of BYD’s brand and public relations division, confirmed the news to nbd.com.cn.

Li also said: “We are grateful for and recognize Hillhouse’s participation in this round of placement. We believe the combination of capital and advanced intellectual manufacturing will bring better development prospects to our company.”

It is worth noting that Hillhouse has just liquidated its position in shares of Chinese new car makers NIO, XPeng, and Li Auto.

Hillhouse Capital, which liquidated NIO at its lowest point, re-bought big in Q3

BYD shares were down 2.6 percent in Hong Kong as of press time, amid a broad sell-off in electric car stocks. The company’s shares have risen month 470% in the past year.

Goldman Sachs recently issued a report that raised BYD’s price target significantly from $38 to $293, with a “neutral” rating.

However, it should be noted that BYD closed at HK$265.4 on the Hong Kong Stock Exchange Thursday. Goldman Sachs’ generosity may just be its need to face reality and give BYD a reasonable valuation.

Goldman Sachs believes that China’s new energy vehicle sales will rise to 4.6 million units in 2025; 8.5 million in 2030; and 12.5 million in 2035, which will drive battery demand 12 times higher over the next 15 years.

This means battery demand will grow at a compound annual growth rate of 18 percent over the next decade, the bank said.

This is who bought and sold NIO stock in Q4

The bank noted that BYD and CATL recently announced plans to accelerate capacity expansion, so the corresponding upward revision of their sales estimates, they are expected to dominate China’s automotive battery market and to capture growth opportunities.

Goldman Sachs expects BYD’s external battery sales to reach 7, 15, and 25 GW each year from 2021 to 2023, and new energy vehicle sales to reach 381,000, 518,000, and 662,000 units respectively, in line with the bank’s industry forecast at the end of last year.

The bank also slightly adjusted BYD’s average sales price forecast to reflect the high-end of car sales, mainly driven by the “Han”, as its average unit price reached RMB 220,000.

Goldman Sachs also expects BYD’s new energy vehicles to increase their market share to 24% in the next five years from 2021 to 2025, up from 16% in 2020, and its battery market share to 13% in 2023-25.

Buffett-backed BYD reportedly plans to launch premium new energy vehicle brand in 2022