Being one of the more interesting Chinese firms I decided to calculate some financial ratios for BYD, which can’t be found on any of the financial websites (1211.hk on Yahoo Finance). Berkshire Hathaway holds just under 10% of the firm and both Warren Buffet and Charlie Munger have shown particular interest in the firm. Munger specifically pointed out that the company employs over 40,000 engineers and its technologies appear exceptional. BYD (Build Your Dreams) largely produces automobiles in the Chinese market, but it also develops its own batteries and has a line of electric cars.

BYD is planning on entering the U.S. market within the year and is contracting with the city of Los Angeles on building electric buses for the city. The company has seen exceptional growth in China as China recently passed the U.S. in automobile sales, but future growth is expected to diminish significantly. This news has clearly evidenced itself in the share of BYD (1211.hk on Yahoo Finance) as the stock has slowly fallen from a peak of $85 in October of 2009 to $39 today.

Warren Buffett was quoted early last year in saying any future share purchases would be contingent on the price. The stock is still trading at a lofty p/e of 19.55, but is down significantly since the time of Buffett’s comments.

Unfortunately the financials for 2010 are yet to be released so I was forced to go off the 2009 annual report published by the company. The figures were also quoted in the Chinese Renminbi so I converted them back to dollars at 1 Renminbi = $.152 USD.

I also had difficulty determining the market capitalization of the firm. It is quoted at 30.16 billion on Yahoo Finance, but it isn’t specified if that’s in USD of HKD. Berkshire Hathaway’s 9.89% stake was quoted at around $2 billion at the end of 2009 so I went off that figure to calculate a $11.2 billion market cap given the falloff over the year. Given the growth in earnings, the 2010 values should show a larger discount to these values.

Figures from the 2009 Annual Report. Numbers are in ‘000 USD

Assets = $6,191,811

Liabilities = 3,299,687

Equity = $2,892,123

Debt/Equity = 1.14

Return On Equity = 21.43%

Times Interest Earned = 18.655

Free Cash Flow Yield = 8%

Price To Book = 6.91

Cash Flow From Operations = $1,826,463

Free Cash Flow = $945,362

Revenues = $5,999,357

Cost Of Revenues = $4,697,518

Interest Expense = $38,819

Net Earnings = $619,923

The financials for 2009 can be found here

Disclosure: No holdings in BYD

Josh Zachariah

What Worked in the Stock Market for Long-Term Investors?

Extensive research has found that the companies with predictable revenues and earnings outperform the market average; they also suffer lower probability of loss. As a matter of fact, this kind of companies are exactly what Warren Buffett wants to buy and hold forever. Please read the research about what worked in the stock market:

Part I: What worked in the market from 1998-2008? Part I: Predictability Rank
Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety

More Gurufocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool