Asia Tech Wire (Feb 22) -- Goldman Sachs has cut its price target on Chinese electric car maker BYD Co Ltd (01211.HK) to HK$304 and reiterated its buy rating.

In its latest report, Goldman Sachs noted that the market concerns that continued price cuts on BYD's mass-market models could lead to pressure on gross margins.

Considering the ongoing destocking and the timetable for new models to hit the market from March onwards, Goldman Sachs forecasted BYD would have a combined price cut of 8.1% in 2024.

As a result, the investment bank lowered its price target for BYD to HK$304, while cutting its forecast for the Chinese automaker's net profit between 2023 and 2025 by 11% to 15%.

Goldman Sachs expected BYD to do well in the premium car market, with its three premium brands Denza, Fangchengbao and Yangwang delivering a total of 136,000 vehicles last year, yielding a gross profit margin between 30% and 40%, versus more than 20% for mass-market models.

It predicted sales of BYD's premium models will reach 312,000 units this year, accounting for 8% and 20% of its total sales and auto revenue respectively.

The stabilising contribution to profits from the premium brands and export business, coupled with lower bills of material (BOM) costs, lead Goldman Sachs to believe these could offset the impact of price cuts on BYD's mass-market models

With the factors, Goldman Sachs expected BYD to maintain a stable gross margin and unit profit this year, and forecasted that it would export 439,000 vehicles in 2024.