On the morning of March 4, BYD Co., Ltd. (01211.HK) announced on the Hong Kong Stock Exchange the completion of a H-share placement plan worth HK$43.509 billion (approximately US$5.6 billion). This fundraising scale not only set a new high for the Hong Kong stock market in nearly four years but also surpassed equity refinancing records in the global automotive industry, attracting significant attention in the capital markets.

However, market reactions were mixed: On the day of the announcement, BYD's Hong Kong share price opened down by more than 7%. This divergence reflects the strategic potential brought by the substantial capital injection, alongside the short-term valuation pressure it creates. What rationale lies behind BYD's capital maneuver?

Financing Structure Analysis: Balancing Discounted Share Placement and Equity Dilution

According to the Hong Kong Stock Research Society, BYD announced on March 3, 2025 (after market close) that the Company and the placement agent had entered into a placement agreement. The placement shares will be issued under general mandate.

Under the terms of the agreement, if all placement shares are successfully placed, the total proceeds are expected to reach approximately HK$43.509 billion. After deducting commissions and estimated expenses, the net proceeds are estimated to be approximately HK$43.383 billion.

BYD issued a total of 129.8 million new H-shares, representing approximately 11.82% of the existing issued H-shares and 4.46% of the total issued shares. The price per share was set at HK$335.20, representing a 7.8% discount to the closing price on March 3 (Monday), which was at the lower end of the trading and marketing price range.

Notably, this placement size increased by 10% compared to BYD's initial plan of 118 million shares. Upon completion, the proportion of A-shares will decrease from 62.26% to 59.60%, while the proportion of H-shares will rise from 37.74% to 40.40%.

BYD intends to invest the raised funds in various key areas, including overseas business expansion, R&D investment, working capital replenishment, and general corporate purposes.

This financing is monumental, marking the largest such activity in the Hong Kong stock market since Meituan's fundraising through additional issuance and convertible bonds in 2021.

According to BYD's investor relations WeChat official account, this HK$5.6 billion H-share flash placement set multiple records: It is the largest equity refinancing project in the global automotive industry over the past decade and the largest flash placement project ever in the sector. It ranks second among all flash placement projects in the Hong Kong market and first among all such projects in the industrial sector of the Hong Kong market.

The transaction successfully attracted participation from top global long-term investors, sovereign funds, and strategic investors from the Middle East, including the UAE's Al-Futtaim family office as a strategic investor.

BYD and the Al-Futtaim Enterprise Group aim to upgrade their existing successful cooperation into a strategic partnership, further strengthening collaboration in fields such as new energy vehicles, starting with regional cooperation to jointly explore more growth opportunities and synergies.

Strategic Depth: Overseas Expansion and R&D Investment Dual Engines

In 2024, BYD's cumulative sales of new energy passenger vehicles exceeded 4.25 million units, a year-on-year increase of 41.1%, ranking first globally. This demonstrates BYD's outstanding strength in the field of new energy vehicles. In the first two months of 2025, BYD's cumulative sales of new energy vehicles reached 623,400 units, up 92.52% year-on-year, maintaining a robust growth trajectory.

Exports in February surged to 67,000 units, a year-on-year increase of 187.8%, marking the second consecutive month with exports exceeding 60,000 units. BYD's overseas market share has continued to expand steadily. With cost-effective products and advanced intelligent technology, BYD has established itself as a model of "Made in China" in the international market, spanning from Southeast Asia to Europe.

In the Brazilian market, BYD achieved remarkable growth of 328.22%, earning the title of "Fastest-Growing Brand in 2024." Models such as the Song Pro and Seagull were highly favored by consumers, becoming best-sellers in the market.

In Colombia, the Yuan UP model achieved notable success, ranking first on the sales chart, helping BYD become the top-selling electric brand locally. In Europe, BYD actively targeted core markets such as Germany, Norway, and the UK, continuously consolidating its market position.

Taking Norway as an example, the BYD Tang has ranked first in local sales of medium and large SUVs for three consecutive months, outperforming traditional luxury brands such as Volvo XC90. In recent years, BYD's overseas sales of new energy passenger vehicles have shown geometric growth, benefiting from its extensive experience in technology research and development, production capacity reserves, and the booming global new energy vehicle market.

BYD's overseas expansion strategy can be vividly described as "octopus-style," with business tentacles extending to six continents worldwide. From the tropical rainforests of Southeast Asia to the bustling cities of Europe, the vast lands of Latin America, and the desert oases of the Middle East, BYD's products are ubiquitous.

This comprehensive and multi-regional market layout not only showcases BYD's strong comprehensive strength but also underscores its ambitious goal of global development.

In this H-share placement, the UAE's Al-Futtaim Group participated as a strategic investor. Both parties plan to deepen their strategic partnership based on existing cooperation, engaging in more extensive and in-depth collaboration in fields such as new energy vehicles to jointly explore the potential of the global market.

R&D investment has always been a top priority for BYD. In 2023, BYD's R&D investment reached RMB 39.9 billion. In the first half of 2024, R&D investment amounted to RMB 20.177 billion, a year-on-year increase of 41.64%. This figure was approximately RMB 6.6 billion higher than net profit during the same period, and the scale of R&D investment has been increasing annually.

In comparison, Geely Auto's total R&D investment in the first half of 2024 was RMB 7 billion, maintaining a high year-on-year growth rate but still lagging significantly behind BYD. Great Wall Motors' R&D investment during the same period was only RMB 4.185 billion. This indicates that BYD's R&D expense ratio is at a high level within the automotive industry and across industries.

Beyond R&D funding, the size of BYD's R&D team has also grown annually. In 2022, the number of R&D personnel was 69,697, and the 2023 annual report revealed that this figure had risen to 102,800, surpassing Toyota and Tesla to rank first in the industry.

Both the high investment in R&D expenses and the large scale of the R&D team fully demonstrate BYD's unwavering commitment and continuous investment in technological innovation.

This financing signifies that BYD will further increase its investment in intelligence, covering key technology sectors such as autonomous driving and the Internet of Vehicles, actively responding to challenges from competitors like Tesla and NIO.

Bernstein analysts predict that from 2025 to 2027, BYD's return on assets (ROA) for overseas operations is expected to reach 16.2%-28.7%, significantly higher than its domestic business level. This prediction reflects the market's high recognition of BYD's overseas business development potential.

Market Dynamics: Balancing Short-Term Pain and Long-Term Value

Despite BYD's record-breaking financing scale, its short-term market reaction was intense. Factors such as discounted placement and equity dilution intertwined, causing BYD's Hong Kong stock market value to evaporate by over HK$30 billion on the opening day.

In response, analysts from investment bank Bernstein noted in their report that BYD Co., Ltd. (1211.HK) has immense potential for overseas development. Considering the robust sales growth in Europe, ASEAN, and other regions, they have long been optimistic about BYD's overseas expansion prospects.

Analysts believe that it is reasonable for BYD to raise over US$5 billion through share placement in Hong Kong, providing a more direct financing channel for its overseas investments.

However, they also mentioned that some investors may perceive this share placement as a "signal of peak valuation." It's worth noting that the stock has risen by 36% this year so far.

Considering the share placement, analysts anticipate some short-term weakness in the stock. Nevertheless, Bernstein maintains its outperform rating for BYD with a target price of HK$460.

However, there are significant differences in opinions among various institutions. Citibank stated that BYD's fundraising through discounted share placement in Hong Kong is expected to primarily invest the funds in key areas such as overseas expansion, R&D investment, and working capital replenishment. Given BYD's high return on overseas assets, Citibank views this equity financing positively.

Jeff Chung, an analyst at Citigroup, clearly stated: "We view this equity financing as a positive move." Joanna Chen, an analyst at Bloomberg Intelligence, also pointed out that amid rising tariff risks, this placement will effectively drive BYD to accelerate the construction of overseas factories, a move that appears particularly urgent.

Yet, a key question remains: From a long-term perspective, will the capital market recognize BYD's transformation and development path from a "Chinese leader" to a "global giant"?

This financing could be a pivotal moment in reshaping BYD's valuation system. It not only tests the market's confidence in BYD's globalization strategy but also determines BYD's valuation positioning and development direction in the global new energy vehicle industry moving forward.