By Jiahui Huang

Shares of BYD fell in a knee-jerk reaction after the Chinese electric-vehicle giant missed estimates for a key profitability metric despite its third-quarter revenue topping Tesla's for the first time.

The automaker's Hong Kong-listed shares were recently 4.3% lower at 282.40 Hong Kong dollars in Thursday afternoon trading, putting it among the biggest decliners on the benchmark Hang Seng Index. The stock remains more than 30% higher this year.

Analysts said the share-price drop was likely due to BYD's net profit per car slightly missing expectations. The sharp rise in its research and development costs and operating expenses also likely weighed on market sentiment, they said.

BYD's net profit per car was 9,300 yuan, equivalent to about $1,307, compared with 11,400 yuan a year earlier and 8,500 yuan in the second quarter, Bernstein analysts wrote in a research note.

Net profit per car hasn't shown a recovery trend after the delivery of models with the new DM-i 5.0 platform, Nomura said in a note. BYD's upgraded powertrain is touted to deliver a driving range of more than 1,300 miles without refueling or recharging.

The Chinese EV maker has also continued to boost spending to stay ahead of rivals as competition in the autonomous-driving space intensifies. Its research and development expenses rose 52% sequentially to 13.7 billion yuan in the third quarter.

Despite those negatives, BYD on Wednesday reported strong sales and solid earnings that were ahead of analysts' expectations. Its net profit rose 11% to a record 11.61 billion yuan in the third quarter, and its revenue was the equivalent of $28.27 billion, surpassing rival Tesla's $25.2 billion.

Bernstein said BYD's gross margin rose to 21.9% from 18.7% in the previous quarter, thanks to higher sales of new models with the upgraded technology.

Nomura analysts led by Joel Ying said the automaker's large scale and cost controls, including upstream cost cuts, also supported its gross margin.

Nomura, Bernstein, Deutsche Bank and Citi all maintained outperform or buy ratings on BYD, with Citi raising its target price to HK$500 from HK$488 and Bernstein increasing it to HK$350 from HK$310.

Ying of Nomura highlighted BYD's improving sales in China and abroad as well as its competitive edge in the EV sector and vertically integrated business model. "We believe no player can challenge it in the foreseeable future," he said.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

October 31, 2024 03:42 ET (07:42 GMT)

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