Many experts believe the increase in global temperatures is the reason why extreme meteorological events are becoming more frequent. The proper strategy to combat this trend is a drastic reduction in CO2 emissions. The planet has to gradually get rid of the polluting activities, and one way to do so is to promote electrification through the use of electric vehicles.
An expensive price tag for EVs has not favored demand so far. However, before long they should become more affordable to a larger number of consumers as governments around the world are providing incentives to promote their purchase. This will boost the demand for EVs, enabling manufacturers to ramp up production and reach a lower cost per unit produced.
Lower prices for EVs will be a prime driver for the market, which globally is expected to grow by more than 8.5 times up to nearly 35 million units produced within a decade, according to analysts.
Buying shares of the Chinese auto manufacturer BAIC Motor Corp. Ltd. (BCCMY, Financial) represents an interesting investment, as its shares are set to trade higher for a number of reasons.
The company is an established player in the Chinese market, holding a leading position in the industry of new energy vehicles and in the market of high-end premium vehicles.
BAIC Motor will continue to supply the Chinese market, which is expected to double its size within four years’ time, with a broad range of new models.
The company's proprietary brand offers BEIJING-X7 PHEV, which is a key vehicle model successfully launched on the market last year, as well as BEIJING-EU5 and BEIJING-EU7, which are the company’s best-selling EVs so far. BAIC also offers traditional internal combustion engine cars, which are currently serving as a base for the development of new 48V hybrid electric vehicle models and innovative PHEV plug-in hybrid electric vehicle models.
Looking ahead to fiscal 2021 2022, and 2023, analysts expect BAIC Motor will increase its Ebitda by 6.7% to $4.95 billion, by 8.7% to $5.05 billion and by 23.6% to $5.74 billion. It recorded Ebitda of $4.64 billion in 2020.
This will strengthen the financial strength of the Chinese automaker that GuruFocus has rated with a 6 score out of 10, paving the path for higher share prices.
The stock was at $3.8 in early trading on Monday for a market capitalization of $3.05 billion and a 52-week range of $3.5 to $4.7.
The price-earnings ratio is 10.86 versus the industry median of 21.21, the price-sales ratio is 0.11 versus the industry median of 0.9 and the enterprise value-to-Ebitda ratio is 0.72 versus the industry median of 11.18.
