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BYD's stock jumps on electric-vehicle expectations

HONG KONG -- BYD, the Chinese automaker backed by U.S. billionaire investor Warren Buffett, is getting some love from investors after a dry spell that kicked off when the company's stock price plummeted in December.

     Earlier this month, BYD announced it was selling parts unit Shenzhen BYD Electronic Components. Investors are betting the move will enhance the parent company's profitability by enabling it to focus more on developing eco-friendly cars. Also lifting the company's share price is speculation that U.S. tech giant Apple has begun developing electric vehicles and that BYD is a supplier for the endeavor.

     Nomura International (Hong Kong) has given BYD a "buy" rating and lifting a target stock price to 64 Hong Kong dollars, 90% higher than the current price. The company's stock price rose by nearly 40% in the four days through Feb. 17.

     A mounting air-pollution problem has prompted the Chinese government to tighten restrictions on car sales. Also, Beijing announced Feb. 16 that it will provide technical support aimed at increasing the number of eco-cars in the country to 5 million by 2020.

     Despite the positive market buzz surrounding BYD, some market watchers remain cautious. Linus Yip, chief strategist at First Shanghai Securities, said he wants to get a clearer picture about the growth prospects for BYD's electric-car business. He predicted the company's stock price will peak at between HK$35 and HK$40.

     BYD said it expects its net profit to decline by up to 22% on the year for the year ended December 2014. Some market experts are saying the company's recent stock price rally is being driven more by wishful thinking than reality, as eco-cars are not catching on as quickly as expected in China.

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