(Adds closing share price, chairman comments)
HONG KONG, Jan 23 (Reuters) - Shares of Chinese battery maker BYD Co Ltd ended nearly 20 percent lower on Thursday, reflecting investor scepticism about the firm's unexpected foray into China's competitive auto sector.
BYD, which makes mobile phone batteries for companies like Motorola and Ericsson , said earlier in the day it would acquire control of a state-owned mini car maker for 269.5 million yuan (US$32.6 million).
Investors punished the stock, pushing it to a low of HK$14.10 during the day. It ended down 19.72 percent at HK$14.45, erasing all its gains in the past month.
"The market doesn't seem to like the deal," said Ben Kwong, associate director at brokers KGI Asia Ltd. "There are concerns about whether management has enough experience to run a car company, and I think some investors want to sell out now."
The stock was also hit by profit-taking after recent sharp gains, he said. BYD shares closed at HK$18 on Wednesday, up nearly 18 percent in the past month.
BYD said in a statement on Thursday it would buy 77 percent of Xian Zhen Chuan Automobile Ltd from two state-owned firms.
The price represents a 6.4 percent premium to Xian Zhen Chuan's estimated net asset value as at November 30, 2002.
Shenzhen-based BYD said the acquisition was a move towards its strategy of producing rechargeable batteries for electric motor vehicles, and would also enable the firm to tap the Chinese auto market.
But analysts were not convinced, saying the deal would increase the company's risks. They also questioned BYD's entry into the competitive car sector in China, where global industry giants are scrambling to increase their market share.
BYD chairman Wang Chuan-fu told reporters in a telephone conference that he expected Xian Zhen Chuan to post a net profit of 30 million yuan for the 2003 financial year.
The production target was for about 30,000 vehicles in 2003, up from 17,000 last year, he said.
"We expect the gross profit margin to go up to 25 percent this year," Wang told reporters, adding that Xian Zhen Chuan's profit margin stood at about 15 percent last year.
Xian Zhen Chuan makes cars under the "Flyer" brand. It posted a net profit of 726,000 yuan in the year ended December 31, 2002, on turnover of 621.75 million yuan.
BYD said the acquisition would be funded by its operating cash flow without using proceeds from its Hong Kong listing last July. The company raised about US$209.9 million in its initial public offering.
(US$1=8.28 yuan)