DBS: Raising the target price of BYD Electronics (00285) to HK$40 and reaffirms the “buy” rating

The Zhitong Finance App learned that DBS released a research report stating that the target price for BYD Electronics (00285) was raised from HK$30 to HK$40, maintaining a “buy” rating. The bank extended the valuation base to 2027, shifting the target price-earnings ratio from 16 times forecasting 2026 to 14 times forecasting 2027 to reflect the weakening visibility of Apple orders and lowering the company's profit forecast for the 2027 fiscal year by 3.6%, but it is expected that AI infrastructure will drive next year's valuation review.

DBS pointed out that BYD Electronics is shifting from the EMS model, which mainly focuses on mobile phones, to higher-value liquid-cooled cooling, power supply, and automotive electronics businesses. The company's latest generation liquid-cooled cold plate project has entered mass production, and various servers have been shipped in batches. Although AI infrastructure is currently insufficient to offset the pressure on the smart terminal business in FY2026, it can provide a clearer growth path. In terms of performance, the company's second-quarter revenue increased 0.7% year on year, 6% higher than market expectations, but net profit fell 64% year on year, 46% lower than market expectations. Revenue from the assembly business in the first half of the year was 11% higher than market expectations, but the parts business was 6% lower. Profits fell short of expectations due to unfavorable product portfolios and exchange losses.