DBS Lifts BYD Electronic Price Target to HK$40 on AI Pivot, Maintains Buy Rating

DBS Bank has raised its price target for BYD Electronic (0285.HK) to HK$40 from a previous HK$30, citing the company's strategic pivot to higher-value businesses like AI infrastructure and automotive electronics. The bank reaffirmed its "Buy" rating on the stock in a research note.

Analyst's Revised Outlook

The price target increase is based on rolling the valuation model forward to 2027, according to DBS. The new target reflects a price-to-earnings (P/E) multiple of 14 times projected 2027 earnings, adjusted from a previous 16 times multiple on 2026 forecasts. DBS stated this change accounts for weaker visibility on orders from Apple.

Despite lowering its fiscal 2027 earnings forecast for the company by 3.6%, the bank anticipates that growth in the AI infrastructure segment will likely drive a valuation re-rating for the stock next year.

Strategic Shift and Growth Drivers

The report highlights BYD Electronic's ongoing transition away from a traditional, mobile phone-focused Electronic Manufacturing Services (EMS) model. The company is increasingly focusing on higher-margin sectors, including liquid cooling systems, power supplies, and automotive electronics.

Ad

DBS noted that the company's latest-generation liquid cooling cold plate projects have entered mass production, and several of its server models are now shipping in bulk. While the AI infrastructure business may not fully offset pressures on the smart device segment in fiscal 2026, analysts believe it provides a clearer path for future growth.

Recent Financial Performance

BYD Electronic's recent results were mixed. Second-quarter revenue rose a modest 0.7% year-over-year, which was 6% ahead of market consensus. However, net profit for the same period fell sharply by 64% year-over-year, missing market expectations by 46%.

DBS attributed the significant earnings miss to an unfavorable product mix and losses from foreign exchange. In the first half of the year, revenue from the assembly business exceeded expectations, while the components business underperformed.