Investment Rating - The report maintains a "Buy" rating for BYD Electronics with a target price of HKD 34.2, indicating a potential upside of 19% from the current price of HKD 28.7 [6][8]. Core Views - BYD Electronics is expected to see further profit release in the second half of the year, driven by growth in high-end Android phone demand, profit contributions from Jabil's consolidation, growth in international client business, and contributions from automotive electronics [6]. - The company is projected to achieve net profits of RMB 4.06 billion and RMB 4.70 billion in 2024 and 2025, respectively, with corresponding target price earnings ratios of 17.3x and 14.9x, suggesting attractive valuation [6][15]. - The AI server business is anticipated to ramp up in the next two years, enhancing asset utilization during the upcycle of demand in smartphones and new energy vehicles [6]. Financial Performance Overview - In Q2, BYD Electronics reported revenue of RMB 42.1 billion, a year-on-year increase of 41% and a quarter-on-quarter increase of 15%. The gross margin was 6.8%, down 1.2 percentage points year-on-year [6][13]. - For the first half of 2024, the company’s revenue reached RMB 78.6 billion, with a 40% year-on-year growth, driven by a 54% increase in mobile and laptop assembly and a 206% increase in components [13]. - The automotive electronics segment grew by 26%, closely aligning with BYD's vehicle sales growth [6]. Earnings Forecast and Valuation - The report employs a sum-of-the-parts valuation method, assigning target price earnings ratios of 10x for international client assembly, 16x for international client components, 8x for Android assembly, 15x for Android components, 10x for new smart products, and 35x for automotive intelligent systems [7]. - The estimated revenue for 2024 is RMB 171.5 billion, with a gross profit of RMB 12.6 billion, reflecting a gross margin of 7.4% [15]. - The report highlights a projected net profit growth of 1% for 2024, with a target price of HKD 34.2 based on the valuation analysis [15].
比亚迪电子：下半年利润有望进一步释放