CITIC Securities: First initiation of BYD ELECTRONIC(00285) with a "buy" rating. Consumer electronics business revenue in the first half of the year increased significantly year-on-year.

China Post Securities released a research report stating that it is expected that BYD ELECTRONIC (00285) will achieve revenues of 171.9/190.4/209.2 billion yuan in 2024/2025/2026 respectively, with a net profit attributable to the parent company of 4.2/5.69/6.8 billion yuan. The company received a "buy" rating for the first time. The expansion of product categories for overseas major clients, combined with the continuous increase in market share, led to a significant increase in revenue for the company's consumer electronics business, which reached 63.303 billion yuan in the first half of the year, a year-on-year increase of 54.22%. The main points of the report are as follows: The expansion of product categories for overseas major clients, combined with the continuous increase in market share, has led to significant growth in the consumer electronics business. Driven by the rapid development of AI technology and replacement cycles, demand for consumer electronics in the market has shown signs of recovery. According to IDC statistics, in the third quarter of 2024, global shipments of smartphones reached 316.1 million units, an increase of 4.0% year-on-year for the fifth consecutive quarter; tablet shipments reached 39.6 million units, an increase of 20.4% year-on- year. Since the beginning of 2024, leading manufacturers have placed a particular emphasis on product innovation, attempting to attract consumers with more competitive products. The company has benefited from improved demand from domestic and overseas clients, with significant growth in Android components and complete machine assembly business. In terms of overseas major client business, business share has further increased, driving year-on-year growth in shipments and revenue. In the first half of 2024, the company's consumer electronics business revenue reached 63.303 billion yuan, a year-on-year increase of 54.22%. Shipments of products such as smart cabins and intelligent driving assistance systems continue to grow, while the new energy vehicle business continues to grow. With the continuous expansion of the overseas footprint of new energy vehicles, Chinese automotive brands have rapidly risen in the international market, with competitiveness and market share continuously increasing. The accelerated development of the digital economy has led to smart connected vehicles becoming an important direction for innovation in the automotive industry. The company has laid out areas such as smart cabins, intelligent driving systems, smart suspension systems, thermal management, controllers, and sensors, with significant technological advantages, with multiple products in mass production and delivery, thereby continuously increasing shipments, including: The intelligent cabin product line covers central control systems, instrument and screen display systems, HUD, acoustic systems, in-vehicle charging systems, T-BOX, switch panel systems, etc., fulfilling users' multi-dimensional interactive experiences; intelligent driving platforms cover low computing power, medium computing power, and high computing power, with smart driving products maintaining a leading position in the domestic market; core components of thermal management system products are independently designed and manufactured, providing consumers with a more comfortable driving environment through efficient heat transfer and utilization. As new energy vehicle sales increase, the company's smart cabin product shipments continue to grow, combined with the entry of intelligent driving assistance systems and thermal management products into the volume stage, the new energy vehicle business sector continues to grow. In the first half of 2024, the new energy vehicle business sector achieved revenue of 7.757 billion yuan, accounting for 9.87% of total revenue, a year-on-year increase of approximately 26.48%. Comprehensive layout in the field of AI business brings new growth points. The continuous expansion of AI application scenarios, explosive growth in data volume, the rise of cloud computing and edge computing, and the rapid iteration of AI algorithms and models are collectively driving the high-speed growth of the AI server market. Large cloud service providers and brands have strong demand for high-end AI servers, and it is estimated that the annual output value of AI servers in 2024 will reach 187 billion US dollars, with a year-on-year increase of 69%, accounting for 65% of the total server market. The company continues to strengthen strategic cooperation with industry-leading customers in all sectors, with the exception of household energy storage business under pressure, the unmanned aerial vehicle, smart home, and gaming hardware sectors are steadily advancing. At the same time, the company continues to invest in R&D for new products, seize market development opportunities, actively cultivate new businesses, and improve its layout in AIDC, industrial Siasun Robot & Automation, and other fields. Risk warning: Risks of technological iteration; risks of R&D falling short of expectations; risks of core technology talent loss; risks of management expansion due to business scale growth.