DBS: Raises target price for BYD ELECTRONIC (00285) to HKD 40, reiterates "Buy" rating.

DBS released a research report stating that it has raised the target price for BYD ELECTRONIC (00285) from HKD 30 to HKD 40, maintaining a "Buy" rating. The bank has extended its valuation basis to 2027, shifting the target price-to-earnings ratio from a projected 16 times for 2026 to a projected 14 times for 2027, reflecting weakened visibility of Apple orders. Additionally, the company's earnings forecast for the fiscal year 2027 has been lowered by 3.6%, but AI infrastructure is expected to drive a revaluation next year. DBS pointed out that BYD ELECTRONIC is transitioning from a mobile phone-focused EMS model to higher-value liquid cooling, power supply, and automotive electronics businesses. The company's latest generation liquid cooling plate project has entered the mass production stage, with multiple servers being shipped in bulk. Although AI infrastructure currently does not compensate for the pressure on the smart terminal business for the fiscal year 2026, it provides a clearer growth path. In terms of performance, the company's second-quarter revenue increased by 0.7% year-on-year, exceeding market expectations by 6%, but net profit fell by 64% year-on-year, which was 46% lower than market expectations. In the first half of the year, the revenue from the assembly business was 11% higher than market expectations, while the components business was 6% lower. An unfavorable product mix and foreign exchange losses led to profits below expectations.