Company Reports

No-moat BYD Electronic, or BYDE, recorded mixed results for its March quarter, but we believe it is on track to achieve our full-year estimates. As such, we maintain our estimates for BYDE’s earnings and its HKD 30 per share fair value estimate. We view BYDE as fairly valued, and further upside to our fair value would come from the firm leveraging Jabil’s know-how in precision manufacturing and material science to expand into higher-end and more profitable nonconsumer electronics applications, such as automotive and servers.

BYD Electronic, or BYDE, manufactures precision components such as metal and plastic parts primarily for consumer electronics and increasingly in automobile hardware and smart home devices. The company also offers assembly services that synergize with its precision components business and deepen relationships with its cost-conscious customers. Both metal and plastic components and assembly are highly competitive, but focusing on higher-end devices can provide some relief from margin pressure as flagship models require greater manufacturing precision, innovative materials, and specialized equipment. We estimate midcycle gross margin for its consumer electronics and automobile segments to be 6.8% and 10%, respectively.

We maintain our fair value estimate for BYD Electronic, BYDE, at HKD 30 as the better-than-expected outlook and performance of its new energy vehicle, or NEV, segment offsets the softer recovery of its consumer electronics segment, as well as a lower-than-expected 2024 revenue contribution from its acquisition of Jabil’s consumer electronics business. We view BYDE’s shares as fairly valued, with the upside catalyst being faster than expected order wins in iPhone assembly or if it starts to supply more crucial automotive parts, such as connectors and sensors, rather than mainly electronics assembly.

We initiate coverage of BYD Electronic, a precision parts manufacturer and device assembler, with a fair value estimate of HKD 30, which corresponds to 12.8 times 2024 price/earnings. We assign the company a no economic moat rating and Standard Morningstar Capital Allocation Rating. We think that BYDE is fairly valued and solid revenue expansion into assembling higher-value products such as iPhones and automobile electronics, and the overall recovery in demand for Android smartphones and iPads are all priced in. Its acquisition of Jabil Mobility allows the company to deepen its long-term relationship with Apple and we believe it may begin to assemble some lower-end iPhones in 2025. Meanwhile, we caution that the profitability of assembly services is vulnerable to intense price competition, which puts pressure on its overall profit margins.

BYD Electronic, or BYDE, manufactures precision components such as metal and plastic parts primarily for consumer electronics and increasingly in automobile hardware and smart home devices. The company also offers assembly services that synergize with its precision components business and deepen relationships with its cost-conscious customers. Both metal and plastic components and assembly are highly competitive, but focusing on higher-end devices can provide some relief from margin pressure as flagship models require greater manufacturing precision, innovative materials, and specialized equipment.