Zhongtong Finance has learned that First Shanghai has released a research report stating that it maintains a "buy" rating on BYD Electronic (00285) and predicts revenue of RMB 162.4 billion, RMB 174.3 billion, and RMB 188.3 billion from 2024 to 2026, with growth rates of 25%, 7.4%, and 8%, respectively. Net income from 2024 to 2026 will be RMB 5 billion, RMB 6.27 billion, and RMB 7.44 billion, with growth rates of 23.8%, 25.3%, and 18.8%, respectively. The main contribution to revenue growth in 2024 comes from the inclusion of JEP into the company's financial statements and the growth of automotive electronics. The company's target price is HKD 54.

First Shanghai's main points are as follows

Net income increased by 33% in the first quarter:

BYD Electronic's revenue in the first quarter of 2024 was RMB 36.5 billion, a year-on-year increase of 38.3%; net income was RMB 610 million, a year-on-year increase of 33%. JEP's business was fully integrated into the company's financial statements this quarter, and its operating capacity performed as expected.

Deeply integrated into the A customer industry chain:

The company acquired JEP's manufacturing business in Chengdu and Wuxi for RMB 15.8 billion, and it was completed on December 29, 2023. JEP's business is currently independently operated, and BYD Electronic provides empowerment in platform, automation, and supply chain, among other areas, with profitability reaching the expected level. This acquisition will generate certain financial expenses this year and will result in intangible asset amortization of approximately RMB 900 million per year for the next five years. It is expected to have a positive contribution to the company's net income after deducting such expenses. The business related to A customers this year is expected to be close to RMB 90 billion, and the scope of cooperation will continue to expand in the future.

Gradual increase in high value-added automotive electronics products:

BYD Electronic's automotive electronics business covers multiple products, including intelligent cabins, intelligent driving, intelligent suspension, and thermal management. In 2024, high value-added new products will be introduced into production in succession, and the value per vehicle is expected to increase, enabling the gross margin to remain stable in the current market environment. It is expected that revenue from automotive electronics in 2024 will maintain a growth rate of 50%, exceeding RMB 20 billion.

Constantly expanding business boundaries:

In recent years, the company has continuously expanded into new product categories, and has also deployed AI servers, household energy storage, smart homes, game hardware, and drones. The company has already covered product solutions for general enterprise servers, storage servers, AI servers, and liquid cooling. It is expected that the AMR (full range of autonomous mobile robots) can be put into use this year. In the development of high-level AMR, NVIDIA provided technical support based on the NVIDIA Isaac and Jetson platforms.