We maintain the BUY rating of BYDE with new TP of HK$40.89 as we believe multiple growth drivers from Apple share gains, Jabil synergy, NEV product pipeline, robotics and AI server business expansion will offset earnings impact from higher expenses of Jabil integration in the near term. We lowered FY24- 26E EPS by 7-14% to factor in 1H24 results, stronger smartphone recovery, and Jabil's integration expenses. We estimate net profit to grow 8%/43% YoY in FY24/25E. We think recent share price corrections have reflected Jabil-related expenses for interest costs, and intangible asset depreciation. Trading at 13.0x/9.1x FY24/25E P/E, we see good buying opportunities for the stock. Upcoming catalysts include iPhone16 event, AI server product launches (e.g. GB200) and NEV product pipeline.
1H24 results below estimates on GPM and higher Jabil-related expenses. BYDE reported inline 1H24 revenue growth of 40% YoY, driven by strong Apple share gains, Android recovery, Jabil consolidation and strong NEV demand, while net profit growth of 0.1% YoY is below our/consensus estimate by 21%/15% YoY, mainly dragged by weaker GPM (-1ppt YoY) and intangible asset depreciation expenses (RMB450mn). Mgmt. guided 1) GPM recovery in 2H24, 2) total intangible asset depreciation expenses of ~RMB4bn will be incurred in next five years, 3) interest expense to decline significantly in 2H24E compared to RMB309mn in 1H24. We revised down FY24-26E EPS by 7-14% mainly to reflect 1H24 results and Jabil-related expenses.
2025 outlook: Apple share gains, Android recovery, NEV rapid growth, robotics/AI servers. Looking into 2025, for smartphone biz, we expect BYDE is set to benefit from iPhone AI cycle and Android high-end model demand. For NEV, mgmt. stated that product pipeline will be expanded into smart cockpit, high-end ADAS, active suspension and controllers/sensors. For robotics, BYDE will co-develop AMR robots with Nvidia focusing on factory automation. For AI dataceter, mgmt. highlighted a strong product roadmap in server (high-speed connectors, cold plate, power board), rack system (copper, UQD), CDU system, high-speed connectivity (optical modules, high-speed copper cables).
Maintain BUY with new TP of HK$40.89. Our new SOTP-based TP of HK$40.89 implies 19.3x FY24E P/E. Maintain BUY. Near-term catalysts include iPhone 16 event, and NEV/AI server product launches.
