Matters:

On October 30, 2024, the company released its report for the third quarter of 2024: revenue of 122.127 billion yuan (YOY +32.54%) and net profit of 3.063 billion yuan (YOY +0.64%) in the first three quarters of 2024.

Single Q3 achieved revenue of 43.546 billion yuan (YOY +21.08%, QOQ +3.43%) and net profit of 1.546 billion yuan (YOY +1.15%, QOQ +70.33%).

Commentary:

Rapid growth in consumer/automotive electronics, high revenue growth, energy storage/exchange &mergers and acquisitionsJP's financial expenses etc. affect performance. On the revenue side, 24Q3 continued the good 24H1 growth trend, achieving revenue of 43.546 billion yuan (YOY +21.08%) in Q3. Consumer electronics/automotive electronics grew faster in the first half of the year (24H1 consumer/automotive electronics/new smart terminal revenue +54.22%/+26.48%/-16.43%). Consumer electronics growth was mainly due to increased sales volume of new energy vehicles and increased sales volume of products related to smart driving and smart driving. The decline in revenue from new smart products is mainly due to pressure on the household storage business. The profit-side company achieved net profit of 3.063 billion yuan (YOY +0.64%) and net profit of 1.546 billion yuan (YOY +1.15%) in the first three quarters of Q3. Under multiple influences such as energy storage business/exchange & merger and acquisition financial expenses, Q3 still achieved a slight year-on-year increase, and operations were steady.

The future can be expected if AI, consumer electronics, and automotive electronics work together. As many businesses enter the peak season, 24Q4 can be expected:

(1) AI business cloud collaborative layout. On the cloud side, BYD Electronics is backed by BYD, the parent company, and has formed a layout covering products and solutions such as general servers, storage servers, AI servers, and immersion liquid cooling solutions, and has now become Nvidia's partner in the data center field. On the end side, BYD Electronics has developed an AMR autonomous mobile robot based on Nvidia's ISAAC and JETSON platforms. Furthermore, BYD and Nvidia continue to deepen cooperation in autonomous driving, bringing potential cooperation opportunities to BYD Electronics.

Projects such as 24H2 AIDC/robots will begin to be implemented and delivered in batches.

(2) Consumer electronics: A leader in the integration of iPad components, the acquisition of Jeep will further deepen the business of major customers, and companies that accelerate AI terminal layout with large customers are expected to benefit. Major 2024Q2 customers released a new iPad to drive the company's Pad business upward. At the end of 2023, the company acquired Jeep's mobile manufacturing business. Jeep is the main supplier of titanium alloy frames for the iPhone 15 Pro. The mid-frame business also marks the company's breakthrough in the largest category of mobile phone products for major customers. In addition to the mid-frame business company actively expanding other product categories, the major customer released AppleIntelligence in June, which is expected to benefit deeply.

(3) Automotive electronics: The parent company, BYD Group, continues to grow in sales, and BYD Electronics relies on the parent company's product categories to continue to expand. In addition to smart cockpits, intelligent driving, thermal management, and sensors, 24H2 smart suspension products will be delivered in batches.

Investment advice: BYD Electronics is the world's leading platform-based manufacturer. The new AI computing/robotics business is progressing smoothly. The traditional consumer electronics business benefits from the new iPad product cycle+AI phones, and automotive electronics continues to accelerate product expansion. Affected by exchange and energy storage business falling short of expectations, etc., we lowered our 24-26 net profit forecast to 4.518/6.138/7.615 billion yuan (original value: 5.069/7.063/8.231 billion yuan). Referring to the valuations of comparable companies such as Lixent Precision, Goertek, USI Electronics, Lansi Technology, and Industries' Fullander, we gave the company 16 xPE in 2025, with a target share price of HK$47.5, maintaining a “strong” rating.

Risk warning: Industry competition intensifies, downstream demand falls short of expectations, share expansion and introduction fall short of expectations.