BYD Electronics (BYDE) is poised for strong growth in 2024, driven by several key factors:
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Consumer Electronics: The company is expected to see a 39% year-over-year (YoY) increase in revenue for the first half of 2024 (1H24), largely due to gains in iPad market share, an iPhone upgrade cycle, growth in the Android premium segment, and the consolidation of its Jabil business. The company forecasts a 53% YoY growth in iPad sales and a slight improvement in assembly gross profit margins to 2.5% in 1H24.
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Automotive Sector: BYD anticipates a 38% YoY revenue growth in FY24, primarily from strong shipments from its parent company and the ramp-up of new high-end products. The company also sees positive developments from external auto customers, particularly with new project wins. It's noted that the company's research and development efforts have led to improvements in the average selling price (ASP) of its new energy vehicle (NEV) products, and this trend is expected to continue into FY24 and FY25.
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New Intelligent Products: The AI server business is expected to offset any weakness in the household energy storage segment, contributing approximately RMB1 billion in revenue for FY24. The company is becoming more positive about its AI server business, anticipating rapid growth in FY25-26 due to the development of next-generation AI server products and components with Nvidia.
BYD Electronics presents an attractive investment opportunity following recent corrections in its stock price. The company's new stock price target of HK$45.28 reflects a forward price-to-earnings (P/E) ratio of 18.3x for FY24, suggesting the stock is undervalued compared to peers. With a BUY rating, the company's earnings are expected to grow significantly, supported by the aforementioned factors, and the AI server business is anticipated to deliver robust growth in the future. The company's new SOTP-based valuation takes into account the diversified nature of its business and provides a compelling long-term investment outlook.
