"Big Banks" Bank of America Securities lowers BYD ELECTRONIC's target price to 40 yuan, reiterates "Neutral" rating

Bank of America Securities released a report indicating that BYD Electronic (00285.HK) third-quarter performance was below expectations, with a net profit of 1.4 billion yuan (same below), a quarter-on-quarter increase of 27%, and a year-on-year decrease of 9%, only reaching 29% and 27% of the bank's and market's full-year estimates, respectively, lower than the 32-38% level of the same period in the past three years. The quarterly gross margin decreased by 0.5 percentage points quarter-on-quarter and fell by 1.6 percentage points year-on-year to 6.9%.

Bank of America Securities has lowered its earnings forecasts for BYD Electronic for 2025 to 2027 by 4% to 8% to reflect the slowdown in growth and lackluster outlook in the third quarter. The target price has been reduced from HKD 45.5 to HKD 40, maintaining the 2026 forecast price-to-earnings ratio at 14 times. The stock is currently trading at a 2026 expected price-to-earnings ratio of 13 times, which is still undervalued compared to the average price-to-earnings ratio of 26 times for peers in the Apple supply chain. Based on reasonable valuation, the "Neutral" rating is reiterated