BOFA Securities: Downgrade BYD ELECTRONIC (00285) rating to "Neutral", lower target price to 42 Hong Kong dollars.

Bank of America Securities released a research report stating that they have downgraded the rating of BYD ELECTRONIC (00285) from "buy" to "neutral". This decision was made due to the fierce competition from rival Lens Technology (06613) in the iPhone casing and smartphone assembly business, starting in the second half of this year. This competition may drag down the already weak sales of consumer electronics products. The bank predicts that with the rapid penetration of ADAS by its parent company BYD COMPANY (01211), the annual compound growth rate of BYD ELECTRONIC's automotive business revenue from 2024 to 2027 is expected to reach 36%, partially offsetting the negative impact. At the same time, the profit forecast for BYD ELECTRONIC from 2025 to 2027 has been lowered by 1% to 11% to reflect the risks in the smartphone business. The bank believes that the slowdown in profit growth due to increased competition warrants a P/E ratio of 14 times (below historical average levels), which is considered reasonable. This month, the stock price rose by 21% due to higher expectations for BYD ELECTRONIC's AI server liquid cooling business. They believe that the current valuation of a P/E ratio of 13 times for 2026 is reasonable and is at a cyclical level in the past three years.