Jefferies downgraded BYD Electronic to Hold from Buy and trimmed its price objective to HK$35.00 from HK$42.00 following the company’s second-half 2025 results, which fell short of both Jefferies’ and consensus estimates and signaled mounting margin pressure in its core businesses.
The Hong Kong-listed supplier reported H2 net profit of RMB1.79 billion, a 35% decline compared with the same period a year earlier. That outcome missed Jefferies’ projection by 31% and consensus forecasts by 37%. For the full year 2025, BYD Electronic recorded net profit of RMB3.5 billion, below management’s previously stated guidance range of RMB4.0–4.5 billion.
Revenue for the period was broadly aligned with expectations, but the company’s gross margin contracted by 1.7 percentage points year-on-year to 5.3%. Jefferies attributed the margin decline to two main factors: a stronger renminbi creating foreign-exchange headwinds - the company earns an estimated 50–60% of its Apple-related sales in U.S. dollars - and softer demand for its metal casing products.
Beyond these near-term drivers, Jefferies highlighted several structural concerns that could weigh on BYD Electronic’s unit economics. One is Apple’s apparent move toward lower-priced aluminum casing for its Pro and Pro Max iPhone models, a shift expected to exert downward pressure on average selling prices (ASPs) for BYD Electronic’s casing products.
Longer-term technology trends also present potential downside. Analysts led by Jacky He noted the industry may adopt 3D-printed metal parts and glass casing for high-end devices, developments that could reduce demand for CNC-machined metal components and pose a "downside risk to dollar content from 2027."
At the same time, BYD Electronic’s businesses outside mobile handset casings have yet to provide meaningful offsetting revenue. The firm’s electric vehicle component operations remain lackluster, and its expansion into AI data center infrastructure - including liquid cooling and power supply components aimed at Nvidia and U.S. cloud providers - is still at an early stage.
Jefferies acknowledged that BYD Electronic has passed qualification for numerous liquid cooling and power supply components from Nvidia, but the analysts wrote that they have not observed clear evidence of the company securing significant orders from cloud service provider customers.
Analysts flagged a few potential upside catalysts, including the expected foldable iPhone launch in late 2026, which they estimate could carry content value in excess of $100, and further scaling of EV and AI data center activities across 2026–27. These factors are viewed as key positive drivers for BYD Electronic over that timeframe, should they materialize.
Reflecting the combination of foreign exchange and structural headwinds, Jefferies reduced its revenue and net profit forecasts for 2026–27 by approximately 10–11% and 28–37%, respectively. The firm also cautioned that consensus estimates may still be too high and that management may lack clear visibility into second-half 2026 market dynamics, which could limit the presence of meaningful near-term catalysts to improve investor sentiment.
BYD Electronic currently trades at an estimated 18x/12x 2026/27E price-to-earnings multiple, which Jefferies described as undemanding relative to peers. However, the analysts warned that further earnings misses could prompt additional downward revisions to consensus earnings per share.
Key figures and guidance noted in the results:
- H2 2025 net profit: RMB1.79 billion, down 35% year-on-year.
- Full-year 2025 net profit: RMB3.5 billion, below management guidance of RMB4.0–4.5 billion.
- Gross margin: 5.3%, down 1.7 percentage points year-on-year.
- Jefferies price target cut: HK$42.00 to HK$35.00; rating downgraded from Buy to Hold.