BYD Electronics (285 HK) Company Update Summary
Core Content
This report provides an update on the financial performance and outlook for BYD Electronics (285 HK), a company involved in electronics manufacturing and components. The analysis includes a review of recent financial results, earnings revisions, valuation, and key financial ratios. The report concludes with a HOLD rating and a revised target price (TP) of HK$17.98, which is 13.1x the FY22E earnings per share (EPS).
Main Points
- Current Rating: HOLD (unchanged from previous recommendations).
- Target Price: HK$17.98 (revised from HK$26.44), implying a 13.1x FY22E P/E.
- Stock Performance:
- Current Price: HK$16.4
- 1-month: -15.7%
- 3-months: -41.1%
- 6-months: -44.0%
- Market Cap: HK$52,162 million
- Shareholding Structure:
- Golden Link Worldwide Ltd: 65.76%
- Gold Dragonfly Ltd: 4.98%
- Vanguard Group: 1.25%
Financial Highlights
Earnings Summary (YE 31 Dec)
| Year |
Revenue (RMB mn) |
YoY Growth (%) |
Net Profit (RMB mn) |
YoY Growth (%) |
EPS (RMB) |
YoY Growth (%) |
| FY20A |
73,121 |
37.9 |
5,441 |
240.6 |
2.41 |
- |
| FY21E |
89,057 |
21.8 |
2,310 |
-57.5 |
1.03 |
- |
| FY22E |
88,016 |
-1.2 |
2,559 |
10.8 |
1.14 |
- |
| FY23E |
98,636 |
12.1 |
3,579 |
39.8 |
1.59 |
- |
| FY24E |
112,893 |
14.5 |
5,048 |
41.0 |
2.24 |
- |
Earnings Miss in FY21
- Net profit declined by 58% YoY to RMB2,310 million.
- The miss was primarily due to GPM pressure (6.2% in 4Q21 vs 7.2% in 3Q21) and the chip shortage.
- Handset OEM revenue grew by 80% YoY, while component revenue declined by 11% YoY.
- Smart/auto intelligent segments showed strong growth: 31% and 107% YoY respectively.
2022 Outlook
- Revenue is expected to decline by 2% YoY to RMB88 billion.
- Net profit is projected to grow by 11% YoY to RMB2.6 billion.
- Android OEM is expected to shrink due to a strategic shift to high-end models.
- iPad and e-cigarette ramp are anticipated, but margin pressure is expected to persist.
- Smart/auto intelligent segments are expected to grow significantly: 35% and 80% YoY.
Earnings Revisions
- EPS for FY22-23 has been trimmed by 30-31% compared to previous estimates.
- Gross margin is expected to be 7.6% for FY22E, which is 0.8% below the consensus of 8.2%.
- Operating margin is projected to be 2.1% for FY22E, 0.6% below the consensus of 2.7%.
- Net margin is expected to be 2.9% for FY22E, 0.7% below the consensus of 3.6%.
Key Financial Ratios
Profitability
| Ratio |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Gross Margin (%) |
13.2 |
6.8 |
7.6 |
8.5 |
9.6 |
| Operating Margin (%) |
7.9 |
1.6 |
2.1 |
3.0 |
4.1 |
| Net Profit Margin (%) |
7.4 |
2.6 |
2.9 |
3.6 |
4.5 |
| ROE (%) |
24.4 |
9.6 |
9.7 |
12.1 |
14.8 |
Liquidity and Leverage
| Ratio |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Current Ratio (x) |
1.8 |
1.7 |
1.8 |
1.8 |
1.9 |
| Net Debt/Total Equity (x) |
Net Cash |
Net Cash |
Net Cash |
Net Cash |
Net Cash |
Efficiency Ratios
| Ratio |
FY20A |
FY21A |
FY22E |
FY23E |
FY24E |
| Receivable Turnover Days |
52 |
49 |
46 |
46 |
46 |
| Inventory Turnover Days |
41 |
38 |
37 |
37 |
37 |
| Payable Turnover Days |
52 |
52 |
52 |
52 |
52 |
Valuation Analysis
SOTP-Based Valuation
| Business Segment |
% of FY22E Profit |
FY22E EPS (RMB) |
Target P/E |
| Assembly |
11% |
0.12 |
10x |
| Components |
25% |
0.29 |
10x |
| Masks |
1% |
0.01 |
8x |
| Others (smart, auto) |
63% |
0.72 |
15x |
| Total Implied P/E |
- |
- |
13.1x |
Peer Comparison
| Company |
Market Cap (US$ mn) |
FY22E P/E |
FY23E P/E |
| BYDE |
4,727 |
12.0 |
8.6 |
| Tongda |
185 |
3.0 |
2.5 |
| AAC Tech |
3,002 |
16.1 |
13.6 |
| TK Group |
249 |
5.7 |
4.5 |
| Ju Teng |
209 |
6.8 |
4.7 |
| Everwin |
1,902 |
10.9 |
7.9 |
| Lens Tech |
9,278 |
9.4 |
7.5 |
| Foxconn |
3,101 |
11.0 |
10.3 |
| Catcher |
3,693 |
12.3 |
11.5 |
Valuation Bands
- 12M Forward P/E: CMBIGM estimates range from 12.0x to 18.6x.
- 12M Forward P/B: CMBIGM estimates range from 0.8x to 1.7x.
Key Takeaways
- The company faces margin pressure due to industry slowdown and chip shortage.
- Smart/auto intelligent segments are expected to drive growth in FY22-24.
- Apple OEM and components are seen as growth areas, but Android OEM is expected to shrink.
- Earnings are conservative and below consensus, leading to a HOLD rating.
- Valuation is considered fair, as the current P/E (12.0x) is close to the revised TP (13.1x).
- The target price reflects the company's diversified business model and growth potential in smart and auto segments.
Conclusion
Despite the company's strong growth in smart and auto intelligent segments, margin pressure and Android OEM weakness are key challenges. The revised target price and HOLD rating suggest a cautious outlook due to these factors and the broader market conditions. The company's diversified revenue streams and strategic shift to high-end models may provide long-term value, but near-term headwinds are expected to keep the stock in a HOLD position.
