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On Wednesday, BofA Securities analyst Katherine Zhu increased the price target on BYD (SZ:002594) Electronic International Co Ltd. (285:HK) (OTC: BYDIF) to HK$60.00, up from the previous HK$43.00, while reiterating a Buy rating on the shares. The revision reflects a more optimistic view on the company’s automotive expansion, which is driven by its parent company BYD. The analyst also cited the potential for gains from the smartphone subsidy, a possible iPhone upcycle, and AI servers.
Zhu’s updated price target is based on a forward-looking price-to-earnings (P/E) ratio of 16 times the estimated 2026 earnings, an increase from the previous 15 times the estimated 2025 earnings. This adjustment aims to account for anticipated improvements in profit margins and a more favorable outlook for both the automotive and smartphone segments. The new P/E multiple is slightly above the historical average but aligns with the trading range observed during the last margin upcycle in the second half of 2023.
The analyst expects BYD Electronic’s earnings for the years 2024 to 2026 to increase by 4-10%. This projection is due to the company’s strategic positioning and the synergies expected from its relationship with BYD, which is a significant player in the electric vehicle (EV) market.
Zhu’s positive stance is further supported by the belief that the company will benefit from its involvement in the smartphone industry, which is anticipated to experience an upcycle. Additionally, the integration of AI servers is seen as a potential catalyst for further growth.
BYD Electronic’s stock price target increase reflects BofA Securities’ confidence in the company’s growth trajectory and its ability to capitalize on opportunities in both the automotive and smartphone markets. The analyst’s commentary suggests that the company is well-positioned to leverage its parent company’s expansion and the evolving technological landscape to enhance its earnings and market valuation.
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