DBS has released a research report stating it has raised the target price for BYD Electronic (00285) from HK$30 to HK$40, while maintaining a "Buy" rating. The bank has extended its valuation base to 2027, shifting the target price-to-earnings ratio from 16 times based on 2026 forecasts to 14 times based on 2027 forecasts, reflecting weaker visibility into Apple orders. It has also cut its FY2027 earnings forecast for the company by 3.6%, but expects AI infrastructure to drive a valuation re-rating next year.

DBS pointed out that BYD Electronic is transitioning from a mobile phone-focused EMS model to higher-value businesses, including liquid cooling, power supply, and automotive electronics. The company's latest generation of liquid-cooled cold plate projects has entered the mass production stage, with multiple server models already shipping in bulk. Although AI infrastructure is currently insufficient to offset the pressure on the smart terminal business in FY2026, it provides a clearer growth path.

In terms of performance, the company's second-quarter revenue grew 0.7% year-on-year, exceeding market expectations by 6%, but net profit fell 64% year-on-year, lagging market expectations by 46%. In the first half, revenue from the assembly business exceeded market expectations by 11%, while the components business was 6% below expectations. An adverse product mix and foreign exchange losses led to earnings disappointing versus market forecasts.