We maintain BYD Electronic’s (the "Company") "Buy" investment rating and increase the target price to HK$65.00. Our new target price is equivalent to 25.5x 2025F PE. We increase BYD Electronic’s 2024F-2026F EPS forecasts by 42.3%, 10.9% and 20.7% to RMB1.625, RMB2.373 and RMB3.106, respectively, reflecting 20.1% CAGR.
　　Going forward, we expect the Company to maintain high R&D spending, thereby further improving and expanding product lines while also developing new products. In the past few years, the Company has shifted from a business growth model driven by precision manufacturing technologies to one driven by R&D and innovation. The Company has consistently invested in R&D and technological innovation, forming a strong R&D team that spans multiple fields including new materials and processes, precision molds, product design and development, automation, and informatization, which further strengthens the Company’s core competitiveness.
We expect the Company to report sustained 2H2024 growth in the shipments of many product categories including intelligent cockpits, intelligent driving, thermal management and sensors. After years of R&D investment and technology accumulation, the Company has developed a diversified product portfolio in the field of electrification and intelligence. As new products are successively progressing from R&D stage to mass production and gaining continuous improvement in penetration rate, we expect the Company to realize a sustainable increase in the number and value of supporting products for a single vehicle, and the new energy vehicle business segment will continue to maintain its rapid growth. Under the backdrop of global expansion of new energy vehicles and accelerated integration of intelligence technologies, we expect the　Company’s intelligent suspension product series will achieve mass delivery in batches as the Company deepens its cooperation with domestic and overseas automotive companies.
　　Catalysts: 1) new product lines for new energy vehicle business, including intelligent cockpits, intelligent driving, intelligent suspension, core controllers and sensors; and 2) new intelligent products developed by the Company such as unmanned aerial vehicles, game hardware and smart home.
　　Downside risks: 1) market competition may be more intense than expected;　and 2) product line expansion may be slower-than-expected.