BYDE’s share price slumped 10% yesterday due to market concerns on lower 4Q24 GPM (5.9%, vs 8.5%/6.8% in 3Q/2Q), in our view. Despite a strong FY24 revenue of +34% YoY, mgmt. attributed the lower 4Q GPM to seasonality and one-off expenses from the share award scheme provision and early-stage ramp costs for iPhone casing biz. Looking ahead in 2025, we remain constructive on BYDE’s NEV business (ADAS/cockpit/suspension/thermal), AI server ODM/component ramp, and improving operating efficiency in iPhone/iPad business, which should drive earnings growth in FY25/26E. We trim FY25/26E EPS to reflect FY24 results and slower OPM improvement. Our new SOTP- based TP of $47.10 implies 16.2x FY25E P/E. Upcoming catalysts include auto product ramp, AI server order wins and improving GPM.
　　4Q24 GPM miss on one-off expenses. During the analyst briefing, mgmt. highlighted that 4Q24 GPM weakness was a result of 1) seasonality impact on higher consumer electronics sales mix, 2) one-off impact from the share award scheme provision, and 3) early-stage ramp costs for the new iPhone project. In our view, we believe the market is disappointed about lower 4Q GPM and slower OPM improvement after Jabil integration. That said, looking ahead, we expect higher revenue share from NEV/AI server/Apple businesses will be positive to GPM in FY25/26E, and improving operating efficiency and better cost management in Jabil casing business will also support margin recovery into FY25/26E.
　　2025 outlook: positive on NEV products, AI server ramp and robotics.
　　For 2025, mgmt. shared business updates on NEV product pipeline, AI server progress and robotics development. For NEV, BYDE will focus on revenue ramp of ADAS and cockpit systems, and expects self-developed suspension/ thermal products will be positive to its product mix. For AI server, leveraging partnership with Nvidia, BYDE started H20/L40 server ODM business for Chinese clients, while server components will start to be shipped to overseas CSP clients, focusing on liquid cooling (e.g., UQD, manifold, cold plate, CDU) and power components (e.g., PDB, power shelf, busbar). For robotics, BYDE is working on R&D for robotics components and expects to start AMR projects with Nvidia for factory automation in 2025.
　　Attractive risk-reward; Maintain BUY. We maintain our positive view onBYDE’s outlook in FY25E and expect an improving revenue mix will continue to drive GPM recovery in FY25/26E. We adjust FY25/26E EPS to reflect FY24 results and margin outlook. Our new SOTP-based TP of $47.10 implies 16.2x FY25E P/E. Trading at 14.6x FY25E P/E, the stock offers attractive risk-reward in our view. Maintain BUY.