Maintain "Buy" with TP at HK$52.00. We remain positive on BYD Electronic's (the "Company") transformation momentum following strong 1H2025 results, with net profit growing 14.0% YoY despite modest revenue growth of 2.6% YoY.
　　The Company's strategic pivot is gaining traction with new energy vehicle business surging 60.6% YoY and AI data center business achieving significant growth. While consumer electronics faces near-term pressure, operational improvements and product mix optimization are driving margin expansion. We expect the strategy of "major client + EV + AI computing" to support further growth. We forecast 2025F-2027F EPS of RMB2.388/RMB3.245/RMB4.204. We maintain TP at HK$52.00 by applying 19.8x 2025F PER.
　　The Company delivered better-than-expected 2Q2025 profitability with strong sequential improvement. 1H2025 revenue increased 2.6% YoY to RMB80.61 bn, while 1H2025 net profit rose 14.0% YoY to RMB1.73 bn. 2Q2025 performance showed notable acceleration with 2Q2025 revenue up 3.9% YoY and 18.6% QoQ to RMB43.73 bn, and 2Q2025 net profit surged 22.2% YoY and 78.1% QoQ to RMB1.11 bn. The 2Q2025 earnings beat was attributed to: 1) improved product mix with higher-margin automotive business increasing to 15.4% of revenue; and 2) effective expense control with financial costs declining RMB134 mn. 1H2025 consumer electronics revenue declined 3.7% YoY to RMB60.95 bn but showed structural improvements, with major overseas client assembly business gaining market share and acquired Jabil operations enhancing profitability through automation upgrades.
　　New electric vehicle segment emerges as primary growth driver while AI data center achieves breakthrough. The new energy vehicle business delivered exceptional performance with 1H2025 revenue surging 60.5% YoY to RMB12.45 bn, driven by strong shipments in intelligent cockpits, ADAS, thermal management, and newly launched intelligent suspension systems. The comprehensive portfolio significantly enhances per-vehicle value content, with partnerships with NVIDIA, Continental, and Bosch strengthening its Tier-1 trajectory. In AI data center, the Company achieved significant milestones with AI server shipments ramping substantially and liquid cooling/power products obtaining certification from industry leaders. As NVIDIA's established partner, the Company offers comprehensive solutions spanning general servers, AI servers, and immersion cooling, positioning for strong growth momentum.
　　Catalysts: 1) production efficiency boost at Jabil plants; 2) shipment of AI server products; and 3) mass production of more new EV products. Downside risks: 1) fierce market competition; and 2) slower product line expansion.