BYD-E reported weak 3Q25 results with revenue (-2% YoY), GPM(-0.5ppt QoQ) and NI (-9% YoY) decline, primarily due to componentshipment delay from key US client and AIS near term weakness. 4Q25guidance of flat YoY again appears to be weaker than consensus ascertain server projects are delayed to 1Q26. But with 32% YTDunderperformance to HSI, good Opex control and more liquid coolingand power product client qualification done, we do not expect muchfurther downside risk. Maintain BUY with new target price of HK$50.2(previously HK$52.2) based on 17x 2026E EPS.
　　Key Factors for Rating
　　3Q25 results: Revenue of RMB42.68bn (-2% YoY) with GPM declining 5ppts QoQto 6.9% due to delivery delay of key US client for component and server. NItherefore declined 9% YoY to RMB1.4bn while partially offset by non-recurringincome and effective cost control. Mgmt. guided for 4Q25 revenue and GPM toremain YoY flat. While full-year 2025 results are expected to fall short of initialguidance, mgmt. anticipates a strong recovery in 2026, driven by highercomponent shipments (thanks to new design of key US client) and growth in liquidcooling and power for server, which should support overall GPM improvement.
　　Component & Assembly: Revenue and gross margin remained largely stable,as growth in assembly business revenue offset a decline in components revenue.Android business continues to perform steadily, despite current memory price hike.Mgmt. expects component revenue (esp. metals and glass) to benefit fromfoldable iPhone launch in 2026 and 2027. New smart home products will also entermass production in 2026. 4Q25 capex will therefore increase, with capacityexpansion scheduled for completion by 1H26.
　　AIS: 3Q25 revenue increased YoY thanks to content growth while GPM declinedQoQ due to competition. Despite of lower 2025 guidance due to parent shipmentslowdown, Mgmt. expects to benefit from parent company’s automotive businessrecovery in both overseas and domestic markets in 2026, with market share inintelligent cockpits and thermal management remaining relatively stable andmoves in line with overall vehicle volumes. Penetration rates for intelligent drivingand suspension products are set to increase, with growth outpacing shipmentvolumes. In addition, BYDE is promoting suspension and thermal managementproducts to European, Japanese, and domestic high-end OEMs.
　　NIP: 3Q25 revenue excluding AI decreased YoY due to reduced orders from avacuum cleaner client. However, mgmt. expects strong 2026 revenue growth asliquid cooling and power supply for AI shall start to scale in 1H26 and non-datacenter business shall recover. Per mgmt., value for liquid cooling and powersupplies is around US$100k per high-end cabinet, with Vera Rubin solutionsoffering even higher value. In addition, BYDE leverages vertical integration todeliver comprehensive solutions to customers, such as the energy storage solutionfor overseas CPS, which presents substantial potential over the next two years.
　　Key Risks for Rating
　　1) Weak macro demand, 2) slow key client NPI design win, 3) BYD’s EV growthslowdown and change in sourcing strategy, 4) unsmooth consolidation of Jabil.
　　Valuation
　　We cut 2025/26/27E revenues by 3%/3%/2% and 2025/26/27E EPS by3%/3%/0% to factor in near term slowdown of AIS, NIP and components butoffset by company’s ability to cut cost. Given BYDE’s solid progress in serverbusiness and structural bullish domestic server outlook, we expect its mid-termoutlook to remain intact. Our new target price of HK$50.2 is based on 17x 2026EEPS (unchanged).