Highlights

• BYDE reported weak results again. Revenue of Rmb45b was in line, but margins missed consensus as consumer devices continued to drag profitability. Bottom line registered a 35% sequential recovery at Rmb537m but still missed consensus expectation by 18%.
   
• Management sees strong opportunities in its AI-infrastructure related business and expects robust growth through 2027, but the consumer electronic business seems to have more downside going forward.
   
• Maintain SELL and keep target price unchanged at HK$14.50.
   

Analysis

• Weak sets of results yet again as the smart terminal segment saw no signs of recovery. BYD Electronics’ (BYDE) 3Q26 revenue grew 6.0% yoy and 2.7% qoq to Rmb45,223m, which is largely in line with growth driven by the auto segment and the emerging AI server ODM business. This is however more than offset by a sustained weakness in the smart terminal segment – the lower capacity utilisation and pricing pressure had led to a 2.4ppt yoy and 0.1ppt qoq compression in gross margins to 4.5%, which is a 0.4ppt miss vs consensus estimates but largely in line with our expectations. On the brighter side, BYDE stated that forex impacts had improved sequentially, and as a result, net profit declined 61.9% yoy but recovered 34.7% qoq to Rmb537m, which is still 17.7% below consensus estimate and largely in line with ours.