BYD Electronic International Co Ltd - 1Q26 earnings miss; AI DC and EV content growth intact
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- BYD Electronic - 3Q25 miss on iPhone Air delay; 2026 catalysts (titanium foldable, auto content) intact31 Oct 2025
- 1Q26 revenue rose 3.5% y/y, 7% above consensus, but net profit fell 95.5% y/y, far below consensus, mainly due to FX losses and weaker smart-terminal mix
- Cut FY26F/FY27F earnings by 21.14%/20.1% on weaker smart-terminal components, especially Android, amid memory and related chips tightness
- AI DC remains the key new driver, with cold plates set for mass production in May-June and 800V HVDC power targeting a 4Q26 breakthrough
- Maintain BUY, but lower TP to HKD30; rerating catalysts include AI DC ramp-up and auto-content gains
1Q26 results highlights
BYDE’s 1Q26 earnings materially missed on FX losses and adverse product mix, despite a revenue beat. Revenue rose 3.5% y/y to RMB38.18bn, 7% above consensus, supported by incremental assembly orders from Apple. However, gross profit fell 14.4% y/y to RMB1.99bn, implying a gross margin of 5.2%, down 1.1ppts y/y but up 1.2ppts q/q from 4Q25. The y/y margin decline was mainly driven by a product-mix shift in smart terminals, as lower-margin assembly grew while higher-margin components declined. Net profit fell 95.5% y/y to RMB28mn, far below consensus of RMB413mn, with management highlighting FX losses as the largest drag, compared with FX gains in 1Q25. Management also noted that part of the assembly business has RMB-denominated costs but is sold in USD, creating FX exposure from timing differences.
At the segment level, smart-terminal assembly revenue increased, mainly driven by Apple demand, while component revenue declined. Management indicated that consumer electronics is still facing pressure from memory inflation and broader supply-chain tightness, including MCU, PCB and connectors. Management expects this pressure to persist through the rest of FY26, especially for low-end Android smartphones, where memory cost inflation could weigh on demand. On the component side, management expects relatively better performance than in assembly, supported by high-end Android programs from Samsung, as well as relatively stable demand from domestic clients and Apple.
Auto revenue declined by high-single digits y/y in 1Q26, mainly due to softer parent BYD EV volume. Management remains confident in the auto business and expects growth to be similar to, or faster than, parent BYD’s over the full year, supported by overseas expansion, a higher-end vehicle mix and rising penetration of smart cockpit, intelligent suspension, thermal management and ADAS-related components. A higher contribution from overseas high-end vehicle sales is expected to boost BYDE’s content value per vehicle, as higher-end models tend to carry richer configurations.
AI infrastructure contribution remained limited in 1Q26 but continued to grow, with server demand partly constrained by memory supply. Management expects liquid-cooling cold plates to start mass production in May-June 2026, and BYDE is expected to be the only domestic supplier in NVIDIA’s cold-plate supply chain. The procurement model with NVIDIA is also shifting from ODM/OEM procurement toward direct customer procurement starting from the Vera Rubin generation. This should improve BYDE’s visibility and qualification value in the liquid-cooling supply chain. Management also targets a breakthrough in 800V HVDC power products in 4Q26, leveraging BYD Group’s accumulated capabilities in 800V/1200V EV platforms, megawatt charging and battery technologies.
Our View
We cut FY26F/FY27F earnings by 21%/ 20% to reflect a weaker outlook for smart-terminal components, especially on the Android side. Memory inflation is now spreading into broader supply-chain tightness across MCU, PCB and connectors, which should pressure low-end Android demand and reduce visibility for assembly and component volumes through the rest of FY26. While Apple assembly demand supported 1Q26 revenue, the mix is less favourable for margins, and higher-margin component recovery remains delayed to FY27’s new-generation iPhone cycle.
However, we remain constructive on BYDE’s mid- to long-term growth story. AI infrastructure is emerging as the most important new driver and is expected to contribute 5.1% of revenue in FY27, with the highest gross margin among the group’s segments. The upcoming mass production of cold plates in May-June should validate BYDE’s ability to move beyond server assembly into higher-value liquid-cooling components. The direct procurement model from NVIDIA should also strengthen BYDE’s supply-chain position, while follow-on opportunities from overseas CSPs and OEMs could expand after the first scaled delivery. Although near-term server demand is partly constrained by memory supply, we believe the long-term direction remains clear as AI racks require more advanced cooling, power and interconnect architectures.
Power products could become the next leg of AI DC growth. BYDE is targeting an 800V HVDC power-product breakthrough in 4Q26, and we see strategic logic in leveraging BYD Group’s EV-side high-voltage platform, charging and battery know-how into data-center power infrastructure. Unlike traditional low-voltage server power, 800V HVDC is still an emerging architecture, meaning BYDE is not entering from a structurally disadvantaged position versus incumbent power suppliers. If validation progresses smoothly, power products could start contributing from 2027, alongside cold plates and high-speed connectivity.
EV momentum remains intact despite a softer 1Q26. We expect BYDE’s auto electronics business to recover with parent BYD’s volume growth and benefit from higher content per vehicle in smart cockpit, ADAS, intelligent suspension and thermal management. Overseas expansion and a higher-end vehicle mix should also support content value and profitability. Management highlighted that overseas models tend to carry richer configurations, which should be positive for BYDE’s average dollar content per vehicle. We also expect external overseas auto customer wins to become a more meaningful growth driver from 2027 onward.
We therefore maintain BUY, but trimmed our TP to HKD30.0 from HKD34.3, reflecting lower FY26F earnings forecast alongside a higher valuation multiple of 16x FY26F P/E (prev. 14x). We raise the multiple as consumer electronics sector valuations have improved sharply since the start of 2Q26. This reflects expectations for ASP and margin recovery across the hardware supply chain, driven by further hardware upgrades as foldables become more mainstream. We believe the market is underappreciating BYDE’s transition toward AI infrastructure and higher-value automotive electronics. Medium-term rerating should be driven by liquid-cooling scale-up, 800V HVDC progress, rising auto content per vehicle and incremental overseas auto-customer wins.
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- BYD Electronic - Assembly-led revenue beat masks earnings miss; AI DC underpins FY27 recovery02 Sep 2026
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- BYD Electronic - Beyond handsets: AI infrastructure and auto drive the next rerating02 Apr 2026
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