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CMB International Global Markets | Equity Research | Company Update PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR AND .hk China Technology Sector Alex Ng (852) 3900 0881 .hk Lily Yang (852) 3916 3716 .hk Stock Data Mkt. Cap. (HK$mn) 52,162 Avg. 3mths t/o (HK$mn) 265.65 52W High/Low (HK$) 63.10/ 22.80 Total Issued Shares (mn) 2,253 Source: Bloomberg Shareholding Structure Golden Link Worldwide Ltd 65.76% Gold Dragonfly Ltd 4.98% Vanguard Group 1.25% Source: Bloomberg Share Performance Absolute Relative 1-mth -15.7% -18.3% 3-mth -41.1% -39.7% 6-mth -44.0% -36.6% Source: Bloomberg 12-mth Price Performance Source: Bloomberg Auditor: Ernst & Young Related reports: 1. Industry headwinds to persist into 4Q; D/G to HOLD 1 Nov 2021 2. Outlook intact despite NT headwinds; Maintain BUY 1 Sep 2021 0. 010 .020 .03 0 .04 0 .05 0 .06 0 .07 0 .0Nov -2 0 Fe b -2 1 M a y -2 1 Au g -2 12 8 5 HK HSI (re b a s e d )(HK $ )HOLD (Maintain) 1 31 Mar 2022 Target Price HK$17.98 (Previous TP HK$26.44) Up/Downside +10% Current Price HK$16.4 We retain HOLD and lowered our SOTP-based TP to HK$17.98, as we believe 1H22 will remain challenging for BYDE, due to Android smartphone weakness (55% of sales), slower-than-expected iPad/e-cigarette ramp and margin pressure during industry slowdown. Looking into 2022, mgmt. expected Android OEM segment (38% of sales) to shrink given strategic shift to high-end models. While we remain positive on BYDEs expansion into Apple OEM and components, we expect margin pressure to be a major overhang during the transition. We trimmed FY22-23E EPS by 30-31% to reflect OEM strategy shift, lower iPad/e-cigarette sales and margin pressure. Our FY22-24E EPS are 32-38% below consensus. FY21 earnings miss on chip shortage and GPM pressure. BYDEs FY21 net profit declined 58% YoY to RMB2,310mn, 21%/21% below our/ consensus estimates, while revenue grew 22% YoY, largely in-line with expectations. The miss was mainly due to continued GPM pressure in 4Q21 (6.2% vs 7.2% in 3Q) amid chip shortage and COVID-19 impact. By segment, handset OEM grew at 80% YoY and component declined 11% YoY, while smart/auto intelligent segments remained strong with 31%/107% YoY growth. 2022 outlook: Android OEM slowdown, iPad ramp and auto strength. Mgmt. expected Android OEM segment to shrink strategically in FY21 and focus on high-end models amid smartphone market slowdown. Despite our positive view on BYDEs ramp in iPad OEM/components, we estimate FY22E revenue will decline 2% YoY to RMB88bn (vs RMB120-130bn prior guidance), driven by 11% decline for Android/Apple OEM, 10% decline for components and 35%/80% growth for smart/auto segments. Overall, we estimate FY22E net profit will grow 11% YoY to RMB2.6bn, which is 38% below consensus given our conservative GPM (7.6%, vs 8.2% for BBG). Our FY22-24E EPS are 32-38% below consensus; Maintain HOLD. While we remain positive on BYDEs product roadmap, share gain in Apple OEM/ components and expansion into e-cigarette markets, we cut FY22-23E EPS by 30-31% to reflect Android weakness and GPM pressure. Our new SOTP-based TP of HK$17.98 implies 13.1x FY22E P/E. Trading at 12.0 x FY22E P/E, the stock is fairly valued due to earnings visibility and near-term industry headwinds. Earnings Summary (YE 31 Dec) FY20A FY21E FY22E FY23E FY24E Revenue (RMB mn) 73,121 89,057 88,016 98,636 112,893 YoY growth (%) 37.9 21.8 (1.2) 12.1 14.5 Net income (RMB mn) 5,441 2,310 2,559 3,579 5,048 EPS (RMB) 2.41 1.03 1.14 1.59 2.24 YoY growth (%) 240.6 (57.5) 10.8 39.8 41.0 Consensus EPS (RMB) NA 1.29 1.83 2.43 3.31 P/E (x) 5.6 13.3 12.0 8.6 6.1 P/B (x) 2.0 1.9 1.7 1.5 1.3 Yield (%) 1.8 0.8 0.8 1.2 1.6 ROE (%) 24.4 9.6 9.7 12.1 14.8 Net gearing (%) Net cash Net cash Net cash Net cash Net cash Source: Company data, Bloomberg, CMBIGM estimatesBYD Electronics (285 HK) Margin pressure remains an overhang; Maintain HOLD 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 2 4Q21 Results review Figure 1: Results review CMBI Consensus RMB mn FY18 FY19 FY20 FY21 YoY FY21E Diff% FY21E Diff% Revenue 41,047 53,028 73,121 89,057 22% 87,959 1% 89,544 -1% Gross profit 4,172 3,957 9,629 6,029 -37% 6,644 -9% 6,779 -11% Operating profit 1,818 994 5,806 1,405 -76% 2,070 -32% 2,205 -36% Net profit 2,146 1,598 5,441 2,310 -58% 2,908 -21% 2,911 -21% EPS (RMB) 0.95 0.71 2.41 1.03 -58% 1.29 -21% 1.29 -21% Gross margin 10.2% 7.5% 13.2% 6.8% -6.4ppt 7.6% -0.8 ppt 7.6% -0.8 ppt Operating margin 4.4% 1.9% 7.9% 1.6% -6.4ppt 2.4% -0.8 ppt 2.5% -0.9 ppt Net margin 5.2% 3.0% 7.4% 2.6% -4.8ppt 3.3% -0.7 ppt 3.3% -0.7 ppt Source: Company data, Bloomberg, CMBIGM estimates Figure 2: Quarterly results review CMBI RMB mn 1Q21 2Q21 3Q21 4Q21 4Q20E Diff% Revenue 19,890 24,641 21,404 23,122 22,024 5% Gross profit 1282 1779 1543 1425 2,040 -30% Net profit 808 835 514 153 751 -80% EPS (RMB) 0.36 0.37 0.23 0.07 0.33 -80% Growth (YoY) Revenue 132% 8% 6% 7% Gross profit 20% -41% -54% -33% Net profit 23% -54% -72% -86% Margin Gross margin 6.4% 7.2% 7.2% 6.2% 9.3% -3.1 ppt Net margin 4.1% 3.4% 2.4% 0.7% 3.4% -2.7 ppt Source: Company data, Bloomberg, CMBIGM estimates Earnings Revision Figure 3: Earnings revision RMB mn New Old Change (%) FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E Revenue 88,016 98,636 112,893 113,572 141,583 NA -23% -30% NA Gross Profit 6,679 8,421 10,875 8,808 11,533 NA -24% -27% NA Operating Profit 1,838 2,996 4,666 3,016 4,695 NA -39% -36% NA Net profit 2,559 3,579 5,048 3,677 5,155 NA -30% -31% NA EPS (RMB) 1.14 1.59 2.24 1.63 2.29 NA -30% -31% NA Gross Margin 7.6% 8.5% 9.6% 7.8% 8.1% NA -0.2 ppt 0.4 ppt NA Operating Margin 2.1% 3.0% 4.1% 2.7% 3.3% NA -0.6 ppt -0.3 ppt NA Net Margin 2.9% 3.6% 4.5% 3.2% 3.6% NA -0.3 ppt 0 ppt NA Sources: Company data, CMBIGM estimates Figure 4: CMBIGM estimates vs consensus RMB mn CMBIGM Consensus Diff (%) FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E Revenue 88,016 98,636 112,893 113,012 134,342 188,601 -22% -27% -40% Gross Profit 6,679 8,421 10,875 9,289 11,586 15,961 -28% -27% -32% Operating Profit 1,838 2,996 4,666 4,139 5,735 na -56% -48% na Net profit 2,559 3,579 5,048 4,122 5,439 7,468 -38% -34% -32% EPS (RMB) 1.14 1.59 2.24 1.83 2.43 3.31 -38% -35% -32% Gross Margin 7.6% 8.5% 9.6% 8.2% 8.6% 8.5% -0.6 ppt -0.1 ppt 1.2 ppt Operating Margin 2.1% 3.0% 4.1% 3.7% 4.3% 0.0% -1.6 ppt -1.2 ppt 4.1 ppt Net Margin 2.9% 3.6% 4.5% 3.6% 4.0% 4.0% -0.7 ppt -0.4 ppt 0.5 ppt Source: Company data, CMBIGM estimates 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 3 Figure 5: Revenue breakdown RMB mn FY20 FY21 FY22E FY23E FY24E Assembly 31,152 55,977 50,000 52,000 54,000 .YoY 16% 80% -11% 4% 4% Component (metal/glass/plastic) 17,576 15,655 14,165 13,007 11,951 .YoY -5% -11% -10% -8% -8% Metal 10,996 8,087 7,304 6,649 6,242 Plastic 4,566 3,789 3,221 2,899 2,609 Glass/ceramic 3,000 5,700 5,130 4,617 4,155 Masks 13,100 1,697 264 91 36 .YoY - -87% -84% -66% -60% New intelligent 9,476 12,445 16,801 22,681 30,619 .YoY 57% 31% 35% 35% 35% E-cigarette 1,000 1,000 1,800 3,060 5,202 - 0% 80% 70% 70% Auto intelligent 1,817 3,770 6,786 10,858 16,286 .YoY 14% 107% 80% 60% 50% Total 73,121 89,544 88,016 98,636 112,893 .YoY 38% 22% -2% 12% 14% Source: Company data, CMBIGM estimates Figure 6: P&L forecast RMB mn FY20 FY21 FY22E FY23E FY24E Revenue 73,121 89,057 88,016 98,636 112,893 YoY 37.9% 21.8% -1.2% 12.1% 14.5% Cost of sales (63,492) (83,028) (81,337) (90,214) (102,019) Gross profit 9,629 6,029 6,679 8,421 10,875 GPM (%) 13% 7% 8% 9% 10% YoY 143.3% -37.4% 10.8% 26.1% 29.1% SG&A (910) (1,316) (1,320) (1,480) (1,693) % of rev 1% 1% 2% 2% 2% R&D (2,913) (3,308) (3,521) (3,945) (4,516) % of rev 4% 4% 4% 4% 4% Operating profit 5,806 1,405 1,838 2,996 4,666 OPM (%) 8% 2% 2% 3% 4% YoY 484% -76% 31% 63% 56% Net profit 5,441 2,310 2,559 3,579 5,048 NPM (%) 7% 3% 3% 4% 4% YoY 241% -58% 11% 40% 41% Source: Company data, CMBIGM estimates 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 4 Valuation Maintain HOLD with new TP HK$17.98 We retain Hold with new TP HK$ 17.98 to reflect lowered EPS forecasts. We derive our TP based on SOTP valuation to reflect BYDEs business diversification with different growth profiles and visibility. Our TP is based on weighted-average target P/E multiple of 13.1x FY21E EPS. We assign 10 x P/E to its assembly EMS business and 10 x P/E for component/e-cigarette business, in-line with TW/HK-listed peers. We assign 8x for mask business to reflect its near-term growth potential amid COVID-19 outbreak. Figure 7: BYDE SOTP valuation Business segment % of FY22E Profit FY22E EPS (RMB) Target P/E Assembly 11% 0.12 10 x Components 25% 0.29 10 x Masks 1% 0.01 8x Others (smart, auto) 63% 0.72 15x Total (RMB) /Implied P/E 1.14 13.1x TP (HK$) 17.98 Sources: Company data, CMBIGM estimates Figure 8: Peers valuation Market Cap Price TP Up/ Down P/E (x) P/B (x) ROE (%) Company Ticker Rating (US$ mn) (LC) (LC) -side FY22E FY23E FY22E FY23E FY22E FY23E BYDE 285 HK Hold 4,727 16.42 17.98 10% 12.0 8.6 1.7 1.5 9.7 12.1 Tongda 698 HK Buy 185 0.15 0.23 54% 3.0 2.5 0.1 0.1 3.8 4.3 AAC Tech 2018 HK Hold 3,002 19.44 23.4 20% 16.1 13.6 0.9 0.9 5.6 6.5 TK Group 2283 HK Buy 249 2.34 3.4 44% 5.7 4.5 1.1 0.9 18.6 20.7 Ju Teng 3336 HK NR 209 1.36 NA NA 6.8 4.7 0.2 0.2 3.5 5.0 Everwin 300115 CH NR 1,902 10.06 NA NA 10.9 7.9 1.6 1.4 13.7 16.4 Lens Tech 300433 CH NR 9,278 11.85 NA NA 9.4 7.5 1.2 1.1 13.0 14.6 Foxconn 2354 TT NR 3,101 62.60 NA NA 11.0 10.3 0.6 0.6 6.9 7.2 Catcher 2474 TT NR 3,693 144.50 NA NA 12.3 11.5 0.7 0.7 5.6 5.9 Average 9.4 7.7 0.8 0.8 9.3 10.7 Source: Bloomberg, CMBIGM estimates Figure 9: 12M forward P/E band Source: Bloomberg, CMBIGM estimates Figure 10: 12M forward P/B band Source: Bloomberg, CMBIGM estimates 05101520253035404550M a r - 1 4 M a r - 1 5 M a r - 1 6 M a r - 1 7 M a r - 1 8 M a r - 1 9 M a r - 2 0 M a r - 2 1 M a r - 2 21 - y r F o r w a r d P / E M e a nM e a n + 1 S D M e a n - 1 S D0 . 01 . 02 . 03 . 04 . 05 . 0M a r - 1 4 M a r - 1 5 M a r - 1 6 M a r - 1 7 M a r - 1 8 M a r - 1 9 M a r - 2 0 M a r - 2 1 M a r - 2 21 - y r Fo r w a r d P / B M e a nM e a n + 1 S D M e a n - 1 S D31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 5 Financial Summary Income statement Cash flow summary YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E Revenue 73,121 89,057 88,016 98,636 112,893 Profit before taxation 6,221 2,465 2,908 4,067 5,736 COGS (63,492) (83,028) (81,337) (90,214) (102,019) Depreciation 1,760 1,717 1,927 2,163 2,433 Gross profit 9,629 6,029 6,679 8,421 10,875 Change in working capital (4,745) (2,228) 1,135 (3,029) 477 Others (27) (187) (306) (445) (645) Selling and marketing (237) (275) (264) (296) (339) Net cash from operating 3,209 1,768 5,665 2,756 8,000 Administrative (673) (1,041) (1,056) (1,184) (1,355) R&D (2,913) (3,308) (3,521) (3,945) (4,516) Capex (2,795) (3,206) (3,169) (3,551) (4,064) Other operating exp. Other (186) - - - - Operating profit 5,806 1,405 1,838 2,996 4,666 Net cash from investing (2,981) (3,206) (3,169) (3,551) (4,064) Financial cost (71) (43) (43) (43) (43) Dividend paid (160) (231) (256) (358) (505) Other income/(losses) 487 1,104 1,114 1,114 1,114 Other 1,730 (43) (43) (43) (43) Pre-tax profit 6,221 2,465 2,908 4,067 5,736 Net cash from financing 1,570 (274) (299) (401) (548) Tax (779) (155) (349) (488) (688) Net change in cash 1,799 (1,712) 2,197 (1,196) 3,388 Minority interest - - - - - Cash at beginning of the year 1,651 3,466 2,825 5,022 3,826 Net profit 5,441 2,310 2,559 3,579 5,048 Exchange difference 16 1,071 - - - Cash at the end of the year 3,466 2,825 5,022 3,826 7,214 Balance sheet Key ratios YE 31 Dec (RMB mn) FY20A FY21A FY22E FY23E FY24E YE 31 Dec FY20A FY21A FY22E FY23E FY24E Current assets 26,069 27,630 28,483 33,062 36,600 Sales mix (%) Cash & equivalents 3,466 2,825 5,022 3,826 7,214 Phone and PC components 24 17 16 13 11 Account receivables 14,391 9,240 12,764 11,895 16,328 Assembly services 43 63 57 53 48 Inventories 6,891 10,567 5,700 12,343 8,061 Masks 18 2 0 0 0 Short-term bank deposits - - - - - New intelligent products 13 14 19 23 27 Other current assets 1,320 4,998 4,998 4,998 4,998 Auto intelligent systems 2 4 8 11 14 Growth (%) Non-current assets 10,825 12,314 13,442 14,704 16,187 Revenue 37.9 21.8 (1.2) 12.1 14.5 PPE 9,693 11,182 12,423 13,811 15,442 Gross profit 143.3 (37.4) 10.8 26.1 29.1 Deferred income tax 201 201 201 201 Operating profit 484.3 (75.8) 30.8 63.1 55.7 Other non-current assets 1,132 931 818 692 544 Net profit 240.6 (57.5) 10.8 39.8 41.0 Total assets 36,894 39,944 41,926 47,766 52,788 Profit & loss ratio (%) Current liabilities 14,840 16,220 16,012 18,757 19,384 Gross margin 13.2 6.8 7.6 8.5 9.6 Deferred income Operating margin 7.9 1.6 2.1 3.0 4.1 Account payables 8,146 11,724 11,515 14,260 14,888 Net profit margin 7.4 2.6 2.9 3.6 4.5 Tax payable 57 184 184 184 184 Other current liabilities 6,636 4,312 4,312 4,312 4,312 Balance sheet ratio Net debt/total equity (x) Net cash Net cash Net cash Net cash Net cash Non-current liabilities 864 928 928 928 928 Current ratio (x) 1.8 1.7 1.8 1.8 1.9 Deferred income 147 150 150 150 150 Receivable turnover days 52 49 46 46 46 Deferred tax liability 313 404 404 404 404 Inventory turnover days 41 38 37 37 37 Total liabilities 15,704 17,148 16,939 19,685 20,312 Payable turnover days 52 52 52 52 52 Share capital 4,052 4,052 4,052 4,052 4,052 Profitability (%) Reserves 18,220 19,975 22,278 25,499 30,042 ROE 24.4 9.6 9.7 12.1 14.8 Minority interest ROA 14.7 5.8 6.1 7.5 9.6 Shareholders equity 22,272 24,027 26,330 29,551 34,094 Total equity and liabilities 37,976 41,175 43,270 49,236 54,406 Per share data (RMB) EPS 2.41 1.03 1.14 1.59 2.24 DPS 0.24 0.10 0.11 0.16 0.22 Source: Company data, CMBIGM estimates 31 Mar 2022 PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE 6 Disclosures & Disclaimers Analyst Certification The research analyst who is primary responsible for the content of this research report, in whole or in part, certifies that with respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report. Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) will deal in or trade in the stock(s) covered in this research report 3 business days afte
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