BYD-E‘s 1H26 results were overall weak but within our expectation, due to a temporary smart terminal components pullback and RMB700m FX losses. Per mgmt., 1H26 marks the trough, with sequential recovery in 3Q26 and a clear inflection in 4Q26 on large-scale smartphone deliveries, liquid cooling shipments and server deployment. We believe high-value automotive products and multi-fold liquid cooling growth will offset consumer electronics weakness and drive stable upward momentum over 3-5 years. Maintain BUY with a target price of HK$33.7 based on 15x 2027E.
We slightly raise our 2026 forecast to reflect better-than-expected assembly business, while revising down 2027/28 EPS slightly. Given BYDE’s solid progress in AI server and AIS, we expect its mid-term outlook to remain intact with undemanding valuation. Our new target price of HK$33.7 is based on 15x 2027E EPS.