We raised our SOTP-based TP to HK$37.7 (from HK$22.2) after lifting our FY20-22E EPS by 36-86% to factor in stronger 1H20 results, better mask demand and rapid share gain in Xiaomi/Apple supply chain. Mgmt. guided revenue of RMB80-90bn/110-120bn in FY20E/21E with improving GPM, despite Huawei’s near-term uncertainties. Overall, we believe BYDE will benefit from industry consolidation and Apple/Xiaomi’s supplier diversification strategy to mitigate supply chain risk. Maintain BUY. Catalysts include Xiaomi/Apple product launch and stronger mask.
- 1H20 net profit jumped 330% YoY, 13%/18% above our/consensus est. BYDE reported stronger 1H20 revenue growth of 35% YoY and net profit jumped 330% YoY to RMB 2,473mn (vs 280%+ YoY in positive profit alert). The beat was a result of stronger assembly biz (Xiaomi/Huawei), higher mask demand and record-high GPM of 13.1%. By segment, component revenue grew 7% YoY to RMB8.6bn driven by 100% YoY from glass/ ceramic offsetting metal/plastic weakness (-2%/-10%), while assembly was down 16% to RMB9.9bn mainly due to COVID-19 impact in 1Q20.
- Rapid share gain in Xiaomi/Apple and glass/ceramic momentum. We expect BYDE will achieve rapid share gain with Xiaomi/Apple given industry consolidation and accelerated diversification strategy. For Xiaomi, we expect BYDE to expand EMS share to 40% in FY21E from 10-20% in FY20. For Apple, we believe BYDE will ramp iPod Touch/iPad EMS to 25mn in 2021E (vs 5mn in 2020E), and ship ceramic components for watch and 5G phone antenna in 2H20E. For casing, we expect share gain in Samsung/Xiaomi and better demand for glass/ceramic casing given rapid 5G adoption.
- Expect mask revenue of RMB20.5/18.5bn in FY20/21E. BYDE’s mask capacity reached 70-80mn/day in Aug, and we forecast mask segment to deliver RMB20.5/18.5bn revenue with 22/19%% GPM in FY20/21E. Mgmt. believe mask biz established a solid foundation to expand into more medical product categories ahead.
- Reiterate BUY; Raise TP to HK$37.7 (28% upside). We are positive on BYDE’s 5G product roadmap/strategy, share gain in major brands and new mask business. We lifted FY20-22E EPS by 36-86% and raised our SOTP-based TP to HK$37.7, implying an undemanding 13x FY21E P/E. Catalysts include faster share gain, stronger mask and Xiaomi/Apple product launches.
